Suze Orman Says Too Many People Think Their Spouse Will Need Just 50% Of Their Household Income When They Die – Here's Why They're Wrong

When planning for retirement, many couples assume that if one spouse passes away, the surviving partner will only need about half of their household income to get by. But personal finance expert Suze Orman says that assumption is a major mistake — and it can lead to serious financial trouble later in life.

A Common Misconception About Post-Retirement Needs

Orman tackled this issue on a recent episode of her "Women & Money" podcast. Responding to a listener named Nisha, who was weighing the choice between a lump-sum payout or a monthly annuity with a 50% survivor benefit, Orman took a moment to address this misconception.

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"The big mistake that all of you make is that you really think that upon your death, that your spouse will need 50% less than what they were getting when you were alive," Orman said. "And I can tell you, over all the years I've been doing this, that is not true."

Why 50% May Not Be Enough

Orman pointed out that the loss of a spouse often comes with a significant drop in income. In Nisha's case, the monthly annuity she was considering would provide $3,300 while both spouses were alive — but just $1,650 for her spouse if she passed away.

And that's not the only income cut a surviving spouse might face. If both partners are receiving Social Security, one of those checks will disappear when a spouse dies. The remaining partner will keep the higher of the two amounts, but the lower benefit is lost permanently.

Add to that the emotional impact of losing a spouse — what Orman calls the "loneliness factor" — and expenses don't necessarily go down.

"You go to visit your kids more, you go out to eat more, you’re just lonely," she explained. "So you have to take that into consideration now."

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Annuity or Lump Sum? It Depends

Nisha had the option of taking a $500,000 lump sum or choosing the monthly $3,300 annuity. On paper, that annuity offers a strong return — about 7.9% annually while both spouses are alive, and about 3.96% after one passes away. But there's a tradeoff: if both spouses die shortly after retirement, none of the money goes to heirs. 

Nisha didn't state if she and her spouse have children, but it's another factor to consider in these circumstances. That's why Orman encourages people to weigh not just the financial numbers, but also their family situation. "Do you have kids? Do you not? Will your spouse be OK on $1,650 per month?"

These are all questions that can influence whether the guaranteed income of an annuity is worth the tradeoff in flexibility and inheritance options.

See Also: ‘Which Bucket Do I Draw From First?’ Suze Orman Explains To 67-Year-Old The Best Order For Tapping Into Her Retirement Accounts

Planning With Realistic Expectations

The takeaway from Orman's message is clear: don't assume that a surviving spouse can live comfortably on half the household's income. Between lower Social Security benefits, reduced pensions, and increased lifestyle spending due to loneliness or health needs, the surviving spouse could need nearly as much — or even more — than when both partners were alive.

Before making retirement income decisions, consider the full financial picture. And when in doubt, speak with a qualified financial advisor who can help tailor a plan to your specific needs.

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