Retirement is a phase of life that many people look forward to with both anticipation and trepidation. It will be nice to have so much time to yourself without the pressure of working, but how will you live? More to the point, how can you afford to live an active retirement, one where you control your own agenda? And what can you do now to plan for the day when you don’t work full time anymore?
More people than ever before are asking these questions. Canada’s population is aging. There are now 4.2 million Canadians age 65 and over—about one in seven people. By 2026, it is estimated that it will be one in five.
The fastest growth is occurring in the 85-and-over category, which has doubled since 1981 to reach over 400,000 people in 2001, and rose to over half a million in the 2006 census. It’s projected to be 1.6 million by 2041—4% of the population. That’s relevant to retirement planning because it tells you that you’re likely to live longer than your ancestors did, so your savings will have to last longer.
And you will want to have the resources to kick up your heels at least on occasion, because Statistics Canada says that seniors today are generally healthier than those of previous generations. And the Public Health Agency of Canada says seniors can stay that way: “Years of collaborative research among international experts has proven the beneficial effects of daily activity and its ability to decelerate the aging process, and has resulted in the new Canada’s Physical Activity Guide to Healthy Active Living for Older Adults.”
Being “comfortable” in retirement is not as big a financial stretch as it once was. The median after-tax income of married couples age 65 and up was $38,900 in 2005, up 34% over $29,000 (in 2005 dollars) in 1980. Few seniors—6.1% in 2005—live below the federal government’s low-income line, among the lowest levels in industrialized countries.
Where does retirees’ income come from? About 24% comes from Old Age Security and 20% from CPP/QPP benefits. About one-third (33%) comes from private pensions (such as company pensions) and RRSPs and another roughly 11% comes from private investments. “Other sources” such as employment account for the remaining 12%.
Although some people are forced into retirement by their health or unemployment, surveys show most seniors choose to retire. That’s because it can be a great lifestyle—if you plan for it. Thinking about retirement now will allow you to anticipate many of the challenges so that you can live a better, more active life when you stop working.
Those looking to invest in preparation for their retirement should bookmark the Investor Education Fund’s site www.investored.ca. Funded by the Ontario Securities Commission (OSC), the Investor Education Fund is Canada’s objective, non-profit source for information and tools to help consumers make better decisions when investing and managing money. If you are retired or thinking about retirement, this website provides information on retirement planning, living your retirement and other important financial advice, lessons and tools.