Many Canadians are retiring early, not because they want to travel the world or sunbathe on the beach, but because they have to, according to a new study.
Nearly half of retirees in a survey conducted by Manulife Group Retirement this week stopped working earlier than planned at an average age of 59, and most of these early retirements were due to reasons beyond their control. Or they suffered a health problem, needed to care for a loved one, or lost their job.
Only 15 per cent retired early because they had saved enough, raising concerns about how prepared Canadians are for what could become an increasingly long retirement.
“I was in good health until I wasn’t,” one retiree said in the survey. “Retirement comes faster than you think.”
Not only is retirement accelerating, but Canadians are also living longer. Since 2023, life expectancy in Canada has increased by two years to 83 years, and since 2001 the number of people over the age of 100 has doubled, according to the study. Globally, the number of centenarians is expected to grow by 800 percent by 2050.
Instead of the 20 or 30 “golden years” of previous generations, today’s workers are potentially considering retirements that span 40 years or more.
“Longevity is rewriting the rules of retirement, and as it increases, we’re seeing more plan members questioning whether their savings and investment strategies will sustain them in retirement,” said Aimee DeCamillo, global head of retirement and wealth at Manulife Wealth & Asset Management.
This can be especially challenging in today’s economy.
Financial pressures on Canadians have increased since the pandemic. The proportion of Canadian workers who consider their financial situation to be fair or poor has increased from 33 per cent in 2020 to 41 per cent today, and those who consider their retirement savings to be behind has increased from 35 per cent in 2021 to 48 per cent.
The high cost of living and Canadians’ heavy debt burden have made working longer an increasingly popular idea, the survey found. The proportion of Canadian workers who want to retire later has increased from 26 per cent in 2020 to 35 per cent today, and in Manulife’s global study, between 40 and 50 per cent of workers across all markets said they planned to work in retirement.
“Unfortunately, the reality in North America is that only 16 percent of retirees surveyed work full or part time,” the study says. “And the retirees surveyed stopped working much earlier than planned, mainly due to their own health problems or to care for a loved one.”
Manulife said many of the retirees in his study were surprised at how expensive retirement was and how quickly they depleted their savings.
More than 60 percent of early retirees have had to make lifestyle adjustments to cut costs, while 32 percent say they are more financially stressed in retirement than before.
Fewer had a formal retirement plan than Canadians who retired later and 11 per cent had no income other than government pensions, compared with 6 per cent of those who retired when planned.
“Plan ahead,” said one Gen Xer in the survey. “It’s here before you know it.”
The latest toy stores
Have you noticed that your neighborhood Toys “R” Us branch has closed or perhaps is for sale? Well, the Financial Post Western Bureau team did too. They’ve put together a five-part series called The Last Toy Stores that explores the changing landscape of toy retail in Canada as the country’s largest chain reduces its footprint. You can read part one, which details the changes at Toys “R” Us, here, and visit the series homepage on Financialpost.com every day this week for a new installment.
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Can you detect the subsidy?
Today’s chart showing EV sales on both sides of the border highlights the importance of government aid for the EV industry.
Canada’s incentive program, which offered $5,000 on new electric vehicles and $2,500 on plug-in hybrids, ended earlier than expected when it ran out of money in January.
The US program, started by former President Joe Biden, which offered a $7,500 tax credit, died on October 1.
In the United States, sales rose 31 percent the month before the subsidy ended and then plunged 27 percent after it did, said Erik Johnson, senior economist at BMO Capital Markets.
Canadian sales fell off a cliff in February and are down an average of 37 per cent over the past eight months.
“Affordability remains the main barrier as consumers focus on costs, and as many automakers are scaling back their electric vehicle production plans, the launch of more affordable models is likely to take longer,” Johnson said.
- Today’s data: Canada Industrial and Commodity Price Index, US Existing Home Sales
- Earnings: Walmart Inc., Intuit Inc.
- ‘Southern waves’: Canadian newcomers worried about declining job opportunities and deportations similar to those in the United States
- Bank of Canada deputy governor says country’s affordability crisis linked to productivity
- The successes and setbacks of the Canadian retail magnate who built his career on failed businesses
Worried about leaving behind a big tax bill? This week, Family Finance looks at how to leave RRIF, TFSA, property, and other assets to your children while avoiding probate and minimizing taxes. Discover more
McLister on mortgages
Do you want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help you navigate the complex industry, from the latest trends to financing opportunities you won’t want to miss. Also, check out their mortgage rates page for Canada’s lowest national mortgage rates, updated daily.
Financial Post on YouTube
Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts on business, economics, housing, the energy sector and more.
Today’s Posthaste was written by Pamela Heaven with additional reporting from staff at the Financial Post, Canadian Press and Bloomberg.
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