Jan 8, 2026
Financial planning for retirement is tricky. In spite of guidelines, average savings amounts and rules for how much you can draw down your investments each year, there’s no way to predict how long you’ll be retired for.
Derek Jones, chartered financial analyst at Scratch Capital, notes, “There are virtually endless scenarios based on different dates of death that will each pose their own unique considerations and levels of complexity. The more prudent move is always to plan for the worst-case scenario” (1).
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On that note, consider Don, a 66-year-old recent retiree who wants to plan for his worst-case scenario. He’s worried that his health indicates he may pass away before his wife does. He and his wife, Rhonda, are well set up financially for retirement right now, but if he dies sooner than she does, she will lose access to one of Don’s pension benefits and her annual income will take a major hit.
Here’s what couples planning for retirement need to know about the options their spouses have if one of them passes away long before the other, and how to protect their retirement plans.
Retirement income after the death of a spouse
Don and Rhonda have set themselves up for a healthy retirement. Here’s what they’re starting with:
- $150,000 income each year, coming from a mix of Social Security, Don’s pension, and their additional savings in 401(k)s and IRAs.
- Don currently collects $3,500 a month from Social Security
- Don has a tax-free disability pension that brings in $60,000 per year.
- Don has also taken out a $500,000 whole life insurance policy which covers both spouses
- Rhonda is projected to get $4,000 a month from Social Security when she retires at age 70.
If Don passes away, Rhonda will be entitled to collect his Social Security benefit before she opts to collect her own at age 70, but she will lose the $60,000 pension. After this time, since her benefit is larger than his, she would only collect her own $4,000 per month, and would lose Don’s $3,500 (2). This would give her $48,000 per year, some of which will be taxable.
Additionally, Rhonda will be able to tap the couple’s 401(k) and IRA accounts to make up for the loss of Don’s pension. For example, if the couple has $1.5 million in their retirement savings, Rhonda can safely draw down 4%, or $60,000 per year, for 25 years before depleting the accounts.
Don’s whole life insurance policy covers both spouses, so Rhonda can draw on it if Don predeceases her, leaving their retirement accounts intact for just over 8 years if she spends $60,000 per year. This period can also help grow their funds and make their investments last longer, in the case that Rhonda is expected to live into her 90s.
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With all of these safety nets in place, Rhonda should be able to comfortably replace the lost income from Don’s pension. However, not all couples are so well-set-up for their later years. This is why good planning with a financial advisor and talking through all the scenarios is so critical.
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What you need to know about end-of-life planning
While discussing your own death or the death of your spouse may feel morbid, it’s important to plan for several common scenarios. Financially, the surviving spouse may take a big hit in income, as their Social Security payout will usually drop to a single benefit, and they will also start paying taxes as a single person. Especially if you were a high-income couple, the surviving spouse may end up with a larger tax bill (3).
It’s important to keep your will up-to-date, and also update beneficiary designations on any life insurance policies and retirement or investment accounts. This is especially critical in the event of remarriage or if you have children.
Working with your financial advisor can help facilitate these open conversations with your spouse. They may also advise you to consult with a CPA and/or tax attorney if you have a number of investments or are in a higher tax bracket and may have difficulties with tax bills following the death of a spouse. These professionals can also help you to prepare legacy planning, consider charitable donation strategies and create good recording keeping for the surviving spouse.
Finally, these conversations should also include a discussion of each person’s final wishes, including funeral arrangements, burial plot decisions and whether you are eligible to become organ donors. Remember that many bereaved individuals experience “widow’s fog” while they’re grieving (4). It’s kinder to plan ahead and make as many decisions in advance so that your spouse doesn’t have to make big decisions at a time when they’re least able to think clearly.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Marketwatch (1); Social Security Administration (2); Cunningham Legal (3); The Death Deck (4)
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
