How to manage as a single parent with no pension

“If someone’s not lucky enough to have a company pension, it’s that much more crucial for them to be building up savings on their own,” says Millie Gormely, a Certified Financial Planner at IG Wealth Management in Thunder Bay, Ont. “But that’s really hard to do when you’re supporting yourself and your kids, because you’re having to stretch that income that much further.”

As of 2022, there were about 1.84 million single-parent families in Canada, and they face unique financial challenges. For starters, the primary caregiver may be covering more than their share of the responsibility and cost of raising their kids, footing bills for everything from food to clothing and childcare. And, thanks to inflation, we all know the cost of living has gone way up in recent years. Plus, a single parent may also be shouldering the burden of saving for their kids’ education (read about RESP planning), taking on medical expenses and more. And then there’s the fact that single parents tend to have less income to work with in the first place. According to Statistics Canada, lone-parent families with two kids report an average household income that’s only about a third of what dual-earner families of four bring in. (Not half, a third.) 

All this financial strain can be a serious hurdle to retirement planning, but it doesn’t mean it’s impossible to save for your future. 

Pinpoint your goals

The first step is to identify your long-term goals (consulting a financial planner can help with this part). You’ll want to figure out your desired income in retirement and how much saving you’ll need to do to reach your goal. The next step is to take a hard look at your spending habits and your budget to find funds you can set aside for your retirement. 

You may wish to review past bank and credit card statements to get a clear picture of what you’re spending on essentials (which can include rent, groceries, transportation and daycare). You’ll also want to get a clear picture of your debts like credit card balances, personal lines of credit and mortgage instalments to help you identify your fixed costs. All of this will help you figure out a budget you can live with—and what you have left over for retirement savings.

If what’s left isn’t much, don’t despair. Even a small monthly savings will help you in the long run, says Gormely. “Contributing something rather than nothing on a regular basis is going to put you so much further ahead than if you just throw up your hands,” she says.

Assess potential sources of retirement income

You may have more options than you realize. A registered retirement savings plan (RRSP) is a long-term investing account that is registered with the Canadian federal government and helps you save for retirement on a tax-deferred basis. It allows for plenty of room to help your money grow. For example, your RRSP contribution limit for 2024 is equal to 18% of your 2023 earned income (or $31,560, whichever is lower). You also can tap into unused contribution room from past years.

A tax-free savings account (TFSA) is another option. Like an RRSP, a TFSA can hold any combination of eligible investment vehicles, including stocks, bonds, cash and more, and the growth will be tax-sheltered. “In general, for someone at a lower income level, they might be better off maxing out their TFSA first, and then looking at their RRSP as a source of retirement income,” says Gormely.

Factor in government programs

There is also Old Age Security (OAS), a monthly payment for Canadians 65 years and older, as well as the Guaranteed Income Supplement (GIS) for low-income pensioners, which might also be a help in the future. And don’t discount the Canada Pension Plan (CPP). “For a time, there was concern that due to high inflation and poor investment returns the plan could run insolvent, but it’s now one of the most solid benefit plans in the world,” says Gormely. People who are self-employed should be careful to contribute enough to boost the benefit while they can for their retirement years; working a bit longer and delaying taking CPP until you are 70 might be part of your strategy, she says.

If you are newly single, ensure that domestic arrangements are in place so that your kids are being supported financially by both parents, as much as possible. This benefits both you and your kids, now and in years to come. “And do what you can to keep emotion out of your planning,” says Gormely. “In the end, it’s essential for single parents to seek the supports they need to prepare for their future,” she says.

More on retiring without a pension:

• 30 and no pension: What are your options?
• Self-employed and no pension
• 40 and no pension: What do you do?
• Single, no pension? Here’s how to plan for retirement in Canada

About Karen Robock

Karen Robock is an award-winning journalist who writes about parenting, wellness and travel—and, occasionally, how you might pay for it all. Her work has appeared in Canadian Living, Reader’s Digest and Prevention magazines.