“Retirement Challenges Ahead: Canadians to Make ‘Significant’ Lifestyle Cuts”

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Canada's working-age population is older than ever, with more than one in five working adults now nearing retirement, according to new census figures. Canada now has a larger proportion of people aged 55 to 64 than it does of those entering the workforce.

A substantial portion of Canadians nearing retirement may need to make significant lifestyle adjustments to maintain comfort in their golden years, a new report from Deloitte Canada suggests. The analysis, examining the financial readiness of Canadians aged 55 to 64, reveals a looming retirement crisis for many.

According to the report, only a fraction, approximately 14%, of near-retirees are well-positioned for a comfortable retirement. This group typically possesses financial assets exceeding $900,000 and owns property. Conversely, nearly a million households are expected to rely heavily on public support systems like the Canada Pension Plan, positioning them precariously against unexpected costs.

More than half of Canadians over 60 in the workforce are there because of financial necessity, according to Statistics Canada, including the cost of essential expenses without support from a pension plan. (Ryan Remiorz/Canadian Press)

The majority, about 55%, face the prospect of adjusting their lifestyles to prevent outliving their savings. This segment mostly includes middle-income earners, some of whom may own their homes. Hwan Kim, a partner at Deloitte Canada, expressed concern over this finding, describing the scenario as “staggering.” He emphasized that these individuals “haven’t saved enough to sustain their lifestyle,” particularly amidst the current economic climate marked by rising costs.

The Deloitte report challenges the traditional focus on a specific savings target for retirement, proposing instead a shift towards understanding cash flow — income and expenses — during retirement. The complexity of accurately predicting living expenses is compounded by ongoing inflation, affecting essential goods such as food and housing.

Older Canadians say they’re worried about the impact of inflation on their finances. PHOTO BY GETTY IMAGES/ISTOCKPHOTO

Jason Evans, a financial planner specializing in retirement transitions, underlined the importance of personalized planning. He advocated for considering various income sources and living costs unique to each individual or family in retirement. The report also highlighted that many Canadians might underestimate expenses related to healthcare, insurance, and long-term care in their later years.

CARP has been pushing for government to take a fresh look at the financial support it offers retired Canadians. (Sean Kilpatrick/The Canadian Press)

The analysis also pointed out the potential misinterpretation of net wealth, especially for those with significant real estate investments. With the looming retirement challenges, Deloitte Canada’s report calls for a reassessment of retirement planning, emphasizing the need for a more comprehensive approach that accounts for the changing economic landscape and individual circumstances.

The findings underscore the need for both private and public sectors to address the “readiness gap” in retirement planning, suggesting that without intervention, the burden of financial stress could extend to future generations. The report’s insights come as a wake-up call for Canadians approaching retirement, highlighting the necessity of proactive and realistic financial planning.