Think you can’t afford to save for retirement on a tight budget? The truth is, even small contributions, like $25 a month, can build real wealth over time. According to the 23rd Annual Transamerica Retirement Survey, 44% of women plan to retire after age 70 or not at all, often due to financial constraints. But the good news is, you don’t need a six-figure salary to build a secure future, you just need to save for retirement.
The earlier you start, the more you can take advantage of the power of time—where your savings generate earnings, which then earn more over time. Even just $25–$50 a month can make a significant difference down the road. Let’s break down exactly how you can start saving for retirement, even on a low income.
Step 1: Set Realistic Retirement Goals (Even on a Low Income)
A realistic retirement plan looks different for everyone, especially if you’re working with a smaller budget. Instead of focusing on a large retirement nest egg, start by setting smaller, achievable goals.
Use a retirement calculator to estimate how much you’ll need based on modest contributions. Financial expert Bola Sokunbi (Clever Girl Finance) emphasizes that women, particularly those earning less, should prioritize retirement savings early on to reduce financial stress later.
Step 2: Maximize Government Retirement Benefits for Low-Income Earners
Before worrying about savings, check your government retirement benefits. Many retirees live comfortably on programs like CPP, OAS, and GIS in Canada or Social Security in the U.S. You may need less personal savings than you think!
Factoring in government benefits provides a clearer picture of your actual retirement needs. This can allow you to retire with no savings but it does put you in a dangerous position if your expenses increase faster than the government benefits.
Canadian Example ($30,000 Pre-Retirement Income)
- CPP (Canada Pension Plan): Approximately $800/month (varies based on contributions).
- OAS (Old Age Security): Around $700/month.
- GIS (Guaranteed Income Supplement): Up to $1,000/month (for very low-income retirees).
This means that even without significant personal savings, you could still receive around $2,500/month in retirement income or $30,000/year, meaning that your retirement income will equal your pre-retirement income.
American Example ($30,000 Pre-Retirement Income)
- Social Security: Around $1,300–$1,500/month (depending on lifetime earnings and when you start benefits).
- Supplemental Security Income (SSI): Up to $943/month (if eligible for full benefits).
- Medicare: Provides essential health coverage, though supplemental insurance may be needed.
This means a retiree could receive around $2,300/month in benefits or $27,600/year.
Why You Still Need a Retirement Fund—Even with Government Pensions
Government pensions can provide a solid foundation for retirement, but they may not be enough to cover rising costs. Your expenses—like housing, healthcare, and everyday necessities—will increase over time, while your pension benefits may not keep pace.
Having personal savings gives you:
✔ Financial breathing room—so you’re not forced to return to work later in life.
✔ A safety net—for unexpected expenses like medical bills, home repairs, or long-term care.
A neighbour of mine relies entirely on government pensions to cover her living costs. However, she keeps her personal savings untouched in case she ever needs a nursing home or major home repairs. She’s fortunate to own her home, which helps keep her expenses within her government income—but not everyone has that advantage.
Even a small savings cushion can mean the difference between financial security and financial stress in retirement.
Step 3: Little-Known Senior Benefits That Can Stretch Your Retirement Savings
Government assistance programs can supplement your income and reduce retirement expenses. Make sure to explore these options:
Canadian Benefits
- Provincial drug plans: Every province and territory offers prescription drug assistance for seniors.
- Housing assistance: Subsidized housing for low-income seniors.
- Health benefits: Dental, vision, and home care services may be available.
American Benefits
- Medicaid: Covers healthcare costs for low-income seniors.
- SNAP (food assistance): Helps with grocery costs.
- State-specific benefits: Some states offer property tax relief or utility assistance.
Accounting for these benefits in your retirement plan can help stretch your income further. Apply for them early as it can take a while for government benefits to kick in.
Step 4: Best Retirement Accounts for Low-Income Earners (TFSA, RRSP, Roth IRA)
Choosing the right account can maximize your savings. Here are the best options for low-income savers:
- In Canada:
- TFSA: Your investments grow tax-free, and withdrawals won’t be taxed. Withdrawals also don’t count towards your taxable income for any benefits.
- RRSP: Contributions reduce your taxable income, which can mean a bigger tax refund. You can put this in your retirement account to grow it faster.
- In the U.S.:
- Roth IRA: Ideal for low-income earners since contributions are made post-tax, and withdrawals are tax-free in retirement.
- Employer-sponsored plans (401k, RRSP matching): If your employer offers a match, take it—it’s free money!
Tax-advantaged accounts allow your money to grow more efficiently over time. Studies show that even small contributions to these accounts can significantly impact long-term savings.
But should you invest in a TFSA or an RRSP? Each has pros and cons, especially for low-income earners. Check out my post on Understanding TFSAs and RRSPs: A Guide for Canadians to help you decide.
Step 5: How to Save for Retirement on a Tight Budget
Think saving is impossible? You don’t need to save hundreds of dollars at once, building the habit is what matters most. Start with an amount that won’t strain your budget, even if it’s just $10 or $25 per month. Small, consistent savings add up faster than you think.
For example, if you invest $25/month for 30 years with an average return of 7%, you’d have over $30,000 saved! As Jean Chatzky (HerMoney) advises, consistency is key—it’s better to start small and stick with it than to wait for the “perfect” time.
You might find that it’s easier than you think. Read my guide on Top 10 Tips to Cut Expenses to find extra money for retirement. Implement them as you can and invest any savings you find.
Step 6: How to Automate Your Savings (So You Never Forget to Save!)
Want to save without even thinking about it? Automate your retirement contributions today. Set up a small, recurring transfer—your future self will thank you! Set up an automatic transfer from your checking account to your retirement account each month.
This follows the “pay yourself first” principle—prioritizing your savings before spending on anything else. Apps like Wealthsimple, Questrade, or Moka can help you invest effortlessly.
Check out my post on Micro-Investing, it has some great tips on ways to invest small amounts of money.
Step 7: How to Save More for Retirement as Your Income Grows
As your income increases, so should your savings. Here are some ways to find extra cash for retirement:
- Side hustle income, tax refunds, pay raises or work bonuses—allocate a portion to your savings.
- Cutting small expenses—canceling a $10/month subscription adds up to $120/year, which can grow significantly in a retirement fund.
A study published in the International Journal of Business Management Invention (IJBMI) in August 2020 titled “Lifestyle Inflation and Addictive Consumption – Dynamics and Function among Urban Youth in Indian Metropolis” by Abhirav Patodia and Dr. Shivaji Banerjee. The study found a strong positive correlation between annual income and monthly expenditure, demonstrating that for every 1 rupee increase in annual income, there was a 0.798 rupee increase in monthly expenditure. Redirecting even a small portion of those extra earnings can have a massive impact.
Step 8: Free Money for Retirement—Employer Matches & Government Incentives
Never leave free money on the table! If your employer offers 401(k) or RRSP matching, contribute enough to get the full match—it’s essentially free money for your future. Plus it’s not often you get a guaranteed return on your investment.
My work matches 8% of my salary if I put in 6%, which means I get a 133.33% return immediately on my investment. Also, if I don’t choose to invest the 6%, I’m basically taking an 8% pay cut.
Additionally, check for government incentives and include these in your retirement plan:
- In Canada:
- RRSP contributions lower taxable income, meaning you could get a tax refund.
- TFSA allows tax-free growth and withdrawals.
- In the U.S.:
- The Saver’s Credit provides tax breaks for low-income earners contributing to retirement accounts.
Unfortunately, many women miss out on these benefits—don’t let that be you!
Step 9: 3 Common Excuses for Not Saving (And How to Overcome Them!)
Think you can’t afford to save? You’re not alone—but even small steps make a big difference. Here’s how to overcome the most common excuses:
🚫 “I can’t afford to save.” → Start with $5 or $10 a week—even small amounts add up. As you get used to it, increase the amount
🚫 “I have debt.” → Prioritize high-interest debt, but still try to save something, even if it’s just a few dollars
🚫 “Retirement is too far away.” → The earlier you start, the less you need to save each month to reach your goal
Frequently Asked Questions About Low-Income Retirement Planning
Yes! Many retired people rely on government benefits like CPP, OAS, and GIS. However, even small personal savings help cover unexpected costs.
In Canada, a TFSA is ideal since it allows tax-free growth without affecting government benefits. In the U.S., a Roth IRA is great for tax-free withdrawals later
Start small! Even $5–$10 per week can grow over time. Cut unnecessary expenses (like subscriptions), use cashback apps, and automate small contributions to a TFSA, RRSP, or Roth IRA.
Yes! While paying off high-interest debt (like credit cards) should be a priority, you should still save something—even if it’s just a few dollars a month. Otherwise, you could end up retiring with no savings and still having debt.
Waiting too long! Many people think they need a lot of money to start. But even if you invest $10/month early, it grows significantly thanks to compound interest and time in the market.
Employer matching: If your job offers RRSP or 401(k) matching, contribute enough to get the full match—it’s literally free money!
Government incentives: Programs like the U.S. Saver’s Credit provide tax benefits for lower-income earners.
Many retirees forget to budget for the following:
Medical expenses & prescriptions
Home repairs & maintenance
Long-term care or assisted living costs
Even a small emergency fund can prevent financial stress later.
Conclusion: Save for Retirement Now, No Matter How Small
Even if you can only set aside a few dollars a month, starting today puts you on the right track. Retirement savings aren’t just for the wealthy—every dollar counts when given enough time to grow.
Take action today:
✅ Use a retirement calculator to see how much you’ll need
✅ Open a TFSA, RRSP, Roth IRA, or employer plan
✅ Set up automatic contributions, even if it’s just $10/month
Start your retirement fund today—even if it’s just $10! Open a TFSA, Roth IRA, or employer plan now and take control of your future. Let’s build financial security together—one step at a time.