When my wife died, I realized our retirement plan wasn't designed for just one of us. What changes should I make?

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• For Love & Money is a weekly Business Insider column answering relationship and money questions.
• This week, a recently widowed reader isn’t sure what changes to make to their financial plan.
• Our columnist spoke with a financial planner who had several straightforward tips.
• Got a question for our columnist? Write to For Love & Money using this Google form.

Dear For Love & Money,

I’m retired, turning 75 this year. My wife passed away in March 2023. My income consists of a state government pension that I will continue receiving monthly as long as I live, plus my Social Security. Together, my income in 2023 was around $90,000.

I’ve paid off my home, but I have about $4,500 a year in property tax due on it, as well as utilities, homeowners insurance, and maintenance costs. I have only $3,600 left in car payments before that, too, is zeroed out. I have no credit card debt; I paid that off after my wife died.

Since my wife’s death, I have found myself single for the first time in 48 years, and I’m looking at a very large income tax liability in 2024 and after. I’ve built a nest egg of $75,000 for my future needs, mostly in CDs. What’s the best way to manage my income and resources going forward?

Sincerely,

Worried Widower

Dear Worried,

I am sorry for your loss. Losing the person you shared a life with is never easy. From the grieving to the financial arrangements, there are plenty of reasons the death of a loved one ranks at the very top of life’s most stressful events.

To help ease this stress, I reached out to Justin Rush, a certified financial planner who specializes in tailoring his clients’ financial plans to their unique needs. I told Rush about your situation and asked how he would advise you to financially navigate this transition from half of a couple to a single entity.

Rush responded with a wealth of great ideas for minimizing your tax liabilities and maximizing your nest egg.

First, Rush tackled the question of your recently increased tax liability. No longer filing jointly means your income automatically gets pushed into higher brackets, which can be a costly adjustment. The good news is that Rush says you can avoid this adjustment by filing your taxes as a qualifying widow for two years after your wife’s death. By filing as a qualifying widow, you will remain in the same tax brackets you were in when you filed jointly.

Rush also mentioned charitable donations as a means people often use to achieve a higher tax benefit. If you have been donating to charity over the years, lumping these charitable contributions together will allow you to itemize them versus taking the standard deduction, increasing your tax break.

Another tax strategy Rush suggested is moving your nest egg from CDs to municipal bonds. Municipal bonds are backed by local taxes and projects. Rush likes municipal bonds because their interest is triple-protected from city, state, and federal taxes, and are, therefore, tax-free. While municipal bonds have lower interest rates than CDs, the amount you will save by not having your interest taxed may be worth the switch.

Speaking of your nest egg, Rush asked about your risk tolerance. If you are comfortable exposing your savings to stocks, dividend-paying stocks have a better tax rate than ordinary income and could be your best bet for making your money work for you.

I also asked Rush about the remainder of your car loan. I wondered if you’d be better off just wiping it out now. He felt you should likely keep doing what you’re doing, although this depends on the interest rate on the car loan. As long as it is lower than the interest rates on your investments, you’re right to continue making payments on it. However, he added the caveat that sometimes, from an emotional standpoint, eliminating as many monthly payments as possible can create a sense of security worth the financial trade-off.

Learning how to live without someone you’ve had by your side for 48 years must feel daunting. The flip side of this, though, is that for the first time in a long while, you have the freedom to make decisions based solely on your wants and needs. According to Rush, as far as the numbers you have given me go, you’re financially solid. Take comfort in this peace of mind you have built for yourself; you deserve it. This may not be the retirement you envisioned for yourself in the early days of your career with your wife by your side, but it’s never too late to dream new dreams.

Rooting for you,

For Love & Money

Looking for advice on how your savings, debt, or another financial challenge is affecting your relationships? Write to For Love & Money using this Google form.

Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three fiduciary financial advisors that serve your area in minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. Start your search now.

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