Groceries are inflation’s sharp end because they’re an unavoidable expense that can be addressed only to a limited extent with coupons, buying in bulk and shopping sales.JulieAlexK/iStockPhoto / Getty Images
The cliché of the poor senior on a fixed income is way overdone.
But inflation does bite hard when you’re retired. Let me give you some examples from my life as a kind-of retiree who left full-time employment a year ago, but still works on a part-time basis. To start, our property taxes went up 3.75 per cent this year and our condo fees rose 1 per cent.
Our equal monthly billing amount for natural gas jumped 15 per cent, and property insurance for our condo edged up 3.5 per cent. Gasoline costs have gone up nearly 30 per cent over the past 12 months on average, which has hit hard because we’ve been driving a lot between our home in Ottawa and Toronto to visit and help aged parents. We own a hybrid vehicle, but still.
I have a system for adjusting to inflation that I’ll share with you, but first let’s put retiree inflation in context. First, Canada Pension Plan retirement benefits are reviewed once yearly in January to account for any increases in living costs, and Old Age Security payments are adjusted four times a year.
CPP payouts increased 2 per cent for 2026, while the Bank of Canada’s inflation calculator says that a basket of goods and services costing $100 in 2025 would come in at $102.80 in 2026. An increase of 2.8 per cent, in other words.
The inflation rate that actually matters most in retirement
Some defined-benefit company pensions also offer annual cost-of-living adjustments, and then there are the annual dividend increases paid by many of the blue-chip companies favoured by mature investors. For example: The widely held utility company Fortis Inc. FTS-T increased its dividend 4.1 per cent late last year, which means 52 years in a row of dividend hikes.
The typical retiree in Canada has multiple streams of income, and several of them adjust automatically to help offset higher living costs. Where retirees are vulnerable is in the lack of opportunities to increase income beyond inflation.
There are no bonuses to be earned at work, no promotions and no opportunities to move to a better-paying job elsewhere. Having a good year in your investment portfolio is not the same as getting a raise in the amount of money deposited into your bank account because it doesn’t help pay the bills.
Even so, retirees cannot claim to be harder hit by inflation than parents with young kids or hungry teens. Groceries are inflation’s sharp end because they’re an unavoidable expense that can be addressed only to a limited extent with coupons, buying in bulk and shopping sales.
My system for dealing with inflation is to keep a spreadsheet with all our household costs broken down into monthly amounts. The spreadsheet is updated roughly twice a year – in January and then in the summer.
I also keep track of monthly income on a strict after-tax basis. After subtracting expenses from income, I can see how we’re tracking on spending.
Cutting costs can help bring the numbers into line, and we’ve done that to some extent. We eat out less than we anticipated before I retired, and we are way less interested in top-tier restaurants. We’ve also travelled less than expected, but that’s as much due to family obligations as anything else.
On a more micro level, we trimmed our portfolio of streaming services to bring down our household expenses a bit. A bigger win was negotiating our cable-internet bill down.
How should Faye, 68, and Ava, 60, draw down their RRSPs given their $108,000 spending target?
After watching our bill increase steadily in the past couple of years, I literally spent the better part of a day chasing our telecom provider for a better rate. The result was a 30 per cent lower monthly cost for two years, enough savings to help pay for that higher monthly natural gas bill and a bunch more.
For a lower cellphone bill, try comparison shopping during Black Friday sales in November. I chopped my cellphone bill by almost two-thirds last fall, although I had to switch providers and then switch back to my original company to get the best deal.
One complication on cost-cutting for retirees is that it contradicts the idea of retirement as your great reward after a lifetime of hard work. It turns out that retirees have to make the same compromises as everyone else.
Rob Carrick is a personal finance expert and former Globe and Mail staff columnist.
