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How to Navigate Retirement Challenges as a Couple

When it comes to retirement planning, several assumptions must be used. For example, at what age does retirement start and at what age does it end, where will people live, etc. The fact is that planning retirement for a single person is much easier than for a couple. Focus is on one set of pensions, one set of health issues and one set of housing assumptions. Unfortunately, when we look at many retirement plans, the assumptions don’t deal well with real life situations and the challenges people face. When you are single and you have a defined benefit pension plan, CPP and OAS, the income is likely sufficient for you to live comfortably until death. If your house is fully paid for, it can provide you with significant capital should you need to sell it and move to assisted living. So, whether you age at home or in a facility you are very likely covered financially for your lifetime regardless of the length of your retirement.

By comparison, when you are married, have a defined benefit pension plan, CPP and OAS and your spouse has limited CPP and OAS, you can split the retirement income. If you both remain healthy, the total income should be sufficient for both of you and might allow you to live comfortably until death. If your house is fully paid for, it can provide you with significant capital if needed. 

Let’s look at a couple of different scenarios that married people can encounter.

  • A same aged married couple (let’s call them Tom and Martha) were living comfortably in their retirement. Tom had a defined benefit pension, CPP and OAS. Martha worked for a company that did not offer a pension. She had only her CPP and OAS. The house they bought 35 years ago is now fully paid for. A few years into retirement, Tom starts to develop Dementia. A few years later, he must be moved to a nursing home that can accommodate his health issues (not all do) and Martha continues to live at home. This represents a significant cost and before long, their savings have been exhausted. Martha is forced to sell the house and downsize to free up the capital required for the nursing home costs. Fast forward another five years and Martha’s health is deteriorating, all the stress has taken its toll, so she needs to sell the current home and move into assisted living. Unfortunately, due to different health challenges Tom and Martha are not able to live in the same facility. The cost of living in two separate facilities means that they will run out of assets to pay for these facilities in less than five years. This is a case where insurance and better planning might have helped.
  • A married couple (let’s call them Bob and Sue) were living comfortably in their retirement. Bob is six years older than Sue. Bob had a defined benefit pension with a 60% survivor’s pension for Sue as well as CPP and OAS. It was important to Bob that Sue was well taken care of when he passed. Sue had not worked for most of her adult life. As such, she had only a very small CPP pension and her OAS. The house they bought 45 years ago is now fully paid for and they were able to split their pension income for tax efficiency. Ten years into retirement, Sue suffers a significant heart attack and passes away. Tom’s planning was always based on him passing away before Sue as she was younger and in better health. In fact, Sue’s mother was still alive at the time of Sue’s sudden passing. No one could see this coming. So now after losing his wife, Bob must adjust to the following financial realities. Other than receiving the one-time $2,500 CPP survivor’s benefit, the CPP and OAS payments to Sue will stop. What Bob didn’t expect was that he would also lose his OAS. This is because he could no longer split his income with Sue. On his own, his income exceeds the threshold for OAS qualification. With virtually all the same expenses, this is making Bob look at areas where he will have to cut back or be forced to sell the only home he has ever lived in during his adult years. This is also a case where insurance, better planning and different thinking might have helped.

Your retirement can last thirty years or more and a lot should go into your retirement planning. Your situation is unique and so too should be your retirement plan. This is one area where working with a qualified retirement expert can make all the difference.

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