Back in 1927 Canada introduced the Old Age Pension Act which set the retirement age at seventy when life expectancy for a Canadian man was sixty and a Canadian woman was sixty-two AND it required a means test.
A few decades later changes to the pension system made the plan universal and had benefits kick in at age 65. Average life expectancy then was sixty-eight and a half.
What Does Retirement Really Mean?
The idea of retirement as a universal reward for a lifetime of hard work is relatively recent. Just a couple of generations ago it was assumed that you would work until you were physically incapable of doing so.
The notion that every Canadian should have a few decades of good health to be filled with travel, gardening, golf, reading and lying around watching reruns of Gilligan’s Island is quite new.
It reached its high point a couple of decades ago when financial planners began encouraging their clients to dream of retiring in their fifties – and living into their nineties. They urged us to invest wisely (they were standing by to help) and by fifty-five we would be free to live a life of leisure.
But the vision of a luxurious, decades-long retirement might already be on the decline. Government pension plans will begin to crack under the pressure of increased demands on benefits and diminished contributions. Personal retirement savings are pretty lean, even setting aside the financial crisis in late 2008.
Approaching Retirement Crisis?
About one third of all Canadians tell pollsters that they have no retirement savings at all. Of the remaining two-thirds, only a minority believes they have saved enough to ensure that their retirement is comfortably independent.
Household savings rates have declined dramatically but the thing that really differentiates Boomers is their willingness to take on debt. Almost a quarter of early Boomers who have already retired have more than $50,0000 in debt. This is the first generation to enter retirement owing large sums of money.
It’s clear that we’re in a time of transition in terms of our approach to retirement. Even if the public pension system continues to chug along, our personal savings don’t totally fail us and our debt loads remain manageable, it’s our lengthening lives that are the heart of the problem.
If we still died at sixty-five on average, pension funds would easily be able to support the few long-lifers among us. But the math doesn’t hold up if the average age surges up to eighty, ninety or a hundred. Is it practical, or even desirable, to fund a large group of people for thirty idle years, especially given that the government will also be paying the cost of health care?
The New Meaning of Retirement – A Working Definition
Many Canadian Baby Boomers are open to continuing work in some form after their so-called retirement according to surveys. Half surveyed say they will do at least some paid work and a few will finally end up starting a franchise or opening the small business they’ve been dreaming of. There is also considerable enthusiasm for volunteering especially in an area that makes use of their professional expertise.
A majority of Boomers intend to stay professionally engaged – whether for money, fun, satisfaction, or all of the above. They want their new work to be different from their old jobs, without the stress of pushing paper, non-productive meetings, and taking orders from some idiot in the corner office. They want satisfaction from a job well done and the social stimulation of co-workers.
Many have a “bucket list” of experiences they’d like to have before they die. Retirement may be busier and more stimulating than the peak of many people’s careers. Eventually they will have to slow down the pace – but not yet.
Much has been made of the enormous transfer of wealth from the elder generation to their Boomer children. Will Boomers make a similar bequest to their own children – or blow it all on fun while they’re still around?