The Reality of Retirement in Canada: A Growing Financial Challenge
Retirement is often seen as a time to relax, travel, and enjoy the fruits of years of hard work. However, for many Canadians, including Diane Clark of Regina, the reality of retirement has been reshaped by financial constraints. Diane, a 75-year-old retiree, never imagined that her golden years would involve playing cards at a seniors’ home instead of traveling or enjoying the finer things in life. Yet, due to rising costs and limited income, she and many others like her have had to adjust their expectations. Diane and her peers have had to cut back on travel, reduce the quality of food they buy, and spend more time at home to make ends meet. The 2008 financial crisis dealt a significant blow to her pension, which was invested in a bank, and the post-COVID-19 pandemic inflation has only made things worse. When asked for advice, Diane’s response was simple yet poignant: “Save, save and save.”
Retirement Plans in Flux: How Economic Changes Are Impacting Canadians
The financial challenges facing retirees like Diane are not isolated. A recent poll by CIBC reveals that about 66% of Canadians are recalibrating their retirement plans due to economic pressures such as inflation and rising living costs. For some, this means saving more aggressively while still working, while others who are already retired are cutting back on planned travel or leisure activities, reevaluating their investments, and adjusting their budgets to make ends meet. Financial planners are urging soon-to-be retirees to take control of their finances now, emphasizing the importance of creating a detailed budget that includes retirement savings and maximizing the use of registered retirement plans. Jamie Golombek, managing director of CIBC tax and estate planning, notes that a well-thought-out budget is essential for ensuring financial stability in retirement.
The Fear of Outliving Savings: A Growing Concern for Retirees
One of the most pressing concerns for retirees is the fear of outliving their savings. Rudy Buttingol, president of the Canadian Association of Retired Persons (CARP), points out that many retirees are “absolutely terrified” about becoming a burden on their families or running out of money. This fear has led groups like CARP to advocate for changes to retirement legislation, particularly around the mandatory withdrawal age for registered retirement savings plans (RRSPs). Currently, Canadians must start withdrawing from their RRSPs by age 71, which can force some seniors who are still working to access retirement funds earlier than necessary. This can result in paying more taxes sooner rather than later, which might have been better saved for when they need it most in their golden years.
Navigating Retirement Income Options: CPP, RRSPs, and More
For many Canadians, the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) is a cornerstone of their retirement income. While it’s possible to start receiving CPP or QPP as early as age 60, doing so comes with a trade-off: a reduced monthly amount. Bonnie-Jeanne MacDonald, research director of the National Institute on Ageing, explains that delaying CPP payments until age 70 can more than double the monthly pension amount. This strategy not only provides a higher guaranteed income for life but also includes inflation indexing, making it a financially savvy choice for those who can afford to wait. MacDonald emphasizes the importance of educating oneself about these options and calls on governments to clarify retirement planning information so Canadians can make informed decisions.
The Evolving Landscape of Retirement: Working Beyond 65
The traditional notion of retirement, where individuals stop working altogether at age 65, is becoming less common. According to the CIBC poll, more than 70% of Canadians expect to work during their retirement, whether through part-time jobs, gig economy roles, or phased retirement arrangements. Many plan to continue working well beyond the age of 65 to supplement their retirement income. This shift reflects both the financial necessity of extending one’s working life and the desire to stay engaged and active. For some, working in retirement is a choice; for others, it’s a necessity driven by the fear of outliving their savings.
A Call to Action: Save, Plan, and Advocate for Change
Diane Clark’s story serves as a stark reminder of the importance of saving and planning for retirement. If she could do it again, she says she would “save way more money” and invest differently. Her experience underscores the need for Canadians to take proactive steps to secure their financial futures. While individual responsibility is key, there is also a role for governments to play in ensuring that retirement policies are fair, flexible, and sustainable for an aging population. As life expectancy in Canada continues to rise, the need for comprehensive retirement planning and legislative reforms becomes increasingly urgent. By saving more, planning carefully, and advocating for change, Canadians can work towards building a more secure and fulfilling retirement.
