Retiring On A Low Income Is A Challenge In Canada

For many Canadians, retirement income planning is a bit like completing a jigsaw puzzle: the challenge is to fit all of the pieces together.

But for those approaching retirement with fewer resources, the puzzle can be more difficult to complete. That’s because conventional retirement advice may fail to address the needs and circumstances of those retiring on lower incomes – particularly how income-tested benefits for low-income retirees, principally the Guaranteed Income Supplement (GIS), mesh with other sources of income.

For Toronto-based book author and freelance writer Sarah Hood, who hopes to retire in about 10 years, the need to plan carefully for income in retirement has grown in importance over the past few years.

“When I was a teenager, there was no information about retirement being disseminated in the way it is now,” she says. “I didn’t see bus-shelter ads or TV commercials about the need to save or how different savings plans worked. But in the last 10 or 15 years, I’ve started to really think hard about retirement, and now I think about it quite often.”

Ms. Hood, who says she has always had “modest” earnings, expects her income in retirement to come from multiple sources, including a mix of savings in an RRSP, a small workplace pension, the Canada Pension Plan (CPP), Old Age Security (OAS) and GIS, and “perhaps some inheritance” although she says that other members of her family “need it more than I do.”

Unknowns complicate planning

Like many Canadians approaching retirement, Ms. Hood says she faces a number of unknowns, which make planning more complicated. These range from when she expects to stop working, when she might opt to start her CPP and OAS benefits, and deciding whether she should allocate time over the next few years to work – to build up more savings – or to travel while her health is good.