Eight Retirement Income Sources for Widows

Executive Summary:

When I meet a widow or widower for the first time, the question I often hear is “Richard, will I be okay—financially?”

Here are my eight pro-tips for possible retirement income sources. They include life insurance proceeds, employer pension plans, net rental income, selling personal property, continuing to work, collecting a CPP survivor pension and investing registered and non registered assets.

Ultimately, a financial advisor may be able to help a widow/er identify sources of retirement income and recommend an investment strategy that matches their risk level and generates the necessary monthly income to maintain their lifestyle.


Am I going to have enough retirement income?

Understandably, after losing a spouse, many widows worry about their financial future. They ask themselves:

  • Will I be able to continue to live in my current home?
  • Will I have enough money to pay for my children’s tuition expenses?
  • Will I be able to retire and maintain my lifestyle?

Restated, the question I often hear from widows/ers is, “Will I be okay—financially?


The Reality of a Widow’s Retirement Lifestyle

Unfortunately, the financial concern is more significant for widows. According to a recent study by Statistics Canada:

“Senior women aged 65 years and over between 1990 and 2001, the standard of living declined continuously for those who became widowed, while it remained relatively constant for their married counterparts.

Five years after they were widowed, median family income declined 9.8% for widows. This was more than six times greater than the 1.5% decline among senior women who remained married during the same time frame.

Not only did the standard of living of widows decline; more of them also fell below the low-income threshold as a result of widowhood. Five years after widowhood, 9.4% of widows were living in low income, almost three times higher than the proportion of women (3.6%) who were in low income in the year before they were widowed1.


Eight Sources of Retirement Income

I have been in exactly the same situation. Thankfully, I was able to lean on my professional experience to overcome my concerns. For those without a financial background, here are my eight pro-tip sources of retirement income that may be available to widows/ers.


1. Life Insurance.

Many couples purchase life insurance to replace income lost from the death of either spouse. As a financial planner, I usually help couples calculate the amount of insurance needed on the hypothetical death of spouse A or B.

Often the amount of insurance will cover outstanding debts (such as home mortgages or lines of credit), the cost of raising any children (such as food and tuition), and a portion is usually allocated to assist the survivor with their retirement goals.

Life insurance proceeds may be invested in dividend paying stocks, life annuities, rental real estate and/or Guaranteed Investments (such as GICs and government bonds), which all provide a monthly income and may be helpful in generating part or all of a widow’s retirement income.

Pro-tip #1: Locate your spouse’s life insurance policies and claim a death benefit (assuming they exist).


2. Company Pension plan and group death benefit.

Many employers provide a retirement pension plan (defined benefit pensions, defined contribution pensions, and group-RRSPs) for all employees and generally, the plan usually includes a survivor pension for the employee’s widow/er. From my experience, the survivor pension ranges from 60% to 80% of the employee’s pension entitlement.

As well, some employer group benefits include an option to purchase employee life insurance (and spousal life insurance). Often the employee’s group coverage is 2-5 times salary.

Pro-tip #2: Call your spouse’s employer and determine if you are eligible for any survivor pension benefits and/or life insurance proceeds.


3. Income generating assets such rental properties.

Some couples invest in rental real estate in the GTA. These properties may generate a positive cash flow after all expenses. In fact, many entrepreneurs, including my client, Doctor Bob, have been investing in rental real estate properties for the sole purpose of supplementing their future retirement income.

If rental properties exist, meet with your professional advisors and determine the extent (if any) of the positive cash flow expected from this asset class.

Pro-tip#3: Do you have rental properties? If so, they may provide a healthy source of retirement income.


4. Selling your spouse’s personal assets.

In some cases, the deceased spouse may have assets of value that have little interest to the surviving widow/er.

For example, I recently met a widow whose late husband had an extensive and expensive car collection. She didn’t share his passion for cars and needed the funds to cover debts. We suggested selling the cars and putting the proceeds towards debt reduction and saving for her retirement.

Pro-tip#4: Does your spouse have assets that you no longer want or need, if so, consider selling to raise cash. Not only can they release cash, but the sale of these personal items can also help you to move on psychologically.


5. Continue working.

For some widows/ers, the least favourable option is to continue working and earning an income, which may be difficult during the first few weeks/months due to grief or family obligations (such as children), but becomes an obligatory option for many reasons, not solely for earning money.

From my experience, work provides a healthy opportunity to engage with team members and clients on an emotional and mental level that was missing after the loss of Mary. As well, working fed my passion for helping clients and my love for the industry. On many mornings, it was the sole reason I jumped out of bed when I wanted to hide under the covers and sleep.

Pro-tip#5: If possible, keep working because it is good for your pocketbook and your mental health. Check out my e-Book: Live well, stay rich, never retire to learn more.


6. Registered investment accounts such as RRSPs, Spousal RRSP, LIfs and TFSAs.

Most couples save money in registered accounts such as RRSPs and TFSAs, fortunately, these accounts may be transferred, on a tax free basis, to the surviving spouse on death of a spouse (assuming the spouse is the beneficiary). The tax (if any) is paid on the death of the widow/er (second spouse) on any remaining funds in the registered accounts.

The RRSPs may be converted into RIFs (Registered investment Fund) and may provide regular cash flow to the widow/er. TFSAs can also be gradually liquidated, which provides retirement cash flow, on a monthly basis.

Pro-tip#6: Consolidate all registered accounts and prepare a withdrawal plan.


7. Non Registered investment accounts (such as cash/open accounts).

Cash accounts are often owned in “Joint Tenancy”, which permits the assets to pass from the deceased’s ownership to the surviving spouse, tax free.

Alternatively, cash accounts may be owned in “Tenants in Common”, in which case, the deceased’s portion of the assets go to their heirs as determined by their will.

Pro-tip #7: Consolidate all investment accounts registered as “Tenants in Common” and prepare a withdrawal plan.’


8. Collect all eligible government pensions.

Depending on several conditions, widows/ers may be eligible to receive additional retirement benefits from the Canada Pension Plan Survivor Pension, see my blog called “CPP for widows/ers planning for retirement” for additional information.

Pro-tip #8: Apply for the CPP Survivor pension soon after the death of a spouse.


Final Thoughts

My eight pro-tips are just a few possible sources of retirement income. Hopefully, one or more sources will provide sufficient retirement income to maintain your lifestyle as a widow/er.

If you need assistance in calculating your entitlement to an employer/government benefit or assistance in organizing and investing assets in order to generate monthly income, please contact me for a complimentary appointment.

If you are newly widowed and you’re not sure how to plan for the future, please give us a call and I will personally introduce our office and our services. In fact, if you have any goal in mind — big or small — that requires some financial planning, but you’re struggling with where to start, reach out to our team. We have the expertise and life experiences to help guide you to achieving your goals.


This article was written by Richard Dri, Senior Wealth Advisor with Scotia Wealth Management. He can be reached through his website RichardDri.ca and his email address is Richard.Dri@scotiawealth.com.