Road to retirement getting longer for Canadians

Prospective retirees are working longer, but it might not be just about the money

Road to retirement getting longer for Canadians
The notion of retiring at 65 is quickly becoming antiquated as more people are choosing to stay in the workforce longer. Part of it might be due to financial concerns; with life expectancies getting longer and fewer corporate pensions to count on, there’s more pressure to store away wealth for the sunset years. But for some, it’s not about the money.

A Canada Project poll conducted early this year by Maclean’s asked Canadians how they felt about their retirement prospects. When asked how confident they were that they’ll have enough to retire by age 65, 62% said they were “very confident” or “somewhat confident.”

To certified financial planner Tom Feigs, the numbers are reassuring, but they don’t change Canadians’ shifting views on retirement.

“Sure, some want to retire early at 55, 60 or 62, but others have no inclination to retire so soon,” he told Maclean’s. “Aging Canadians want to be more involved with community and are keen to stay busy pursuing other passions. No one wants to sit on their duff for 30 years.”

Not all groups are equally confident. While the Maclean’s poll found 68% of those without children were confident they’d have enough to retire at 65, just 56% of those raising kids under 18 felt that way. Among females, the percentage was just 59%; it was even less for Gen-Xers (36%) and millennials (39%).

Still, the financial aspect might not be as much of a challenge as some suggest. According to a 2014 study by Philip Cross at the Vanier Institute, Canadians are actually gathering enough resources for their retirement.

“The perception that they are not doing so is encouraged by two common errors by analysts,” Cross said. “The first is a failure to take proper account of the large amounts of saving being done by government and firms for future pensions …. And the second is an exclusive focus on the traditional ‘three pillars’ of the pension system, which include Old Age Security (OAS), the Canada and Quebec Pension plans (C/QPP), and voluntary pensions like RRSPs.”

Cross said there are at least two other pillars that support Canadians’ retirement security: the trillions of dollars in assets held outside formal pension vehicles, such as home equity and non-taxable accounts; and the mostly undocumented network of friends and relatives that retirees can count on.

With the decline of company-sponsored pension vehicles, Canadians have fallen back on TFSAs, RRSPs, and the equity in their primary residence. Around 10% have a second home, small business, farm, and savings. There are also stocks and bonds held outside the RRSP or TFSA. “And let’s not forget about inheritances and other wealth transfers,” Cross said.

The Vanier study found that Canadian household owned $9.5 trillion in assets, which included $900 billion in RRSPs. The non-RRSP assets were split roughly equally between non-financial assets (including $3.6 trillion in homes and land) and financial assets.

While prospective retirees are more willing to draw on housing assets and home equity as a source of retirement income compared to previous generations, most Canadians will still be relying on their CPP, OAS, and guaranteed income supplement (GIS) as the backbone of their retirement.

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