By Sheryl Smolkin
Later retirement and working longer is the new norm. That’s the message in Sun Life’s 2013 Canadian Unretirement Index report.
Over 3000 adults aged 30 to 65 years of age polled online by Ipsos Reid in late 2012 present a startlingly different picture than five years ago.
The number of Canadians who are planning to exit the workforce by age 66 has declined by nearly half since 2008. Just 27% of survey respondents expect to be retired by that age versus 51% five years ago.
As a result, there is a corresponding increase in the number of Canadians who assume they will be working retirees. And according to the study, we’re not talking about part-time work.
Twenty-six percent now expecting to be working full-time at age 66. This figure represents a 10-percentage point increase since 2008 in the number of Canadians who expect to be punching the clock for a full 40 hours or more a week.
Furthermore, most people say they will be working longer not because they want to, but because they need the money. This is apparent when we examine the order in which Canadians ranked their reasons for working at age 66 in 2008 as compared to 2012.
Reasons for working at age 65
|15%: I enjoy my job or career||25%: To earn enough money to pay basic living expenses|
|14%: To stay mentally active||21%: To earn enough money to live well|
|13%: To earn enough money to live well||16%: I don’t believe government pension benefits will be enough to live on|
|13%: I don’t believe government pensionbenefits will be enough to live on||13%: To stay mentally active|
|11%: To earn enough money to pay basicliving expenses||10%: I enjoy my job or career|
SOURCE: 2013 Sun Life Unretirement Index Report
It is apparent that there is a serious disconnect between retirement dreams and retirement reality for many Canadians. According to the Sun Life study, on average Canadians anticipate needing $46,000 in annual retirement income and they expect to live in retirement for 20 years.
But the average amount they anticipate saving by the time they retire is $385,000 (not including the equity in their house). That’s well below the amount required to meet these average expectations.
In fact 58% of Canadians aim to have less than $250,000 saved for retirement. Thirty-eight percent say they will have less than $100,000 tucked away.
There is no doubt that we all have competing priorities that make it difficult to save for retirement. Paying down debt and raising our children are pretty high on the list. But small steps can make a huge difference.
A good way to start is to pay yourself first. That means arranging for automatic monthly deposits in a registered retirement savings account like the Saskatchewan Pension Plan.
And if you complete and file the Canada Revenue Agency’s T1213 form you can request permission from your employer to deduct a lower amount of taxes at source.
By reducing your withholdings at source, you are paying yourself and not the Canada Revenue Agency first, and increasing your net take home pay. You are effectively giving yourself a raise all year long, not just once at tax time.
In 2013 you can contribute up to $2,500/year to the Saskatchewan Pension Plan and contribution options include directly contributing from your bank account on a pre-authorized contribution schedule. Additional amounts up to your RRSP contribution limit can be contributed to your individual or workplace retirement savings plans.
Developing the “Pay yourself first” habit can help you build up a substantial retirement nest egg. For example, if you deposit $2,500/year in the SPP and earn five percent over a 40 year career (age 25 to 65) you will have a lump sum of about $317,000 in your account.
The value of planning and saving is that you can decide how and when you want to fully retire. Saving with SPP will help you accumulate the funds you need to enjoy your golden years on your own terms.