The inability to split income means singles may require slightly different saving and investing strategies.GETTY IMAGES
The number of single people is growing in Canada, but most financial advice is aimed at couples. It’s why experts encourage singles to seek advice tailored to their relationship status to better manage their financial futures.
“[Single people] need to have a plan and have a good sense of where they are, where they need to be and how they’re going to get there,” says Sarah Bull, managing partner and portfolio manager at KJ Harrison Investors in Toronto.
For starters, single people have higher living costs because there isn’t a partner to share expenses, Ms. Bull says. They also have fewer tax benefits compared with couples.
“For those clients, what is super important is having a plan and thinking about things holistically because there’s no spousal benefits, there’s no spousal RRSP [registered retirement savings plan], there’s no income splitting,” she says.
Single saving and investing
The inability to split income means singles may require slightly different saving and investing strategies, says Howard Kabot, vice-president of financial planning at RBC Wealth Management Canada.
For example, he says it may be even more important for some singles to maximize the tax efficiency of their portfolios using tax-sheltered registered accounts as well as dividends and capital gains in non-registered accounts, which are taxed at a lower rate than regular income.
“[It’s] one of the primary ways you can take advantage of how our Income Tax Act is written and try to be more efficient with the income you’re receiving,” Mr. Kabot says.
Singles nearing or in retirement may also withdraw their registered and non-registered funds differently than couples, he says, including the decision around when to take their Canada Pension Plan (CPP) and Old Age Security (OAS) benefits based on a single retirement portfolio.
Understanding your investment risk profile – whether you’re conservative or more aggressive – is also important, Mr. Kabot says.
“Maybe as a single person, you’re not going to take on as much risk as you might otherwise, given that there is no partner to offset that risk.”
Some singles may look at their portfolios and decide to take on more risk to boost returns without a second income to rely on, Ms. Bull adds.
She says advisors can help single clients determine how much risk they can or should take, based on how much money they have to invest and what they expect their spending needs to be in retirement.
Ms. Bull says it’s also important for singles to have an updated will and estate plan, including an executor and powers of attorney for personal care and property, to ensure their wishes are met. Single people don’t have the same automatic legal protections and assumptions as spouse-based intestacy laws, which means their assets may pass to unintended beneficiaries or the government.
Protecting a single income
Single Canadian Renée Sylvestre-Williams meets with her advisor a few times a year to ensure she’s on track financially.
“It’s not so much planning just for retirement, it’s planning for everything leading up to retirement and beyond,” says Ms. Sylvestre-Williams, a professional writer and author of singles-focused financial newsletter The Budgette and the recently released book The Singles Tax.
Her plan includes having critical illness and disability insurance to protect her finances if she becomes ill and can’t work.
“It’s very important to me. Part of the planning up to retirement is making sure that you’re covered if something happens to you,” she says, believing it’s better to have it and not use it than not have it and then need it.
Ms. Sylvestre-Williams says she also believes that having an emergency fund is more important when you’re a solo earner. She contributes with regular automatic deposits into a high-interest savings account.
She suggests solo workers become disciplined savers early in their careers and take advantage of any employer-matching retirement savings plans, if available.
Ms. Sylvestre-Williams also recommends that singles find an advisor who can help them manage their money in both the short and long term, including retirement and any health-related costs as they age.
“It’s always good to talk to an expert, unbiased third party [who] can run the numbers, look at it, and maybe tell you some hard truths, or validate that you’re doing the right thing.”