A funeral is followed by a month of paperwork. One of those forms changes the household income. Hardly anybody sees it coming.

Social Security pays one benefit, and it pays the larger one. So when a husband and wife have both been drawing checks, the household keeps his or hers, whichever is bigger. The other stops that month.

The rent does not shrink to match. Neither does the tax bill on the house. Nor the insurance.

There is a second turn most people miss, and it arrives the following April.

The survivor files as a single taxpayer now. The same income runs through narrower brackets, so a household with less money can owe more of it. Advisers call it the widow’s penalty.

Now put that next to the number everybody quotes.

Cerulli Associates counts $124 trillion leaving American households through 2048. About $105 trillion of it reaches heirs. That is the figure in every headline about the great wealth transfer.

Look at how it actually travels, though.

$54 trillion

Moving between spouses through 2048

 

$105 trillion

Reaching heirs over the same period

So half of the great handoff is horizontal. It moves between two people the same age, in the same house. Cerulli puts about $40 trillion of that spousal money in the hands of widowed women in the boomer generation and older.

Forty trillion dollars. Held largely by women in their seventies and eighties, most of it arriving on the worst day of their lives.

The reason is plain demography. A woman reaching 65 can expect about 19.5 more years. A man reaching 65 can expect 17.0.

And the household that inherits it is usually leaning on Social Security already.

Take women 65 and over in beneficiary families. For about 42 percent of them, Social Security supplies half or more of family income. For roughly 15 percent it supplies nine tenths or more.

So the check that stops is not pocket money. For a lot of these households it was the floor.

Where the cohort’s money sits this quarter, and the stage that opens without warning.

The honest limit is that most of this money does not move at all.

A widow of 79 who has just consolidated two accounts into one usually wants nothing touched. That instinct is often correct. It is also why the sales pressure in this corner of the business is the ugliest part of it.

The median American household net worth was $192,900 at the last Federal Reserve survey. Trillions in aggregate, a house and a modest account in practice.

And the system does not volunteer help. A Social Security inspector general audit looked at this. It found about $131.8 million underpaid to roughly 9,200 widows and widowers over 70. Most of them were never told a better claiming option existed.

The arithmetic

Cerulli Associates wealth transfer research: $124 trillion leaving American households through 2048, about $105 trillion of it to heirs, roughly $54 trillion moving between spouses, and about $40 trillion of that spousal total going to widowed women in the baby boomer generation and older. Social Security Administration rules on survivor benefits: the agency pays one benefit, the higher of those a person qualifies for, and a surviving spouse at full retirement age can receive up to 100 percent of the deceased worker’s benefit, reduced to about 71.5 percent if claimed at 60. Congressional Research Service, drawing on SSA data, for life expectancy of 19.5 more years at 65 for women against 17.0 for men, and for Social Security supplying half or more of family income for about 42 percent of women 65 and over in beneficiary families and nine tenths or more for about 15 percent. Federal Reserve Survey of Consumer Finances for median household net worth of $192,900. Social Security Administration Office of the Inspector General for the $131.8 million underpaid to about 9,200 widows and widowers aged 70 and over. The widow’s penalty describes the shift from joint to single filing status and is a plain reading of the tax tables rather than a published figure.

 

There is one conversation worth having while both people are still at the table. Find out which of your two Social Security checks is larger. Then look at the household budget with only that one arriving. Write the number down somewhere findable. It is a grim hour of arithmetic and it is the kindest thing either of you can do for the other.

Andrew

Boomers Trade is written by someone getting older right alongside you, and watching who profits from it.