Single, no pension? Here’s how to plan for retirement in Canada

Cost of living as a single person in Canada

One third of Canadians struggle to plan for retirement and 75% of people say their cost of living is negatively impacting their retirement savings, according to a Sun Life survey.

What does this mean for singles? You know it doesn’t cost twice as much to live with another person, because there are fixed costs to running a household that apply to singles and couples.

According to Statistics Canada’s Survey of Household Spending, a one-person household had total expenditures of $49,661 in 2021. By comparison, couples without children had total expenditures of $91,121. This implies cost savings of about 17% for the second person in the household.

Shelter costs were the largest expense for all households in 2021. Couples without children coughed up about 30% of their household spending on shelter. By comparison, singles spent 37%.

As a result, singles need to save more than couples on a per-person basis to provide the same standard of living and maintain it in their golden years.

Couples have more tax advantages than singles

Compared to one-person households, couples have more ability to minimize taxes. For example:

• The couple can focus on contributing to the higher-income spouse or common-law partner’s registered retirement savings plan (RRSP) to get a larger tax refund as a couple.
• The higher-income spouse can contribute to the lower-income partner’s retirement savings through a spousal RRSP. The higher income spouse gets the tax deduction today, and the lower income spouse withdraws the income in the future.
• The couple can combine or allocate tax credits like donations or medical expenses to result in a larger tax reduction.
• The couple can split the higher-income spouse or partner’s eligible pension income in retirement, including registered retirement income fund (RRIF) withdrawals after the age of 65.

There are more sophisticated strategies as well, but the point is this: couples can legally and strategically minimize tax more easily than a single taxpayer can.

Options for single retirees without a pension

Pension plan participation has been on the decline for all workers in all industries. Defined benefit plans are being replaced with defined contribution (DC) plans that put more risk on retirees. Single retirees who do not have pensions have options, though.

• Canada Pension Plan (CPP) deferral: CPP deferral is worth considering for any healthy senior in their 60s. If you live well into your 80s, you may collect more pension income than if you start CPP early, even after accounting for the time value of money and the ability to invest the earlier payments or draw down less of your investments. CPP deferral can protect against the risk of living too long, especially for a single retiree, and particularly for women, who tend to live longer than men. CPP can be deferred as late as age 70. The benefit increases by 8.4% per year after age 65, plus an annual inflation adjustment.

• Old Age Security (OAS) deferral: Like CPP, deferring OAS can be beneficial for seniors who live well into their 80s. One exception is low-income seniors who might qualify for the Guaranteed Income Supplement (GIS) between 65 and 70. Single seniors aged 65 and older, whose income is less than about $22,000, may qualify. OAS can be deferred as late as age 70. The benefit increases by 7.2% per year after age 65, plus an annual inflation adjustment.

• Annuities: Almost everyone wants a pension, yet almost no one is willing to buy one. You can buy an annuity from a life insurance company using non-registered or registered (ie. RRSP) savings. (What is a non-registered account? How does it work?) Based primarily on your age and resulting life expectancy, an insurer will pay you an immediate or deferred monthly amount for life—even if you live until 110. If interest rates are higher when you buy an annuity, the monthly payment amount may be slightly higher as well. If you don’t have a pension and you want the security of a monthly payment, an annuity can be worth considering. Especially if you’re in good health and are a conservative investor.

Survivor benefits in Canada

Most DB pension benefits are payable only to surviving spouses. Some pensions have survivor benefits for children or a guaranteed number of months of payments to an estate.

A CPP survivor pension can be paid to the spouse or common-law partner of a deceased contributor. Single retirees are somewhat disadvantaged since their children will usually not qualify for a benefit if they die.

Children’s benefits are only payable if a surviving child is under 18, or if they are attending full-time post-secondary education and are between 18 and 25.

Advice, accountability and cognitive decline

One of the challenges everyone faces as they age is making sound financial decisions. Our experience and knowledge may increase as we age but our ability to process complex decisions tends to begin declining before we retire.

Single seniors don’t have a partner to bounce ideas off, so many may find themselves stressed about retirement and financial planning. And not everyone feels comfortable talking about money with their children and friends, and not everyone has a financial advisor, either. (Use the MoneySense Find a Qualified Advisor Tool to find an advisor near you.)

Partners, adult children and friends can provide accountability, as well with spending and other financial decisions and keep each other in check.

A single retiree can certainly be successful, but the challenges they face are different from that of couples.

For these reasons, being conservative, deferring pensions, considering annuities, seeking financial advice, and proactively planning are all strategies to consider when planning for retirement as a one-person household—especially if you have no pension plan.

More on retiring without a pension:

• 30 and no pension
• 40 and no pension
• New to Canada and no pension
• Not enough pension

About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

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