If retirement feels like an out of reach financial goal, you aren’t alone.
A recent report from Deloitte Canada found that only 14 per cent of near retirees can expect comfortable golden years. This study focused on Canadians aged 55 to 64 and revealed that those who are likely to be financially secure after 65 have more than $900,000 in assets and own their home outright.
However, Paul Kershaw, founder of the think tank Generation Squeeze, warns that young people face an even more dire situation.
“I increasingly worry about the challenges they will face in their aspirations to retire because the reality is that for young folks today, hard work doesn’t pay off like it used to,” he said.
Kershaw highlights a wide range of pressures faced by younger generations that make life less affordable compared to their older peers.
“They spend more on post-secondary education, pay more for the privilege of landing jobs that often pay less after adjusting for inflation. Additionally, they face dramatically higher housing prices that increasingly make homeownership unattainable, leaving them with rising rental costs,” he explained. “All of this makes it much more difficult to save for retirement in the long run.”
Considering the typical retirement age of 65 and an average life expectancy of 81, Kershaw emphasizes that the struggles faced by younger generations will lead to more fiscal challenges for retirement programs.
“There are only three working-age residents to support every retiree. This adds risks to securing the retirement of our loved ones and puts significant pressure on younger taxpayers,” he added.
While some retirees enjoy lower housing costs and interest rates compared to their millennial and Generation Z descendants, Laura Tamblyn Watts, CEO of CanAge, argues that seniors are also facing financial hardships.
“Boomers are the most indebted generation we’ve ever had. Some of them are retiring with student debt, let alone mortgage debt,” she said on The West Block.
“So, they’ve accumulated a lot of debt, but their savings haven’t grown much due to historically low interest rates. Now that the cost of debt and living has increased, their financial situation has worsened,” she added.
In this scenario, Tamblyn Watts states that more people are considering extending their working years beyond 65.
“The idea of retirement at 65 originated from a time when people lived until 67. That’s when we created our Canada Pension Plan. It was only expected that you would live for two more years and then pass away. Now we’re looking at a third of our life being in retirement,” said Tamblyn Watts.
When the CPP was created in 1965, the average life expectancy in Canada was 68.73 years for men and 75.25 years for women, according to Statistics Canada.
RBC reports that about 14 per cent of Boomer households in Canada still carry mortgage debt.
Kershaw states that while more Boomers are retiring with debt, they are still economically secure.
“Although there has been a slight increase in the number of Boomers retiring with mortgage debt, it is typically because they have been refinancing homes or purchasing additional properties to take advantage of the wealth generated by the housing market,” he explained.
On the other hand, Tamblyn Watts believes that downsizing is becoming more challenging for seniors.
“Most rental options are not suitable for older individuals. They struggle to downsize and remain in their communities,” she said.
“Many are forced to sell or move to remote areas, making it difficult to access the necessary services and healthcare they require. Transportation becomes a significant issue in these cases.”
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