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HOOPP
Members Life Changes Planning for Retirement Choosing a Spousal Option Choosing a Spousal Option: Example

Choosing a spousal option: example

Meet Cora

HOOPP member Cora

Cora is a 60-year old Nurse from St. Catharines, ON. She’s decided it’s time to retire and is eager to start this new chapter in her life. As she is about to start her HOOPP pension, she wonders which spousal benefit option will make sense for her and her spouse. She knows her HOOPP pension will be a significant part of their total household income in retirement and is an important part of the “big picture” for her to consider. Cora also has other considerations to keep in mind:

  • Cora’s spouse, Ron, is 62 years old and already retired.
  • Cora and Ron are both in good health and live comfortably but modestly. They are fortunate enough to own their house and have no mortgage. Their children are grown and already live on their own independently.
  • Ron does not have a workplace pension but has been prudent about saving for retirement. He has started to withdraw money from his personal savings in a registered retirement income fund (RRIF).
  • Both Cora and Ron plan to start receiving their Canada Pension Plan (CPP) and Old Age Security (OAS) at age 65.

Cora also wonders about Ron’s future financial well-being if she were to pass away first. What would that look like?

Cora has three spousal benefit options to choose from at the time of her retirement: 66 2/3% of her monthly pension, or she can increase this benefit to 80% or 100%. The benefit option she chooses will represent the percentage of her monthly pension that will be paid to Ron as a spousal pension if Cora passes away in retirement. Selecting an increased spousal benefit option will result in Cora's pension being slightly lower, but will provide Ron with additional financial security in the event she passes away first. With all these things in mind, Cora considered which of the spousal benefit options below would be right for her personal circumstances:

Spousal benefit optionCora's annual pensionRon's annual survivor pension
66 2/3%$30,000$20,000
80%$29,600$23,700
100%$28,700$28,700

If Cora chooses the 66 2/3% option

  • Choosing the 66 2/3% spousal benefit option will provide Cora and Ron with a total household income of $76,800/year ($48,400 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
  • This option will give them the largest amount of annual household income in retirement of the three options.

After Cora passes away:

  • Although Cora’s CPP and OAS pensions will stop, Ron will receive a CPP survivor’s pension in addition to his own CPP and OAS pensions.
  • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
  • With all these sources of income, Ron’s total household income will be $51,900/year, before taxes, after Cora passes away.
  • This option will provide Ron with 68%, before taxes, of their previous total household income.

Choosing a spousal option example - 66 2/3%

If Cora chooses the 80% option

  • Choosing the 80% spousal benefit option will provide Cora and Ron with a total household income of $76,400/year ($48,000 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
  • To provide Ron with a larger spousal pension, Cora’s lifetime pension and their total household income would be reduced by $400/year, compared to the 66 2/3% spousal option.

After Cora passes away:

  • After Cora passes away, her CPP and OAS pensions will stop, but Ron will continue to receive his CPP (plus the CPP survivor’s pension) and his OAS pensions.
  • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
  • After Cora passes away, Ron’s total household income will be $55,600/year, before taxes. This is an increase of $3,700/year compared to the 66 2/3% option.
  • This option will provide Ron with 73%, before taxes, of their previous total household income.

Choosing a spousal option - 80% example

If Cora chooses the 100% option

  • Choosing the 100% spousal benefit option will provide Cora and Ron with a total household income of $75,500/year ($47,100 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
  • To provide Ron with a larger spousal pension, Cora’s lifetime pension and their total household income would be reduced by $1,300/year, compared to the 66 2/3% spousal option.

After Cora passes away:

  • After Cora passes away, her CPP and OAS pensions will stop, but Ron will continue to receive his CPP (plus the CPP survivor’s pension) and his OAS pensions.
  • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
  • After Cora passes away, Ron’s total household income will be $60,600/year, before taxes. This is an increase of $8,700/year compared to the 66 2/3% option.
  • This option will provide Ron with 80%, before taxes, of their previous total household income and with the most financial support as he will continue to receive the same HOOPP pension she was receiving.

 

Choosing a spousal option - 100% example

Cora's decision

Thinking about their total household income was helpful for Cora to understand the "big picture" when it came to their life in retirement. Here are the factors Cora considered before making her final decision:

  • After considering age, family history and health, Cora recognized that she was relatively healthy. She also knew that, on average, women tend to live longer than men. 
  • Cora and Ron try to live within their means. Although Ron does not have a workplace pension, he has been diligent about saving for retirement. Cora recognized that the 66 2/3% option would provide an overall income replacement of 68%, which would be enough to for him to live on.
  • Plus, most of Ron's income will be secure and predictable, and may be eligible for cost of living adjustments (i.e., HOOPP pension, CPP, OAS). HOOPP's inflation protection can help his pension keep up with the rising cost of living and maintain its buying power in retirement.
  • Cora and Ron are fortunate enough to have no mortgage or other large debt that Ron would have to take care of if Cora passed away first. Based on these factors, they discussed that they would rather have a higher household income to enjoy together in retirement.

Cora decided that choosing the 66 2/3% spousal option was right for her. She knew this option would allow them to live comfortably in retirement and that Ron would be taken care of after she passes away.

Choosing a spousal option example

  • 66 2/3% option

    If Cora chooses the 66 2/3% option

    • Choosing the 66 2/3% spousal benefit option will provide Cora and Ron with a total household income of $76,800/year ($48,400 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
    • This option will give them the largest amount of annual household income in retirement of the three options.

    After Cora passes away:

    • Although Cora’s CPP and OAS pensions will stop, Ron will receive a CPP survivor’s pension in addition to his own CPP and OAS pensions.
    • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
    • With all these sources of income, Ron’s total household income will be $51,900/year, before taxes, after Cora passes away.
    • This option will provide Ron with 68%, before taxes, of their previous total household income.

    Choosing a spousal option example - 66 2/3%
  • 80% option

    If Cora chooses the 80% option

    • Choosing the 80% spousal benefit option will provide Cora and Ron with a total household income of $76,400/year ($48,000 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
    • To provide Ron with a larger spousal pension, Cora’s lifetime pension and their total household income would be reduced by $400/year, compared to the 66 2/3% spousal option.

    After Cora passes away:

    • After Cora passes away, her CPP and OAS pensions will stop, but Ron will continue to receive his CPP (plus the CPP survivor’s pension) and his OAS pensions.
    • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
    • After Cora passes away, Ron’s total household income will be $55,600/year, before taxes. This is an increase of $3,700/year compared to the 66 2/3% option.
    • This option will provide Ron with 73%, before taxes, of their previous total household income.

    Choosing a spousal option - 80% example
  • 100% option

    If Cora chooses the 100% option

    • Choosing the 100% spousal benefit option will provide Cora and Ron with a total household income of $75,500/year ($47,100 from Cora and $28,400 from Ron) at age 65, when Cora’s CPP starts.
    • To provide Ron with a larger spousal pension, Cora’s lifetime pension and their total household income would be reduced by $1,300/year, compared to the 66 2/3% spousal option.

    After Cora passes away:

    • After Cora passes away, her CPP and OAS pensions will stop, but Ron will continue to receive his CPP (plus the CPP survivor’s pension) and his OAS pensions.
    • Ron will also continue to rely on the $10,000 annual income ($833 monthly) he receives from his RRIF.
    • After Cora passes away, Ron’s total household income will be $60,600/year, before taxes. This is an increase of $8,700/year compared to the 66 2/3% option.
    • This option will provide Ron with 80%, before taxes, of their previous total household income and with the most financial support as he will continue to receive the same HOOPP pension she was receiving.

     

    Choosing a spousal option - 100% example

  • Cora's decision

    Cora's decision

    Thinking about their total household income was helpful for Cora to understand the "big picture" when it came to their life in retirement. Here are the factors Cora considered before making her final decision:

    • After considering age, family history and health, Cora recognized that she was relatively healthy. She also knew that, on average, women tend to live longer than men. 
    • Cora and Ron try to live within their means. Although Ron does not have a workplace pension, he has been diligent about saving for retirement. Cora recognized that the 66 2/3% option would provide an overall income replacement of 68%, which would be enough to for him to live on.
    • Plus, most of Ron's income will be secure and predictable, and may be eligible for cost of living adjustments (i.e., HOOPP pension, CPP, OAS). HOOPP's inflation protection can help his pension keep up with the rising cost of living and maintain its buying power in retirement.
    • Cora and Ron are fortunate enough to have no mortgage or other large debt that Ron would have to take care of if Cora passed away first. Based on these factors, they discussed that they would rather have a higher household income to enjoy together in retirement.

    Cora decided that choosing the 66 2/3% spousal option was right for her. She knew this option would allow them to live comfortably in retirement and that Ron would be taken care of after she passes away.

    Choosing a spousal option example

Note: Income replacement ratios compare your spouse’s household income levels before and after your passing. For example, a 65% income replacement ratio indicates that Ron’s household income after Cora passes away could be about 65% of what it was before Cora’s passing.

Cora was developed as an example by HOOPP for illustrative purposes only. This example assumes that Cora retires at age 60 and starts her CPP and OAS at age 65. It also assumes that she passes away before age 75 (the age when OAS increases). All amounts are before taxes and do not include any future cost of living adjustments (COLA) on her HOOPP pension, or any increases to CPP or OAS benefits. Cora and Ron start receiving their CPP and OAS at age 65. They both receive the average amount of CPP and the maximum OAS benefits payable on January 1, 2024. After Cora passes away, Ron continues to receive his CPP pension, plus the CPP survivor’s pension. The CPP survivor benefit calculation is complex and may be impacted by the amount of retirement pension that you or your spouse receive. In this example, the survivor pension is assumed to be 36% of the average amount of CPP pension payable to someone retiring on January 1, at age 65 and this combined amount is below the maximum CPP that applies in this situation. Life insurance or other assets were not included in the example.

This document provides a simplified overview of HOOPP's benefits based on the terms of the HOOPP Plan Text at the time of publication. From time to time, HOOPP may amend the HOOPP Plan Text. In cases where the information provided in this document differs from that contained in the HOOPP Plan Text, the HOOPP Plan Text will govern. More details, including the full HOOPP Plan Text and a complete description of the Plan and its benefits, can be found on hoopp.com.