JOHN WOODS FOR THE GLOBE AND MAIL
Solo fliers buck the headwinds
Singles face more financial disadvantages than couples, and must plan more thoroughly
After a 35-year career in nursing, Winnipeg's Audrey McClelland has enjoyed a comfortable and active retirement for well over a decade, despite the fact she has never, as she puts it, "had anyone to rely on."
The 72-year-old is just one example of a growing trend: Canadians who are retiring alone, whether by choice or by chance, and as such face unique financial challenges, according to a recent report from the Bank of Montreal.
Single seniors currently account for 43 per cent of all Canadian retirees, and as longevity continues to stretch, the odds are now 50 per cent that at least one member of a couple, both age 65, will live to age 90.
The single pensioner, says Tina Di Vito, director of the BMO Retirement Institute, will find that his or her living expenses are not simply half that of a couple's, but closer to two-thirds.
What's more, singles must cope with another financial disadvantage. In having to devote a larger share of their income to basic living expenses, such as shelter and transportation, smaller amounts are left for savings. As well, single women in particular are also more likely to put savings and RRSP contributions into safer investments, such as guaranteed investment certificates (GICs), which can yield a lower rate of return over the long term than other vehicles, such as stocks.
"It's more important for singles to plan ahead than it is for couples because a single person will only have one retirement income to rely upon during their many retirement years, while a couple often has two sources of Canada Pension Plan income, Old Age Security and perhaps an employer pension," Ms. Di Vito says.
"That means it's even more important for [a single person] to make an RRSP contribution, and as early as they possibly can," she says.
Ms. McClelland did think about the implications of retiring alone "because I wasn't getting married," she says. "I didn't plan not to, but I didn't. And I was doing community health work, where you meet people of all ages, and women in all kinds of situations."
The number of older women she encountered in work as a public-health nurse made her think carefully about her own future. "I realized how lucky I was to have had a job and a salary all those years," says Ms. McClelland.
She also credits her involvement in social justice and environmental issues for instilling sound habits that helped pave the way for a secure retirement: living simply, saving and not obsessing over the latest gadget or expensive clothes.
She paid off her house by the time she was 50, stayed out of debt and even stopped driving her car because of environmental concerns.
But that kind of approach and forethought is relatively rare. Even among singles with a retirement date in mind, more than 60 per cent said they had not gathered any data about it during the previous five years, according to a Statistics Canada survey in 2007.
"With singles, one of the interesting things that we learned is that they don't tend to plan as early," Ms. Di Vito says. "When there's a couple, sitting at the dinner table thinking about their future, they tend to plan and talk about what they're going to be doing in the future."
The StatsCan survey also found that singles nearing retirement age were less likely to be informed about public retirement programs than their married peers, at a rate of 30 per cent to 24 per cent.
Remaining or becoming single isn't always part of an individual's plans. Divorce affects 8 per cent of seniors, according to Census Canada, and widowhood 30 per cent. Both can take a drastic toll on retirement living standards, especially for women.
The BMO report cites a 2007 Boston College study that found that married adults who become divorced or widowed between the ages of 67 and 80 can expect their income to fall by as much as 37 per cent.
Yet a survey of 1,300 Canadians done for the BMO report found that more than 71 per cent of respondents 40 and older who suddenly became single said they did not have a plan to deal with this eventuality - and were negatively impacted by it.
That is why couples also need to consider their retirement needs, "not only as a couple but also as a single, because women will outlive their husbands," Ms. Di Vito says. That means having a clear idea of items such as survivor pension benefits, for example: "With an employer pension, you may choose for 50 per cent to go to a survivor - well, is that sufficient?"
She also points out that if both partners receive the maximum CPP amount, there is no survivor benefit when one member of the couple dies.
What's more, the trend in recent years has been away from employer pensions with defined benefits (where the pension amount is guaranteed for life) to defined contributions, where income is based on investment performance. In this case, married employees ought to consider issues such as inflation, or what happens to any health-care provisions, if one of them is left on their own.
Along with talking to a financial planner, Ms. Di Vito says a budget is a key tool for single pre-retirees to determine where their money is going now, and give them an idea of how much they will likely need in the years ahead. "Do a self-assessment and see what you are spending your money on," she says. "If you take ownership of it, it goes a long way compared to if someone else is telling you what to do."
Ms. Di Vito says that saving even a little bit at a time, early on, makes a big difference, especially for a retirement portfolio. An automatic continuous savings program is one way to begin. "I always try to encourage people in their twenties, or even in their thirties - for whom retirement is just this far off thing that will happen when everything else is taken care of - to start thinking about retirement as early as possible," she says.
"If you start [saving] early and are taking a more conservative approach, then as you build up your portfolio, you can become a little more aggressive, looking at investments that are perhaps not as conservative."
Special to The Globe and Mail