Risk of Outliving Our Money: 79% of Canadians 55+ Concerned
In 1980, Talking Heads released its song “Once in a Lifetime”, with David Byrne’s quixotic lyrics:
“And you may find yourself living in a shotgun shack
And you may find yourself in another part of the world
And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful wife
And you may ask yourself, “Well, how did I get here?”
If you remember that, this notes for you.
Maybe you even saw them live then (I did, but a couple of years later, on their last tour. What bands did you see live back then?). Now, as you think about financing your retirement, the topic of this article, whether trying to get there or already retired, you may think back to 1980 and consider some financial decisions made since then that you would do differently. I know I do. Back in 1980, the Canadian economy wasn’t in great shape, with interest rates about 13%, the inflation rate over 10% and unemployment at 7-8%, feeling the impact of a geopolitical event: the Iranian Revolution in 1979 and the lingering effect on oil prices. I remember the concerns my parents had about their high mortgage rate. Lot’s of similarities to today.
While thinking about 1980 for a minute: the “New Wave” in music was all the rage, and other top bands in 1980 in Canada were Blondie, The B-52s, The Knack, The Police, The Pretenders, Gary Numan, Canada’s Martha and the Muffins (Echo Beach). But I digress.
Risk of Outliving Our Money: 79% of Canadians 55+ Worried About It
It’s clear that for most of us “Freedom 55” is a relic of the defined benefits pension era, neither one attainable for us. Especially with the longevity most of us can expect, retiring at 55 would add at least 10 years of retirement that needs to be financed. Most experts already recommend being able to fund 20-30 years of retirement after age 65, without that extra 10. JP Morgan is telling its clients to prepare for living to 100 if in excellent health and a non-smoker.
So for most of us Canadians age 45+, as surveys find, including the National Institute on Aging, the risk of outliving our money is very real and growing. In fact, @Bill VanGorder of CARP says they continually find that finances are seniors’ top concern. It’s like a “Perfect Storm” of macro-factors converging to increase that risk, such as high inflation, higher interest rates, high housing costs (including property taxes and maintenance costs), and volatile financial markets, let alone the impacts on all these factors from geopolitical events, pandemics, and climate change.
We certainly live in a very complex era now, compared to, for example, the 1980 we experienced. The responsibility for our retirement finances has long since shifted to us as individuals, unable to count on company nor government pensions to see us through.
So with all these uncertainties, it’s not surprising that many older Canadians are taking action to reduce the risk of outliving their money, by either postponing retirement or working in retirement. As @David Cravit, of Zoomer and CARP put it: “The need to produce income for 20-30 years post-age 65 will make continued employment – fulltime, parttime, side hustle, you name it, a necessity for a huge number of Boomers.”
62% of Older Canadians are Delaying Retirement
A survey released in June 2022 by Angus Reid for Bromwich + Smith found that among Canadians aged 55+, 62% have delayed, or plan to delay their retirement because they don’t have enough savings. 54% have delayed due to rising inflation and/or higher living costs. Most of us with retirement plans don’t include scenarios with inflation of 7-9% or more. Facing skills shortages, employers might benefit from this deferring of retirement. Curiously, as CBC reported, there also seems to be a massive number of older Canadians now retiring, including a record number aged 55-64. Perhaps many delayed retiring during the pandemic, so we have double or triple cohorts of seniors retiring at once. It makes me wonder, given the challenging context we all now face, if many of these recent retires will become a new kind of boomerang generation – in this case returning to work after retiring, rather than Gen Xers returning to live at home after university.
62% of Older Canadians Expect to Work During Retirement
Another study, by Fidelity Canada, and released in November 2021, found that among pre-retirees, coincidentally also found that 62% expect to work during retirement. That is a much larger figure than the only 20 % already retired who are working, as Statscan found in 2015. This suggests a fundamental change in the nature of retirement may be coming, due to the challenging context we now all face, where most retirees continue to do some work.
The reasons for expecting to work during retirement, as Fidelity found, largely (62%) are about maintaining a preferred lifestyle (including travel and hobbies), followed by more specific financial needs, whether because the money is needed for basic necessities to reduce risks of being short of money later.
JP Morgan’s results of its US survey, grouped seniors’ reasons for working in retirement into “Wants” and “Needs”. The top 3 Needs were buying extras, avoiding diminishing one’s nest egg, and making ends meet. The top 3 Wants were to stay active and involved, enjoy working, and a job opportunity.
Do You Think These Trends Have Crested Yet? Take Our 2 minute Poll
We took 5 key statistics, from various sources cited in this article, and made them into 5 questions for you to say whether you think the next year’s findings on these same issues will be higher, lower, or the same % as these figures. The questions cover concerns about outliving money, delaying retirement, reasons for delaying, working in retirement, and whether they can ever retire. Please take the poll here.
Helping Age 45+ Regardless of Life Stage and Motivation
In subsequent blogs I will be discussing the opportunity for Canadians age 45+ to address the risk of outliving their money by earning income from their lifetime’s expertise.