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?
(In case you’re wondering this email was likely triggered by this post – how we intend to generate retirement income.)
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?
“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.”
First, I’m less inclined to feel sorry for someone who waits till his 70’s to worry about his retirement. He’s had a lifetime to think about it and certainly by the time he was 50 or 60 at the latest he should have began to worry that his retirement income might not meet his needs,
Secondly, how much income does he need? Why can’t he meet his expenses with his potential pension income? CPP is probably $800 monthly, OAS another $700, possibly close to $16,000 or $18,000 per year. If he has a company pension can he expect another $1,000 per month? or another $12,000 per year for a possible total income of $30,000?
Thirdly, as you’ve mentioned, there are ways to reduce ones expenses and make the effort to live within ones means.
Forth, if he has some savings, what type of income is it producing. Yes, get it into a TFSA and if its only GIC’s than he should decide if he wants more than just 1% on his money, or does he plan to draw it down to cover expenses. Even at this age, investing in a good DG stock will provide 4% and grow in the future, all be it slowly.
Fifth. If he owns a house, sell it. Take any equity from the sale and invest it. Move into a Low Income government home and start looking at life realistically.
The rest of Marks points are great suggestions.
Thanks for the detailed comment. It’s hard to say what this reader/email individual will or won’t do. Sometimes life simply throws you a very bad deal. Sometimes you make your own bed. Without details I cannot speculate…
I will say when you think about it, you really don’t need much “stuff” to live from. For most seniors, living and working in Canada for the last 40 years, you will likely earn about $15,000 in government pensions after tax. Not very much. Add in GIS for low-income, as you have more. Add in any savings, and you have a bit more still.
I suspect individuals or any senior for that matter would find that <$25k coming in per year would find it very tough - especially if they don't own their home ; have a mortgage or have a car payment. I believe it's simply not smart to have lots of debt (major mortgages, major car payments) as a senior but again, sometimes life forces your hand.
Good question and an excellent response Mark.
I know of of situations like Helen described and I suspect taking time to research everything available could improve the writers situation and might even allow them to retire now. There are many programs for low income and aging people available at all levels of government.
I do believe the reader has some options but they might not like those. There are a number of programs for aging and low income seniors. I believe this is not an uncommon narrative.
This is an excellent question. I know of some older low-income people who suffer from ignorance. I mean ignorance regarding investment options, ignorance about income tax optimization, ignorance about various assistance programs. (Example: In Toronto, low income seniors can apply for a hydro electricity rebate. Hydro has publicized that very few eligible people have taken them up on this offer.) Ignorance about getting better deals and shopping around for better prices. Sad situation.
I don’t know many low-income seniors personally but I know this group exists, I hear about it and read about it all the time. Ignorance is costly when it comes to financial management – indeed Helen. Thanks for reading.
I am going to be a lower income retiree when I finally retire but I continually educate myself on investing and reducing my expenses. I hope that, if I work part time, it will because I choose to for the social interaction and mental stimulation and not because I am forced to.
It would be very sad to be a low income senior who couldn’t afford new dentures or whatever else they needed.
Great work to continually educate yourself. I think I will always work, just depends on what.
I agree re: dentures. Teeth are important!
Thanks for reading Beth.
All the suggestions you gave this person are excellent, and may I suggest a few more. If you are living in a larger or medium size city, you might want to move to a smaller town where most expenses would be cheaper. Find a place where you don’t need a car, and can walk or take public transit to work, shopping, etc. On a slightly more aggressive note, do what many are doing, and move to Mexico or Central America where your cost of living is a fraction of what you pay, and you still have access to your government checks deposited. I have a very dear friend who moved to Nicaragua several years ago, and loves it there, and having visited him twice, can agree that it is a great lifestyle, where there are no heating bills, property taxes, food is cheap, rent is low & always warm. Something to consider.
To be able to move to Mexico, you must have a verifiable source of income, that is fairly substantial. You can go on a 180 day tourist visa, though, and cross the border (either USA or Guatemala) to re set the clock.
Good to hear from you Brian. Having a car payment or any nice car is a drain on cash flow for sure. I continually get mocked for driving my old car to work. I have a good job and I use the money I don’t pay in cars for other things in my life. Meanwhile, I see other folks driving fancy new Audis in my team. Interesting…. Then again, maybe I’m doing it all wrong 🙂
Moving to a lower cost country is certainly an option. There are simply up front capital costs/relocation costs to do so. We’re not ruling out living in another country – eventually – we’ll see!
another question i would pose ” is this a lady or gentleman”? a lot of widowed ladies are in a similar situation — little or no savings, never worked until late in life and therefore a very small cpp. my heart goes out these folks; it’s a terrible, scary situation to be in. the bulk of our charitable donations goes to the senior wish foundation; a wonderful organization. i wish this person nothing but my sincere prayers for their future.
I recall male but they didn’t disclose. I don’t know their full story so I don’t want to speculate on decisions, decisions made for them, etc. It was sad reading that email and like you I only hope for their future.
Yeah that my thinking also, someone in their 70s would have a SAHM before that term became a term. My Mum predeceased my Dad but would have been in the same situation, never worked never handled the budget.. Mark have you thought of adding Disqus to your site, don’t know if it costs anything but it would easier to follow conversations in the comments section
Thanks for the suggestion Rob. re: Disqus. I know I tried in the past but had challenges. Some people never learn how to budget, it’s really amazing when you think about it but then again, if you’re never taught it can be challenging to learn on your own – credit is just SO easy for folks to come by.
Regarding commenting I suspect that’s the reason most bloggers don’t add it. I do subscribe to comments while not perfect, does allow me to follow comments
Fair point Rob. Happy to have you follow comments on this site.
Edit: you’re on wordpress which means I can follow comments there.