Canadians’ views of retirement sure have changed over the last few years.
Not long ago, Freedom 55 ads filled the airwaves. Retirement at age 55 was seen as an attainable goal. All you needed was some good financial planning and investments, and you were set for life.
Now, it seems, Canadians have had to re-evaluate that dream of retirement and push it back by a few years at least, if not more.
Statistics Canada’s latest social survey report on the retirement plans and expectations of older workers showed that many Canadians nearing retirement have pushed back their retirement plans.
Between 1991 and 2007, the proportion of near-retirees aged 45 to 49 planning to retire before 60 decreased four percentage points, while those planning to retire at 65 or older increased by seven per cent. The same pattern existed for near-retirees aged 50 to 54.
Overall, the data suggests that Canadians in their late 40s and early 50s have pushed back their retirement plans.
One reason is that Canadians are living longer.
Statistic Canada’s 2006 census report shows that the second-fastest-growing segment of the population are Canadians who are 80 or older. For the first time, the number of Canadians over 80 surpassed one million between 2001 and 2006, and there were 4,635 people 100 or older in 2006.
With a longer life expectancy, however, comes the possibility that they could outlive their money.
Another is that Canadians are not financially prepared to retire and their pensions are inadequate.
The Association of Canadian Pension Management (ACPM) says in a report that the typical pension plans being offered to Canadian workers won’t make a “meaningful” contribution to the creation of an adequate retirement income for them.
The Canadian Institute of Actuaries and the University of Waterloo concludes that two-thirds of Canadian households expecting to retire in 2030 are not saving enough to meet necessary living expenses such as food, shelter, clothing, transportation, health care and taxes.
New research by Investors Group has added another factor into the retirement equation: taxes. Its study shows that high income and property taxes are considered the top threat to the retirement security of Canadians, followed by inflation, currency fluctuations, poor stock market returns and fear of job loss.
“Taxes can have a significant impact on investors, whether saving for retirement or in later years when living on fixed income,” said Jack Courtney, assistant vice-president of advanced financial planning with Investors Group. “It pays to employ tax saving strategies that can help cut tax bills in future years or help mitigate the impact of taxes when withdrawing from investments.”
It’s a well-known fact that Canadians are some of the highest taxed citizens in the industrial world.
According to the Fraser Institute, the total tax bill for the average family of two people in Canada in 2009 is $37,700. The average family pays $13,000 in income taxes, $5,800 in sales taxes, $2,900 in property taxes, $8,300 in security, medical and hospital taxes, and then a bunch of other taxes.
“Canadians can expect to pay 43 per cent of their income in taxes,” said Niels Veldhuis, senior economist with the Fraser Institute. “Taxes are the largest portion of expenses, greater than food, shelter and clothing, before and after their retirement.”
The Fraser Institute expects the heavy tax burden in Canada will continue because governments will be forced to raise taxes to pay off the debts they are building up during this recession.
“Retirees can’t plan for things like inflation and drops in the stock market, but taxes are one thing they can plan for now and in the future,” Veldhuis said.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors. He can be contacted at boggsyourmoney@rogers.com.