Canadians not saving enough for Retirement

Courtesy of Sandra Boyd, Great-West Life, Posted 07 Mar 2016

This week's Monday Muse highlights the unfortunate truth around retirement readiness, or the lack thereof, amongst many Canadians. It is important that investors truly understand the benefits of working with an advisor, and perhaps more importantly, the risks associated with choosing not to. The information below, courtesy of a report highlighted in the Globe and Mail, should provide ample support of the latter.

  • Half of Canadian couples between 55 and 64 have no employer pension between them, and of those, less than 20 per cent of middle-income families have saved enough to adequately supplement government benefits and the Canada/Quebec Pension Plan;
  • "The vast majority of these Canadians retiring without an employer pension plan have totally inadequate retirement savings," said the report, which was authored by pension consultant Richard Shillington;
  • Among all Canadians ages 55 to 64 without pensions, half have only enough savings to last for one year.
  • Income trends suggest the percentage of Canadian seniors living in poverty will increase in the coming years, especially for single women who already face a higher than average rate, the report said;
  • The poverty rate for seniors will climb at the same time as a sharply rising number of Canadians hit retirement age in the next two decades;
  • More than 20 per cent of the population will be older than 65 within 10 years.
  • "This new data on retirement savings and gaps in support makes one thing perfectly clear - we have a retirement-income crisis on our hands that requires urgent government action now," said Rick Smith, executive director of the Broadbent Institute, an Ottawa-based think tank;
  • The Canada Pension Plan pays out a maximum $12,780 a year. But many retirees don't qualify for the maximum - the average CPP payment for men last year was $7,626 while the average for women was $5,922. Seniors also collect Old Age Security payments to a maximum of $6,839, while the poorest seniors can collect the Guaranteed Annual Income;
  • Mr. Shillington's study noted that the existing retirement system has succeeded in keeping Canada's poverty rate among seniors well below the average for industrialized countries.