Aug 6, 2025
Major financial decisions aren’t easy, especially as you’re mourning the loss of your partner, especially with regards to a pension.
You will have to choose between taking a lump-sum payout now or claiming your husband’s pension monthly for the rest of your life.
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Additionally, you may also have the option to wait and receive a bigger survivor’s benefit in the future.
Before making a decision, it's important to consider the pros and cons of each option carefully, and make sure you are selecting the best choice for your own financial situation.
Pros and cons of taking a lump sum
For some, especially those with confidence about managing money or serious financial needs in the short-term, taking the lump-sum payout may be the better choice.
This option gives you complete control and flexibility with the money immediately. You can save it, spend it, gift it or invest it. This money could have a big impact on your life. You can use it to build a nest egg for your retirement, buy long-term investments, bolster your emergency fund, or pay down expensive debt. By taking a lump sum, there’s also a good chance of leaving something behind for your loved ones upon your death.
However, you should know that if you decide to take a lump-sum payment, a portion of it, as defined by the federal and provincial government, goes into a LIRA (locked-in retirement account), while the remainder would be available as cash. The potential for growing your wealth is still significant, however — if you put half, or $45,000, into an index fund or another relatively safe investment, and we assume it provides a 6% average annual return, you will have $110,434 in 15 years thanks to the magic of compound interest.
But you have to make careful choices and there’s always the risk of losing money depending on what you do with it. You will no longer have a guaranteed safety net for life. For instance, you may choose risky investments that fail to provide the returns you expected. You may also fall for a scam or be tempted to spend in ways that are financially irresponsible.
Moreover, you may worry about the future of the pension fund. While 71% of defined benefit pensions are in the public sector in Canada, the rest are in the private sector, which means that your husband’s company could go bankrupt.
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There will also be tax implications for you to consider. Speak to a financial advisor about the best path forward for you.
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Pros and cons of taking the monthly benefit
Rather than a lump sum, you can opt for monthly payments until you die.
A guaranteed monthly income can help you manage your expenses as life circumstances change. It will be a steady source of income you won’t have to think about. You may also have more wiggle room to save and invest more than you do now.
If you are worried about running out of the money before you die, taking a monthly payout helps you avoid unnecessary spending or mismanagement. And there’s good reason to be concerned. A 2022 MetLife study of retirees found that 1 in 3 who took a lump sum from a defined contribution plan depleted their lump sum, on average, in 5 years.
However, if you ever fall on hard times and need more money to cover an emergency, you usually can’t ask for a lump-sum payout after you’ve already started the monthly benefit. It’s more restrictive when unexpected life events come up.
If you opt for monthly payments, it would take you about 15 years to receive what you would get in a lump-sum payment today. Since there’s no guarantee of how long you will live, you could also earn less monthly benefits than you would if you had taken the lump sum.
The best option depends on individual circumstances, your spending habits and financial knowledge, how you want to map out your future, and where that money would best be utilized in the coming months and years. Make sure you get professional financial advice that will help you meet your goals.
Sources
1. MetLife: 2022 Paycheck or Pot of Gold Study (Feb 23, 2022)
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Dori Zinn is an award-winning personal finance journalist, focusing on credit and debt, budgeting, investing, fintech, and the intersection of money and mental health. Alongside MoneyWise, her work has been featured in the New York Times, Wall Street Journal, CNN, USA Today, Yahoo, and more. She loves helping people learn about money.
