After decades of work, retirement is supposed to feel like freedom, and for many Canadians it did, until costs for groceries and essentials soared. What was once a comfortable retirement income in 2021 now does not go as far. Many retirees are therefore reconsidering their financial plans, not due to poor decisions but because the economic landscape has changed and retirement can be expensive. Fortunately, there are practical ways to supplement your retirement income without sacrificing the lifestyle you have built.
The reality of a fixed income in a high-cost era
People tend to spend to the level of their income, whatever that income happens to be. When costs rise faster than income does, something must give. For retirees, that tension can feel especially stressful because the usual options, such as asking for a raise or picking up more hours, are not available. During certain periods after the pandemic, investment returns were strong and some households benefited from rising real estate values. Some retirees were temporarily shielded from the rising cost of living expenses. But market volatility is real and a portfolio that looked healthy at retirement can look different a few years later, particularly for those drawing down their savings during a downturn.
Before exploring ways to bring in more income, it is worth taking a careful look at your current budget. Tracking actual spending for a month or two often reveals expenses that have quietly crept up or debt payments that consume significant portions of your income. Trimming expenses will not solve everything, but it creates breathing room while you explore other options.
Revisiting when you draw CPP and OAS
If you retired early and have not yet started collecting Canada Pension Plan (CPP) or Old Age Security (OAS) benefits, the timing of when you begin drawing them deserves careful thought. You can choose to start receiving CPP as early as age 60 with reduced payments or delay receiving it to increase your monthly amount, up to age 70. CPP also has a child-rearing provision that, no matter when you begin receiving the CPP benefits, could increase the amount you receive each month. Apply for the child-rearing provision when you apply for any CPP benefit.
OAS follows a similar logic. Delaying OAS from age 65 to 70 increases the monthly payment by 36 per cent. If higher living costs are manageable in the short term through other means, waiting even a year or two to start these benefits can meaningfully improve long-term income. These are not decisions to make quickly or without guidance. A Certified Financial Planner (CFP) or financial adviser can calculate the break-even points based on your health, other income sources and tax situation. What works for one household may not work for another, so personalized advice is crucial.
Additional strategies to consider
Beyond CPP and OAS, retirees can explore part-time work, downsizing their home, or utilizing home equity through a reverse mortgage. Investing in dividend-paying stocks or annuities can also provide steady income. It is essential to review your investment portfolio regularly and adjust for inflation and market conditions. Consulting with a financial professional can help tailor a plan that meets your specific needs and goals.
