Thought Leadership: A Secure Retirement for Seniors?

Running out of money or the inability to maintain a desired standard of living is a very familiar concern for most Canadians. It’s an issue that needs to be addressed, not only by the government, but also by wealth planners who have an opportunity to work with senior clients in overcoming the obstacles they face.

Seniors’ main retirement concerns stem from a few different fronts. Statistics show that the population of Canadians aged 65 and over is increasing. In 1999, the senior demographic made up 12% of the Canadian population.  In 2017 it rose to nearly 17%, and it’s projected to increase to 24% by 2036. This means that programs like CPP, GIS, and OAS will have a larger population to support, and fewer Canadians in the workforce paying into it. Increasing concerns further is the fact that, seniors’ debt load is at an all-time high. In 2016, the percentage of senior families with debt was 42%., 14% of senior families still hold mortgages, and consumer debt was at 37% in 2016. Heading into retirement with a debt load not only creates unease about the future, but also more to think about and prepare for in retirement.

Another issue: as Knowledge Bureau previously reported, as many as 10% of Canadian seniors fail to receive their Guaranteed Income Supplement (GIS), meaning these seniors are missing out on this important income stream in their retirement years. A clear concern for many seniors, as Statistics Canada reports that we could see more than 25% of the labour force made up of people aged 55 or older by the year 2036 – a choice to work later in life which is often motivated by concerns related to financial stability. Service Canada has also noted a few other concerns, including the fact that many Canadians do not know that they have to ask the government to deduct taxes from CCP payments and that when surveyed many Canadians did not know that CPP benefits and contributions were going up starting in 2019.   

And, an additional concern, identified by respondents to our March poll: 68% said that envisioning retirement is as difficult as saving for it.

How does the Finance Department intend to address these concerns? During an April 25 town hall, the Finance Minister indicated that “Every Canadian should feel good about what the future holds, and confident that support will be there when they need it.”  And that seniors, in particular, should feel assured that the Canadian government is investing in their retirement. Mr Morneau went as far to say that with the investments outlined in the 2019 Budget, Canada is doing more to “support seniors and help them enjoy a secure and dignified retirement, free of financial worries.”

A few of the proposed investments include:

  • Helping seniors who choose to work keep more of their earnings.
  • Creating more opportunities for seniors to be active in their communities.
  • Ensuring that eligible Canadians receive their Canada Pension Plan benefits.
  • Introducing new measures to better protect workplace pensions in the event of corporate insolvency; and
  • Create Canada’s first National Dementia Strategy. 

The proposed investments have also opened up further conversation focused on ensuring that everyone entitled to CPP receives it. To deal with this gap, the 2019 Budget has proposed to proactively enroll Canadians over 70 years of age.

But there are critics of the government’s efforts of pension reform in Canada. Baldwin and Shillington co-wrote an article on pension reform in Canada and noted that the Canadian government reform is incomplete. They suggested that the Canadian government has not considered how the current labour market trends affect the Canadian pension environment. They note that slower labour force growth, and the differences in age Canadians enter and exit the labour force need to be factored. An article in The Globe and Mail suggested that the expansion of the CPP is putting pressure on both workers and employers for additional contributions which can affect the Canadian economy. 

So even with the grand vision for no financial worries in retirement, the reality is that for most people, the biggest issue they have when it comes to their future, is “will I have enough?”  Advisors play an important role in ensuring that all Canadians understand and plan for their own investments to prepare for retirement, including their rights to access public programs such as CPP and Old Age Security in the most tax effective way, to make sure they get the most from the A lifetime of work. 

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