Cameron Zabko, CFP®
When you’ve spent a lifetime working—or relied on a spouse’s income—it can feel overwhelming figuring out which investments create a monthly paycheck replacement once that steady deposit goes away. In widowhood, this concern often arrives at the most emotionally challenging time possible. Instead of facing both grief and the fear of running out of money, it helps to focus on recreating a reliable, predictable stream of income to cover your everyday needs. At Westhollow Wealth Management® we believe that the emotional weight of losing a spouse shouldn’t be compounded by the confusion of how to financially sustain your future. In this guide, we’ll walk through how you can transform your existing assets into a clear “retirement paycheck” that continues to support your lifestyle.
The first step toward building any kind of predictable retirement income is to know how much money needs to show up in your bank account each month. When you were working, or when your spouse was still here, you might have simply matched expenses to paychecks without giving it a second thought. In widowhood, the budget can shift dramatically. Housing costs may not change much, but your tax filing status might, and that can have a surprisingly big impact on your monthly needs.
At Westhollow Wealth Management®, we take the time to help widows break down their expenses into two categories. Essential expenses include costs like mortgage or rent, utilities, groceries, insurance, and healthcare. Lifestyle expenses—such as pickleball memberships, family trips, and church activities—are also important, but they can be adjusted more flexibly if needed. Many retirement planners suggest aiming to replace roughly 70–80% of pre-retirement income at first. For widows, that guideline is simply a starting point: income requirements can recalibrate as you settle into your new financial reality.
If your monthly number is the target, the next step is figuring out which sources of income are least likely to fluctuate. Guaranteed or near-guaranteed income often comes from Social Security, pensions, or certain annuities. Many widows already have a survivor pension option, which can replace some fraction of their spouse’s pension, but not everyone is aware of how to optimize these benefits.
It’s also important to review claiming Social Security survivor benefits. Sometimes beginning survivors’ benefits early provides short-term relief, although waiting until full retirement age or even age 70 often means a higher monthly amount down the road. If you do decide to incorporate an annuity, treat it simply as one part of your foundation—an added layer of predictable cash flow. We frequently hear from people concerned about a market downturn derailing their retirement. While annuities can help smooth out returns, we consider them only one tool among many, not a one size fits all fix. Our goal is always to align your essential expenses with stable income streams, so you’re not forced to make tough decisions if the stock market dips.
You also might wonder, “Is it possible to earn enough income using CDs and treasuries?” While today’s interest rate environment can offer more attractive returns on short-term certificates of deposit or government bonds than we’ve seen in years past, they may not be able to outpace inflation. CDs, Treasuries, and bonds won’t skyrocket in value like a risky investment might, but they can provide steady interest to help cover your essential bills. That's why it is important to have a custom income plan that matches your needs.
After establishing stable footing, the next step is turning the rest of your assets into a workable “paycheck.” One straightforward approach is segmenting your money by time horizon, frequently called the “bucket strategy.” You might keep enough cash or cash-like assets in the first bucket to cover one to two years' worth of expenses so you’re never stuck selling stocks or funds when the market is down. (For additional ideas on guarding against market downturns, see how to prevent outliving your savings during market crashes.) A second bucket can hold bonds or income funds designed to throw off relatively predictable interest, while a third bucket includes longer-term growth investments.
Within the income bucket, you can explore using dividend ETFs or a bond ladder for predictable retirement cash flow. Both can be powerful. Dividend-paying ETFs might provide quarterly payouts, though you may need to fix uneven cash flow from quarterly dividend stocks if they don’t match your monthly spending needs. A bond ladder, on the other hand, staggers bond maturities so that one matures on a set schedule, replenishing your cash just when you need it. Ultimately, the right approach depends on your time horizon, comfort with fluctuations, and how consistently you need income to arrive.
If you already hold stocks that pay dividends quarterly, it’s totally feasible to set up a separate cash reserve to smooth out those intervals. In practice, an automatic monthly withdrawal from your taxable brokerage account or IRA can deposit earnings directly into your checking account. This can provide the same sense of security you once had on payday. For a deeper dive into converting existing assets into reliable income, read our guide on how to replace a paycheck using your late husband’s investments.
The concept of a withdrawal strategy goes beyond just picking which funds to invest in. It’s about deciding the pace and timing of withdrawals—ideally at a monthly cadence. One well-known guideline is the four percent rule, which suggests withdrawing about four percent of your portfolio in the first year of retirement and adjusting for inflation afterward. However, this approach was never meant to be a monthly distribution plan; it’s simply an estimate of how much you could spend annually without exhausting your savings too quickly.
Balancing risk and tax management is especially important once you rely on investments for your paycheck. The first big consideration: how you diversify. Equities may offer growth over the long run, but they also come with volatility. Bonds, CDs, and Treasuries help stabilize the swings, particularly when covering essential expenses.
Taxes are another key piece of the puzzle. Once you file as a single individual, your tax brackets compress. Suddenly, taking large withdrawals from tax-deferred accounts may push you into a higher bracket than you expect. It can pay to be strategic about which accounts you tap first. Sometimes taking distributions from a taxable brokerage account or Roth IRA early in retirement helps manage your yearly tax bill, leaving tax-deferred accounts to grow longer. Other times, partial Roth conversions in lower income years can reduce your eventual Required Minimum Distributions (RMDs). This proactive approach helps ensure you don’t face unwelcome tax surprises—an added layer of security when you’re already managing so many other priorities in widowhood.
Consider a scenario where a widow—let’s call her Susan—is 67 and needs about $5,000 to meet her monthly expenses. Her Social Security survivor benefit provides $2,200, and a small pension adds another $600 per month, leaving a $2,200 gap to be filled by her investments. Susan has a $450,000 IRA, a $150,000 Roth IRA, a $200,000 taxable brokerage account, and $50,000 in cash.
To create a monthly paycheck, Susan decides to build a layered approach. Part of her IRA is used to create a bond ladder, where each bond matures in a specific year, ensuring ongoing interest plus a predictable return of principal. She balances that with conservative stock and dividend-paying funds in her other accounts. Together, these are structured to produce enough monthly distributions so that each month, $2,200 automatically appears in her checking account—covering her remaining expenses.
Understandably, Susan is worried about outliving her savings, especially in her early days of widowhood. That's where the growth bucket comes in. Since her income need is satisfied, the rest of her assets can be used to purchase riskier stocks that will have bigger market swings, but also hopefully higher returns. If she wants to adjust for bigger travel plans one year or reduce her withdrawals to let the portfolio grow, she can—without feeling trapped by a rigid schedule. Over time, she and her advisor at Westhollow Wealth Management® revisit her spending, verify that the plan is on track, and ensure she isn’t underestimating her healthcare expenses or other life changes.
Going from “I’ve lost my paychecks, now what?” to “My monthly retirement paycheck arrives like clockwork” is a process rooted in structure and purposeful planning. That’s precisely why we focus on demystifying these concepts—turning what feels overwhelming into something straightforward. We’ve seen firsthand how a coherent, personalized plan can replace fear with calm assurance, even when life has thrown its worst curveballs.
You don’t have to shoulder this financial transition alone. At Westhollow Wealth Management®, we specialize in helping widows navigate everything from probate complexities to monthly budgeting and investment management. If you’d like to discuss how to build a monthly paycheck that fits your unique needs, we’d be honored to help you explore your options. Schedule an intro call if you’d like to walk through your next steps with clarity and confidence—or learn more about what we do for widows in transition.
Should I focus on dividend ETFs or create a bond ladder for predictable cash flow?
Both can be valuable, but they serve different purposes. Dividend ETFs typically pay out quarterly and can fluctuate if the companies change their dividends. A bond ladder staggers bond maturities—providing predictable payments and principal returns at different times. Many retirees and widows prefer a blend of these strategies, pairing the stability of a bond ladder with the potential for moderate growth from equity dividends.
Is it realistic to get a stable 5% yield from CDs or Treasuries?
In certain interest rate environments, short-term Treasuries or long-term CDs can indeed yield around 4–5%. However, these rates are not guaranteed to remain constant over a full retirement. Economic shifts may cause interest rates to fluctuate, so it’s wise to schedule periodic portfolio reviews to see if you can lock in higher yields down the road or diversify into other stable-income investments.
How often should I adjust my “monthly paycheck” from investments?
For most widows, an annual or semiannual review is sufficient. During that review, you can discuss whether to increase or decrease your monthly withdrawal based on your portfolio’s performance, changes in expenses, or tax considerations. This keeps you on a steady path without locking you into an inflexible strategy that might not reflect your current reality.
What if my cash flow is uneven with quarterly dividend-paying funds?
You can set up a cash reserve at your brokerage or bank, then draw a consistent monthly amount from that reserve. The quarterly dividends replenish that reserve. It takes a bit of work initially, but once set up correctly, the uneven distribution schedule from certain ETFs or stocks won’t disrupt your month-to-month budget.
Who can benefit most from this kind of planning?
Anyone worried about outliving their savings can benefit from a steady retirement paycheck strategy, but it’s particularly helpful for widows who are adjusting to a new financial reality. By mapping out exactly where your monthly income will come from—and how to make it last—you can avoid many of the sleepless nights that come with uncertainty.
