Pay Day

Canadians preparing for life without retirement

It looks like the concept of retiring is ready for retirement. Nearly one in five Canadian workers (17 per cent) expect that they’ll never be able to retire fully, compared to 12 per cent globally, according to a new HSBC report.

The Future of Retirement: Life after Work? global survey also found that 40 per cent of retired Canadians said they had not prepared adequately or at all for a comfortable retirement, while 4 per cent of those retirees reported they’d have to go back to work to cover their financial shortfall.

Furthermore, 54 per cent of retired Canadians who said they’ve been unable to realize their retirement plans believed this is because they have less money to live on than they had expected.

“Where some people regard a comfortable retirement as a natural entitlement, for a growing number [of Canadians] this is not the case,” says Betty Miao, executive vice president of retail banking and wealth management at HSBC Bank Canada.

So what’s fuelling the “age of the unretired”? Vancouver certified financial planner Anne Brandt says several factors have contributed to people being unprepared financially for their so-called golden years.

Employment changes
Lack of full-time employment, loss of guaranteed pensions and restructuring in peak earnings years have crushed the retirement dreams of many Canadians.

“A lot of people are finding that they can’t retire as soon as they wanted to with all the downsizing that’s gone on over the years,” Brandt says.

"It’s also harder if you’ve been downsized in your 50s or later to find employment that pays what you were making prior to that, and sometimes it takes a while to find new work. People who had to change jobs might have been in a defined benefit plan and now they no longer are.”

The Great Recession
We all saw the markets crash, and when they did, Baby Boomers say their retirement dreams go up in smoke. “With what happened in 2008, people’s portfolios are just now starting to recover after a five-year loss in terms of growth,” Brandt says. “That’s definitely put things behind.”

Assumption that expenses will decrease in retirement
According to the HSBC report, 52 per cent of global respondents in retirement have seen no reduction in their expenses, while 17 per cent have seen their expenses increase. Many people aren’t prepared specifically for the costs of aging like medical, home care and nursing-care costs.

Boomerang kids
According to Statistics Canada, 42.3 per cent of young adults aged 20 to 29 lived in the parental home putting a strain on parents who thought they would be empty nesters. “Especially in markets like Vancouver, a lot of people have kids at university who are living at home because they can’t afford to move out,” Brandt notes.

Stuck in the sandwich generation
More and more Canadians find themselves caring for children as well as aging and possibly ailing parents, putting them in a financial vise. According to recent data from Statistics Canada, there are more than 8 million caregivers in Canada's "sandwich generation."

Hefty mortgage payments
“Some people do end up with mortgages when they go to retire,” Brandt says. “I do see people who have a $400,000 mortgage when they’re retiring and they’re going to have to work or go back to work, even if they left or received a package, even if they’re in their 60s.”

Relying solely on the family home as nest egg
Relying solely on your home to finance retirement is a risky plan. “For many people, a lot of their equity is in their homes,” Brandt notes. “If you downsize, where are you going to go? It can be difficult, because even going into a condo or a townhouse, by the time you start to pay condo fees, and you’ve added the cost of the commission to a realtor, and you get to the new place do a few renos, you don’t have a lot of money left.”

Not budgeting
“A lot of people don’t know what they spend,” Brandt says. “You don’t need to nickel and dime yourself, but going into retirement, it’s really important to know what you actually spend money on.” Many financial planners suggest tracking spending for a few weeks or months to really get a grip on this.

Rushing into retirement
Sixty-four per cent of all survey respondents who entered semi-retirement wished that they had stayed in full-time employment longer. This regret is largely for positive reasons, with many retired people seeing work as an important means of keeping the body and mind active.

On the positive side of things, many semi-retired Canadians said they genuinely wanted to stay in the work force. Forty-seven per cent said they like keeping active physically and mentally, 41 per cent said they like working, and 35 per cent said it would ease the transition into retirement.

“I do see lots of people who are prepared for retirement,” Brandt notes. “It is possible.”

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