All things considered, the more money you make, the more money you can likely save for retirement.
Some people can save but don’t. Some people want to save but can’t for a variety of reasons.
If you’re earning a low income you really don’t have the luxury of spending frivolously – you really can’t spend what you don’t have.
I recently got an email in my inbox something like the following:
None of what you wrote applies to me. I am in my early 70s. I’m still working to make ends meet. If I retire now, with my government pension and my pension I would still be short of my needs. I’ve managed to save a bit but that’s about it. I can go on working but don’t want to. What advice do you have for me?
Thanks for your email and here is my reply to you.
First of all, I can’t speak to your past decisions, money wise or otherwise. I will say if you’re in your 70s, and still working or able to work, you seem to have your health. This is a very good thing.
Second, making ends meet – I would need more details and context. Are you struggling to pay rent or your mortgage still? Do you own a car? What is your monthly budget? Do you know what your monthly expenses are? How many debts do you have and how long have you had this debt? Any credit card debt? I would need more insight into what making ends might mean. I’m not suggesting this is the case but if you still have major debts like a sizeable mortgage or multiple years of car payments remaining on a low income in your 70s this is not ideal.
Third, now that you’re into your 70s, have you considered how to convert any savings you have into income-producing assets? Consider even $50,000 saved up, placed inside a Tax Free Saving Account (TFSA), that money would likely churn out at least $200 per month in tax free income for as long as you continue to live. Are you taking full advantage of our Canada Pension Plan and Old Age Security benefits? Have you looked into the Guaranteed Income Supplement program? What about an annuity? An annuity is an insurance product where you pay upfront in exchange for guaranteed payouts until you pass away. Annuities can be a viable solution for older seniors in good health and those that need an income stream in retirement.
I can appreciate you don’t want to work any longer than you have to. You seem legitimately concerned about your income to meet expenses. However, without understanding in detail how to you got to this situation, quite a bit more about your current expenses, and what short-term objectives you have other than not working I can only suggest you keep working just for a bit longer. As you work, I suggest you take a honest look at where your money goes and what value you get in return for money spent. I wish you well.
What advice would you have for an aspiring saver on a low income? What advice would you have for a low-income senior?