Things seniors need to be aware of to avoid senior poverty: Janet Gray

While the Conference Board of Canada reports that only 6.7 per cent of Canadian seniors live in poverty, it’s still a concern giving the rising cost of housing and the relative modesty of government retirement benefits.

We asked Janet Gray, an advice-only Certified Financial Planner with MoneyCoachesCanada, for her thoughts on this issue. She believes that most people aren’t aware of what they are getting into when they retire.

She began our conversation by saying that she wished there was some sort of mandatory retirement coaching for people prior to them leaving the workforce, to help deal with the “fear of the unknown” that many face. It’s important, she says, for people to have “at least some awareness of their situation.”

As an example, many seniors living in expensive homes worry that they only have $5,000 in the bank, even though the home may be worth a million or two.

Senior females tend to be the people who have lower incomes, and for a variety of reasons, she explains.

First, women tend to be paid less throughout their working careers, she says.

Second, because Canada is so “home ownership focused,” older women are very reluctant to give up the family home even after their partners have passed away. “People are almost declaring bankruptcy to stay in the house,” she explains. “They’d rather cut off their leg than lose the house.”

But, if the cost of owning and maintaining a house becomes more expensive over time, there are still things that can be done, she says.

“Here in Ottawa you can defer property taxes until you pass away (or sell the home), and let them be settled through your estate/time of sale,” she explains.

Older women living alone face safety issues – getting up on a ladder to change a light bulb can be risky. She says some of her clients have gone the “co-housing” route, having a friend or family member move in with them and share the costs of running the place.

Another option is a reverse mortgage, where you access some of the equity in your home now.

She recommends that clients open a home equity line of credit while they can before retirement, because these are harder to get once have less income in retirement. “That way, if one day you might need to access that money, it’s there for you,” she notes.

People also don’t seem to realize that the Canada Pension Plan doesn’t offer a full survivor benefit to the surviving spouse. Sometimes, she says, all that happens is that the surviving spouse gets their CPP topped up to the maximum individual benefit amount from what their late partner was getting (even if the partner was getting more). The partner’s Old Age Security  payments end upon the partner’s death, she explains.

That, she says, can be a big hit, as the survivor “loses most of the CPP their partner was getting and also all of the OAS.” She says these rules “are not well understood by people,” but they should be, particularly by women who tend to “live longer generally.”

She thinks it is unlikely any future government will try to improve CPP benefits.

And for that reason, it’s important for people to personally save for retirement, even if they have some sort of retirement savings arrangement at work. “People often remark on how government workers get better pensions, but they are putting away 10 per cent of their earnings into the pension every year,” she explains. “If everyone tried to put away 10 per cent of their earnings each year, we would have less problems” with retirement income, she says.

Low income seniors can get subsidized accommodation in places like a long-term care residence, she says. She also says the Disability Tax Credit is worth applying for seniors, as it could lead to a significant tax refund.

For having cars in one’s senior years, Gray says that while older, lower income people are less likely to qualify for car loans, they can still get around with ride-sharing services, or by leasing a car. While age might stand in the way of a car loan, it’s not usually an issue with a car lease, she explains.

We thank Janet Gray for taking the time to speak with us.

If you are saving on your own for retirement, take a look at the Saskatchewan Pension Plan. You provide the savings, and we’ll invest your hard-saved dollars in a low-cost, professionally managed pooled fund. At retirement, your options include the possibility of a lifetime monthly annuity payment or the more flexible Variable Benefit.

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