Retirement in Canada: past, present and future

In a recent white paper, we document how Canadians have experienced retirement over the past two decades. We draw from Statistics Canada data to understand the range of income, the type of income and how that income is spent. We also consider the changing pension landscape in Canada and how this impacts those currently planning for retirement.
Some key takeaways:

• In general, those who retired 20 years ago have had a positive experience with retirement income meeting their expectations. A significant minority of these retirees have more retirement assets than they started with!
• This period coincided with above average investment returns, low inflation and the widespread availability of defined pension plans that mitigated individual pension risk.
• The current median annual income for an individual retiree aged 65 or over is $33,200. 10% of retirees have an income of $80,000 or more.
• Retirees’ income declines by about 0.5% annually as they go through retirement.
• Women have about 5% less income than men both pre and during retirement.
• For both men and women, after-tax income falls by about 25% in retirement.
• For both men and women, divorce or loss of a spouse reduces retirement income. On average, divorce has the biggest impact.

Looking forward the biggest challenge for generating reliable retirement income is the declining availability of risk pooling in retirement, a key feature of the increasingly scarce defined benefit pension plans. The consequence is that individual retirement planning is riskier or, equivalently, more expensive to achieve the same level of risk. It also makes generating a coherent and tax effective retirement plan more complicated. Fortunately, modern retirement planning methods have begun to address this challenge. For more information, please contact us at daley@richardsonwealth.com.