Challenges of Retirement for Single Canadians

For many single Canadians, reaching retirement age can be particularly challenging, especially without a partner to provide additional financial support. Author Renee Silvestre Williams points out that, without a partner, “there’s no financial backstop.” This can lead to a smoother retirement process for couples, while those planning to retire alone must navigate risks without that additional cushion.

Take, for instance, how couples can manage their pension income. Williams notes in her book that they can share qualified pension income, like RRIF withdrawals after turning 65, which can actually lessen their overall tax burden. Additionally, they can combine certain tax deductions for things like charitable donations and medical expenses.

It’s also worth mentioning that a higher-earning partner can help the lower-earning partner bolster their retirement savings through vehicles like a spousal RRSP while they’re still working. Furthermore, many pension plans offer survivor benefits, ensuring ongoing payments to the spouse after one partner passes away.

Williams highlights caregiving support as another factor. While there’s no assumption that care will be provided, the healthy partner in a couple often steps up, and this tends to be unpaid labor, which is an important consideration.

These factors may explain why some single Canadians perceive retirement as out of reach, even if they have diligently saved and worked hard. Experts suggest that those looking for a secure retirement need to craft a strategy that’s different from what married couples use.

Jackie Porter, a financial advisor at iA Private Wealth, notes that single Canadians usually have fewer family-related tax deductions. Consequently, RRSP contributions often become a crucial way to manage taxes as marginal rates increase, effectively lowering annual taxable income.

With that in mind, she recommends prioritizing RRSP contributions if your income exceeds $60,000, as you could potentially use the resulting tax refund to contribute to a TFSA later.

On the flip side, if you’re in a group RRSP plan offered by your employer, that should take precedence over your personal RRSP due to the matching contributions available. “It’s just free money,” Porter emphasizes, suggesting it would be unwise not to take advantage of that.

However, it’s essential for single Canadians to consider the trade-offs associated with RRSPs when planning for retirement. Unlike married couples, single people can’t transfer RRSP assets to a surviving spouse without facing a tax bill. This means that if someone passes away with funds still in the RRSP, the remaining balance will be taxed as income in the final year, which could lead to significant tax obligations.

Porter describes it as a balancing act: “It’s about taking what you need for your lifestyle without draining your investments. Live too long, and you might outlive your resources.” Timing Canada’s pension plan becomes crucial for single individuals. Porter generally advises delaying CPP enrollment for as long as possible, unless health issues necessitate an earlier withdrawal. She points out that CPP and retirement security aren’t solely based on an individual’s life expectancy, especially for women. Delaying CPP, if feasible, can enhance lifetime income.

The reality is that many Canadians aren’t adequately prepared for retirement, according to Porter. However, a growing number of individuals are reevaluating what retirement means for them. For some, this might involve taking on side jobs to increase their earnings.

Still, the aim should be to have sufficient savings to retire around age 65 or 70, allowing for health issues that may hinder the ability to work part-time in the future.