INDEPTH: RETIREMENT
Introduction
by Peter Hadzipetros, CBC News Online | Research: Laura Carlin | Feb. 11, 2005
If you're like most Canadians, you want to retire early and you're confident you'll have the means to do it. But chances are you won't be packing it in as early as you planned to – and you won't be living in the lap of luxury.
With the buyouts and downsizing of the 1990s over, Canadians appear to be sticking around the workforce a little longer
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You won't be stocking up when tins of cat food go on sale, either.
Canada is on the cusp of a retirement revolution. It's those baby boomers playing their demographic games once again.
Over the next five to 10 years, more Canadians than ever will be in a position to clean out their desks for the last time.
In 1981, there were 4.6 million near-retirees (people between 45 and 64 years old) in Canada. They made up 27.8 per cent of the working-age population. By 2002, that number had grown to 7.6 million – or 35.7 per cent of the working-age population. By 2006, 8.7 million – or 38.8 per cent of the working-age population – will be close enough to the golden handshake to give it serious thought.
Workers per retired person
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1991: 3.8
2001: 2.7
2011: 1.8 (projected)
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According to the number crunchers at Statistics Canada, a third of them will conclude they haven't set aside enough to be able to afford to do it.
That same study (the General Social Survey of 2002) asked people who had been retired for a year, how they were faring financially now that they were collecting a pension. Just over a third – 34.1 per cent – said they were worse off. The rest said their situation was about the same – or they were better off.
Here are a few more numbers to ponder:
- The median retirement age fell from 65.1 years in 1976 to 60.6 in 1997. By 2003, it was up again – to 61.8 years.
- Canada/Quebec Pension Plans are designed to provide retirement income of no more than 25 per cent of the average Canadian wage ($41,100 for 2005). Throw in Old Age Security benefits, and you're up to 40 per cent.
- Most retirement planners say you should have accumulated enough assets to replace 70-80 per cent of your pre-retirement income by the time you stop working.
- Most Canadians retire on far less than that (and don't have 101 canned tuna recipes).
Retirement Age Trends
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Britain plans to gradually raise its age of retirement at which full state pensions will kick in. By the year 2044, the U.K,'s retirement age will be 68.
The U.S. and Germany also plan to raise their retirement age to 67.
Italy and Belgium have already raised their age of retirement to 60
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About 40 per cent of Canadians are currently covered by an employer pension plan. Twenty years ago, more than half were.
Coverage ranges from almost 100 per cent for public sector workers to about 30 per cent for employees of private sector firms. Some of those plans are in deep trouble and may need major overhauls if they're to provide the benefits promised. In some cases, companies with active pension plans have gone under.
Not all have been as fortunate as former Eaton's employees. Two of the three pension plans in effect when Eaton's stopped administering its pension plans on Nov. 18, 1999, had surpluses. Promised benefits have been paid and – in some cases – former employees got a little extra as the surplus was divided among them.
But that was 1999, before the bears chased the bulls off Bay and Wall Streets. The end of double-digit returns forced employers to take a hard look at pension plans.
QUICK FACTS
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Two-thirds of Canadians retire before the full Canada Pension Plan/Quebec Pension Plan benefit age of 65, oftentimes involuntarily.
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Low interest rates and prolonged market losses meant some pension plans that promised set retirement benefits were running huge deficits. And not just in the private sector.
On February 1, 2005, Nova Scotia teachers narrowly rejected a deal worked out between their union and the province that changes the way pension benefits are indexed to inflation. Under the current rules, benefits are automatically indexed to the inflation rate minus one per cent. But the pension plan is short of money - and the government wanted to tie indexing to the plan's financial health. The two sides will resume negotiations.
It's a problem that has dogged Stelco, the giant steel maker in Hamilton, Ont., since Jan. 29, 2004, when the company sought protection from its creditors. At the time, the steel maker cited a looming liquidity crisis and a potential pension shortfall of $1.25 billion. Despite the woes, several interested parties have come forward – especially since Stelco's liquidity problems were chased away with a profit of more than $100 million in the second and third quarters of 2004.
Many employers are turning to less-expensive pension options that put much more of the burden of saving on the employee.
QUOTE
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"It is seldom too late to plan for retirement."
Canada's Certified General Accountants
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But what about the 60 per cent of Canadians who aren't part of any pension plan? Those who retire today can collect a maximum C/QPP of $828.75 and Old Age Security of $471.76 a month, if they're 65. That's a grand total of $15,606.12 a year - assuming those plans will be around when your time comes around.
And if you've made it to 65, you've got better than even odds of making it past 80, according to the actuaries. You very well might find it tough to have a grand time for 15 years on just 15 grand per.
On the bright side, if you are like most Canadians – and if your health holds up – your lifestyle in retirement will be pretty much what it was while you were working. If you didn't travel extensively while you were working, you probably won't morph into Magellan.
So if you prefer taking long walks or hanging out at the library instead of spending afternoons at the club or wintering in Tahiti, you might get by on government benefits.
On the other hand, if you're looking forward to spending your retirement on golf courses, tennis courts and cruise ships and your retirement savings plan consists of C/QPP contributions – and a lottery ticket every week – you may find yourself spending those golden years sitting in a rocking chair, complaining about the government full time.
Stick around for the next few pages and we'll try to help you sort out the whole confusing mess.
» NEXT: HOW MUCH IS ENOUGH?
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| NEWS ARCHIVE: |
Britain to raise retirement age (May 25, 2006)
Richmond tops life expectancy list (CBC BC, Feb 2, 2005)
Canadians made little economic headway in past 15 years: TD economists (Jan 18, 2005)
Pension legislation changes on the way (CBC Manitoba, Dec. 7, 2004)
Ontario court upholds CPP benefits for same-sex couples (Nov 26, 2004)
Mandatory retirement ban won't be retroactive: labour minister (CBC Ottawa, Nov.3, 2004)
Martin against mandatory retirement (Dec. 20, 2003)
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