Managing Money as a Single Parent With No Pension

If you’re worried about retirement, you’re not alone. With the rise of the gig economy and other shifts in the labour market, fewer than two in five Canadians today have access to a workplace pension. For single parents, planning and saving for retirement brings additional challenges—and greater urgency.

“If you don’t have a company pension, it becomes even more important to build savings on your own,” says Millie Gormely, a Certified Financial Planner at IG Wealth Management in Thunder Bay, Ont. “That’s a lot harder when you’re supporting yourself and children and stretching every dollar.”

As of 2022, there were about 1.84 million single-parent families in Canada, and they face distinct financial pressures. The primary caregiver often carries a larger share of daily expenses—everything from groceries and clothing to childcare and medical costs. Inflation and higher living costs in recent years have added stress, and many single parents are also saving for children’s education through RESPs or similar vehicles. At the same time, single parents commonly have less household income to work with. Statistics Canada reports that lone-parent families with two children report an average household income of only about a third of what a two-earner family of four brings in.

All of this makes retirement planning more difficult, but not impossible. With clear priorities and consistent actions, single parents can build a more secure retirement future.

Pinpoint your goals

Start by defining your long-term goals. Consider the lifestyle you want in retirement, where you might live, and the level of monthly income you’ll need. A certified financial planner can help turn those goals into concrete numbers and a realistic savings plan, but you can begin on your own by estimating a target retirement income.

Next, take a close look at your current spending and build a realistic monthly budget. Review recent bank and credit card statements to see what you spend on essentials such as rent or mortgage, groceries, transportation and childcare. Include regular obligations such as debt payments—credit cards, lines of credit and mortgage instalments—to understand your fixed costs. Knowing where your money goes lets you identify amounts you can reasonably redirect to retirement savings.

If the amount left over is small, don’t be discouraged. Small, steady contributions compound over time. “Contributing something rather than nothing on a regular basis will get you much further than doing nothing,” Gormely notes. Automating even modest monthly transfers to a dedicated retirement account can create saving momentum without requiring constant effort.

Assess potential sources of retirement income

You may have more options than you think. Registered Retirement Savings Plans (RRSPs) are tax-deferred accounts that allow retirement-focused investing. For 2024, the RRSP contribution limit equals 18% of your 2023 earned income (or $31,560, whichever is lower), and you can use unused contribution room from previous years.

Tax-Free Savings Accounts (TFSAs) are another flexible vehicle for retirement savings. A TFSA can hold a mix of eligible investments—cash, stocks, bonds and mutual funds—and investment growth is tax-sheltered. For many lower-income earners, prioritizing TFSA contributions before RRSP contributions can make sense, because TFSA withdrawals do not increase taxable income in retirement.

If you are self-employed, pay special attention to the contributions you make toward retirement accounts. Contributing regularly can boost your future Canada Pension Plan (CPP) benefits; delaying CPP until age 70 is an option to increase monthly payments. Speak with an advisor about how best to balance TFSA and RRSP use given your current income and anticipated tax situation.

Factor in government programs

Government programs can form an important part of your retirement plan. Old Age Security (OAS) provides a monthly payment for Canadians 65 and older. The Guaranteed Income Supplement (GIS) helps low-income pensioners and can boost retirement income for eligible seniors. The Canada Pension Plan (CPP) is a core source of retirement income for many Canadians; its benefits depend on your contribution history, so contributing adequately while working is important.

If you are newly single, take steps to ensure domestic and legal arrangements protect your children’s financial support and your own financial stability. This may include updating child support agreements, guardianship designations and beneficiary information on accounts. Where possible, try to separate financial decisions from the emotional stress of family transitions so you can make clear, practical choices for the long term.

Practical steps single parents can take now:

• Build or maintain an emergency fund to avoid dipping into retirement accounts when unexpected costs arise.
• Automate savings so contributions are consistent and less tempting to skip.
• Prioritize paying down high-interest debt to free up future cash flow for saving.
• Maximize tax-advantaged accounts such as TFSA and RRSP according to your income and tax situation.
• Seek available benefits and supports—for childcare, tax credits or provincial programs—that can reduce current expenses and increase saving capacity.
• Consult a financial planner to create a tailored retirement strategy, and review it annually as circumstances change.

More on retiring without a pension

• 30 and no pension: what are your options?
• Self-employed and no pension: strategies for planning
• 40 and no pension: steps to catch up
• Single and no pension? How to plan for retirement in Canada

Retirement planning for single parents requires realistic goals, disciplined budgeting and use of available tools and programs. Small, consistent steps—combined with professional advice where possible—can help single parents build the foundation for a more secure retirement.