Navigating Income Instability: Saving for a Secure Retirement –
An in-depth analysis.
Retirement planning is a crucial aspect of financial wellbeing, yet for many individuals, especially those experiencing income instability, saving for retirement can be a significant challenge. Income instability—characterized by unpredictable or fluctuating earnings—can arise from various sources such as gig work, self-employment, disability, unemployment, or reliance on social assistance. This blog explores how income instability affects retirement savings behavior, drawing on recent research and highlighting the unique challenges faced by different groups.
Understanding Income Instability
Income instability refers to irregular or unpredictable changes in earnings over time. Unlike steady employment, where income is relatively predictable, those with unstable work histories may face periods of unemployment, underemployment, or health-related work interruptions. This instability can disrupt long-term financial planning and make it difficult to consistently contribute to retirement savings.
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How Income Instability Affects Retirement Savings
Lower Retirement Savings and Financial Wellbeing
Research shows that instability in work and income histories is strongly associated with a lower perceived standard of living in retirement, even after accounting for retirement benefits. In a Canadian study using 20 years of linked tax data, both men and women who experienced more instability during their working years reported lower financial wellbeing in retirement. For women, cumulative exposure to disability and periods of social assistance were particularly detrimental, while for men, repeated unemployment had the most significant impact (Taylor et al., 2024; Taylor et al., 2020).
Gendered Effects
The effects of income instability on retirement savings are not uniform across genders. Women often face greater overall income disadvantages due to reduced labor force participation, caregiving responsibilities, and higher rates of disability. These factors restrict their ability to save and accumulate retirement benefits. In contrast, men’s retirement wellbeing is more closely tied to their experiences with unemployment. Despite the presence of public pension programs, these gendered patterns persist, underscoring the need for targeted policy interventions (Taylor et al., 2024; Taylor et al., 2020).
The Role of Financial Behavior and Literacy
Strong financial behavior—such as budgeting, regular saving, and avoiding unnecessary withdrawals—plays a critical role in retirement savings outcomes. Studies indicate that individuals with strong financial habits are more likely to participate in retirement plans and less likely to deplete their savings, regardless of income level. Interestingly, financial literacy alone is less predictive of positive retirement savings behavior than actual financial habits. Those with a “financial literacy blind spot”—not knowing what they don’t know—are at higher risk of depleting their retirement savings, even if they are not financially vulnerable (Sargent et al., 2025).
Barriers to Retirement Savings for Those with Income Instability
Limited Access to Retirement Plans
Individuals with unstable incomes, such as gig workers or the self-employed, often lack access to employer-sponsored retirement plans. This makes it harder to save consistently and benefit from employer contributions or automatic payroll deductions (Taylor et al., 2024; Lim & Spalding, 2024).
Insufficient Compensation from Retirement Benefits
Even in countries with generous public pension systems, retirement benefits do not fully offset the negative effects of a history of income and work instability. This means that those with unstable incomes remain at a persistent disadvantage when it comes to retirement savings and financial security (Taylor et al., 2024; Taylor et al., 2020).
Illiquidity of Assets
For certain groups, such as farm households, much of their wealth may be tied up in illiquid assets like land or equipment. While these assets contribute to overall net worth, they are not easily converted into income during retirement, increasing financial vulnerability (Lim & Spalding, 2024).
Protective Factors and Strategies
Income Assistance and Personal Investments
Income assistance programs can provide some protection for women in retirement, while personal investments are more protective for men. These findings suggest that tailored support mechanisms are needed to address the unique challenges faced by different groups (Taylor et al., 2024; Taylor et al., 2020).
The Importance of Early and Consistent Planning
Starting to save for retirement as soon as one begins earning is crucial. The right kind of planning and sufficient savings can make retirement a time for pursuing hobbies and relaxation, while lack of planning can lead to financial anxiety and insecurity (Patel, 2017; Vivel-Búa et al., 2019).
Policy Implications
Policies that promote access to retirement savings vehicles for non-traditional workers, encourage strong financial behaviors, and provide targeted support for vulnerable groups can help mitigate the negative effects of income instability on retirement savings.
Conclusion
Income instability poses a significant barrier to effective retirement savings, with lasting effects on financial wellbeing in later life. These effects are persistent and gendered, with women and men facing different challenges and requiring different forms of support. While strong financial behavior and early planning can help, policy interventions are needed to ensure that all individuals, regardless of their work history, have the opportunity to achieve financial security in retirement.
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References:
(Sargent et al., 2025) Examining retirement savings building and depleting behavior
(Patel, 2017) Influence of Income on Retirement Saving Behaviour
(Lim & Spalding, 2024) Retirement income and savings behavior in farm households
(Vivel-Búa et al., 2019) Financial planning for retirement: the role of income
References
- Taylor, M., Carr, D., Carpenter, R., & Quesnel-Vallée, A. (2024). Work and income instability and retirement financial wellbeing for women and men. Journal of Women & Aging, 36, 197 – 209. https://doi.org/10.1080/08952841.2023.2286846
- Taylor, M., Carr, D., & Quesnel-Vallée, A. (2020). Retirement Financial Insecurity for Men and Women in Canada: The Impact of Life Course Work and Income Instability. Innovation in Aging, 4, 463 – 463. https://doi.org/10.1093/geroni/igaa057.1500.
- Sargent, C., Balasubramnian, B., Bowler, B., & Lambert, C. (2025). Examining retirement savings building and depleting behavior. Managerial Finance. https://doi.org/10.1108/mf-07-2024-0481
- Patel, F. (2017). Influence of Income on Retirement Saving Behaviour. **, 2. https://doi.org/10.18535/AFMJ/V2I7.01
- Lim, K., & Spalding, A. (2024). Retirement income and savings behavior in farm households. Agriculture and Human Values. https://doi.org/10.1007/s10460-024-10618-8
- Vivel-Búa, M., Rey‐Ares, L., Lado-Sestayo, R., & Fernández‐López, S. (2019). Financial planning for retirement: the role of income. International Journal of Bank Marketing. https://doi.org/10.1108/IJBM-09-2018-0253
