The financial strain on single people in retirement is substantially higher than if they are married, a new report from the BMO Retirement Institute says. Since many clients, particularly women, will likely spend a portion of their retirement without their spouse, advisors need to create a contingency plan.

Already, nearly one-half of Canadians over the age of 65 are single. As boomers retire, that number is expected to increase, says Tina Di Vito, author of the study and director of retirement strategies for BMO Financial Group.

"We realized 43% of Canadians over the age of 65 are single. That number is on the rise," she says. "One of things making that number go higher is so many grey divorces. Individuals in their 60s and 70s are filing for divorce."

Di Vito says this is creating a difficult dynamic for advisors, because the financial strain of retirement is magnified when a person is single. A survey conducted by Leger for BMO, of 1,325 Canadians aged 40 and older, found that 70% of those who had suddenly become single were feeling greater financial strain. More than half (54%) of married respondents felt they would be negatively impacted financially if they found themselves single again.

It makes sense — a married couple has pooled assets to cover these fixed expenses. If someone loses a spouse or partner, Di Vito points out there is only an incremental decrease in their expenditures — in some cases, they may have greater expenses depending on the roles of the individuals in the couple.

"If you have a couple with comparable incomes during their working years, [they will receive] double the CPP and double the OAS. A person who has never been in a couple situation will basically only have one set of OAS and CPP [payments]," she says. "Even in terms of caregiving, singles are probably going to require support from outside firms. A widow or widower has the same amount of bills, because expenses rarely go down, and they've got less income and they don't have the home support they did before. They have to go out there to hire caregiver support or maybe housecleaning services. "

Di Vito says BMO advisors are now trying to outline what a single person's retirement needs will be. She says most people entering retirement as a single tend to have given it less contemplation than married couples. Most married couples tend not to consider the fact that one of them will most likely be on his or her own at some point in retirement.

Talking about death is not easy, but it's imperative when it comes to the financial health of retirees. The survey found only 38% of respondents had a financial contingency plan in case they outlive their spouse.

"One of the things we do talk about is the implications should one of you die. In other words, what is the survivor going to be faced with financially?" Di Vito says. "We can model that through our financial planning software quite easily. Advisors have to consider the emotional aspects of this as well, but at the very least we can provide a financial snapshot should one of them die."

Statistically, women will make up the bulk of single retirees, which is problematic because 61% of women said if they became single it would have negative consequences on their financial situation, compared to only 48% of men who were worried about their finances should they outlive their spouse.

"Women currently in Canada are outliving their male counterparts by three to five years. That's what we have to address," Di Vito says. "For our clients in a couple situation, chances are their advisor will be dealing solely with the survivor and it will most likely be the woman. It's put significant implications on how we talk to our clients today."

For instance, Di Vito says many clients have let their life insurance coverage lapse as they approached retirement, not realizing the financial burden they may be imposing on their spouse.

"It's a good opportunity to talk about life insurance, which plays an important role for couples. They tend to discount the value of life insurance after their kids have grown up," she says. "They have to realize should one die, it provides a significant drain on the capital for their loved one to live with."

(01/16/09)

Originally published on Advisor.ca