Scotiabank published a major report last week on the retirement of Canada`s baby boomers. The report, The Retirement Landscape -- A Focus on the Baby Boomer, offers up a remarkable, detailed and disturbing picture of the coming retirement of the boomers.
One of the takeaways: Too few have saved too little. So-called Boomer Remorse will be the result.
Scotiabank economist Andrew Pyle recently explained that the much-discussed retirement of the boomers is here and is becoming reality. "We've heard about this for a long time. Finally we're seeing it in the stats," says Pyle, in an interview with WP. "I think we should all be concerned. A frightening large percentage of Canadians have not put in a solid plan for retirement."
The numbers in the report are distressing. Forty four percent express concern about outliving their retirement savings. Nearly one-third don't know what percentage of pre-retirement income they'll need. Just over one-quarter will be carrying some form of debt into their retirement (far higher than previous generations). Working in retirement is becoming common among boomers; 40% of retirees working past retirement; 84% of those working are working part-time. Of the boomers not yet retired 15% plan to never stop working and more than half of boomers who haven't retired yet agreed that "not having enough money saved up to retire comfortably."
The idea that so many have not got a solid plan in place suggests problems in the years ahead. Today, of course, more than 62% of boomers believe they'll be healthier in retirement than other generations. But even as today's boomers live longer, many won't have the money needed to fund their retirement. "Half a century ago people retired at 65, died in their '70s. They only had five years of retirement to fund. Now, people are living longer and funding 25 to 30 years of retirement. A large chunk of Canadians may not have enough to get to the finish line," says Pyle.
Those surveyed offered up all kinds of excuses for why they have not saved--kids, mortgages--the excuses have seen saving put off until the last minute. "We found some talking about beginning to save five to ten years before retirement. That's crazy. If you understand markets, these timelines are not going to afford many the retirement they assume they'll have. The percentage here is a big concern," says Pyle.
Also unique is the number of boomers--a little over one-third--who will be hitting retiring still in-debt. Baby boomers are far more debt-laden than previous generations. This debt could be a problem. "If we could say interest rates aren't going to go up, this might not be a problem. But that's not something you want to count on," says Pyle. "If we look the ones who do the planning, only a slim majority are saving for health costs like long-term care facilities, which can be expensive. For those who haven't started a financial plan, policy makers need to think about this. More Canadians are going to have to work past retirement age. That is something we are going to have to get our head around. I think it's going to be common to see people working into their '70s. Policy makers can't take their foot off the accelerator, they need to be promoting financial planning, financial literacy."
Some other notes from the study:
- Twenty-five per cent of boomers are concerned about their parents' health and how it will impact them in retirement.
-Sixty-four per cent of boomers say they have one or both parents alive, while 15% of boomers say that preparing for the health care costs of aging parents is extremely or very important;
- Almost one-half (45%) of the 41% of boomers with children currently under the age of 21 living at home expect their adult children to continue to live at home past the age of 21. The study also found that 16% of boomers say helping their children financially is going to be a financial objective.
- Only 40% of younger boomers (45-54 year olds) feel prepared for their retirement compared to 62% of older boomers (65-70 year olds). Younger boomers (49%) are also more concerned about outliving their money in retirement than older boomers (33%).
- Not surprisingly, younger boomers are considering how their aging parents will affect their retirement. Twenty-eight per cent are concerned about how their parents health will impact them (vs. 12% of older boomers), and 45% say that preparing for their aging parents' health care costs is an important financial objective in retirement (vs. 17% of older boomers).
- Boomers agree that, on average, 65% of their pre-retirement income is needed to live in retirement.
- Boomers' retirement income will come from a variety of sources with pensions (84%), particularly government pensions (72%) and RRSPs/RRIFs (77%), as the primary sources of income, followed by savings accounts (52).
The study coins the phrase "Boomer Remorse" to describe the anxiety some will feel having not saved enough for retirement.