October 16, 2023

Three tips to help lower-income Canucks save for retirement

Let’s face it. For those of us who are earning a modest income, just making ends meet is a challenge — and putting the notion of saving for retirement on top of that seems, well, unlikely.

But it’s possible, writes Amy Legate-Wolfe of The Motley Fool Canada in an article that appears on Yahoo! Finance.

She opens her article by defining a “low income” as one that “falls below 50 per cent of the median after-tax income of Canada,” which works out to $34,200 annually.

“This amount certainly makes it hard to save for retirement if you’re just trying to get by, but it can be done,” she writes.

First, she notes, you have to start, even if you start small.

“The worst thing Canadians can do is put off saving because they fear they don’t have enough. While investing takes research, saving does not. So, a great starting point is to just start,” she encourages.

A good target for low-income savers is one per cent, she writes. “From there, consider making a one per cent increase in that amount every quarter, every six months, or whenever you get an increase in pay,” she continues.

“Even just that small amount could create savings of $4,104 in the first year! That makes you all that much closer to your retirement goals,” notes Legate-Wolfe.

Next, she advocates for safe investing when you are earning a modest income.

“If you’re putting savings aside on a low income, a large portion should be kept safe for as long as possible. In this case, consider investing in 10-year Guaranteed Investment Certificates (GIC) from banks. These fixed interest rates will add on that interest each year! For example, most banks offer a 10-year GIC, which can be around four per cent especially if you put it in a non-cashable GIC. This means you cannot take it out before that 10-year mark, however,” she writes.

After starting to divert one per cent of earnings to savings, and putting most of it into GICs, Legate-Wolfe’s final piece of advice is to consider investing a smaller portion of your overall savings in blue-chip, dividend-paying stocks. She suggests that stocks like the Bank of Montreal (BMO) in an example of a company “that provide(s) passive income through dividends on a regular basis.” The dividend income “increases your savings… (but) you can also use that cash flow to reinvest in other stocks, or your GIC.”

So, summing up the tips from this article — don’t put off starting to save for retirement, even if you have to start small. Consider safe investments like GICs first before wading into stocks. If you do consider stocks, look for dividend payers with a reliable track record.

Another route you can take is joining the Saskatchewan Pension Plan. You can start contributing at any level, and can increase your contributions as your circumstances improve. SPP’s experts will invest your savings for you in a low-cost, pooled fund, relieving you of the costs and stress of picking your own investments. And when it comes time to cash those savings into retirement income, SPP is there to help with many options, including the chance to receive a lifetime monthly annuity payment.

Check out SPP today!

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Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.


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