1 in 4 Canadian pre-retirees in poor financial shape

Majority are not considering unexpected expenses in retirement savings, finds report

1 in 4 Canadian pre-retirees in poor financial shape

Many Canadians nearing retirement are in bad shape financially, according to a recent report from the Ontario Securities Commission (OSC).

A majority (53%) of Canadians aged 50 years or older who are not yet retired report their financial situation is strong, including 6% who say it’s very strong.

However, 24% rate their current financial situation as poor, with 22% saying it’s neither strong nor poor, finds the survey of 1,500 Canadians 50 years of age or older – including 878 Canadians currently retired and 622 Canadians not yet retired – conducted from March 1 to April 18, 2023.

Comparatively, 66% of retirees rate their current financial situation as strong, including 12% who say it’s very strong. Only 15% rate their current financial situation as poor, and 18% say it’s neither strong nor poor.

About 19.5 million Canadians are currently facing financial vulnerability, according to a previous report from the Financial Resilience Institute.

What is a good savings for retirement?

OSC’s study finds that the most common financial concern for both retirees and pre-retirees are:

  • sustained high inflation rates (62% of pre-retirees, 56% of retirees)
  • running out of money during retirement (57% of pre-retirees, 37% of retirees)
  • increased housing and rental costs (53% of pre-retirees, 39% of retirees)
  • unexpected healthcare costs (49% of pre-retirees, 43% of retirees)

Pre-retirees are saving for the time they stop working in a variety of ways, including:

  • putting lump sums of money towards long-term savings and/or investments whenever I can (33%)
  • putting regular amounts of money including automatic withdrawals from bank account towards long-term savings and/or investments (31%)
  • making contributions to a pension plan through an employer (30%)
  • making contributions to a group RRSP through an employer (with employer RRSP matching) (20%)

One thing that most pre-retirees do not seem to be preparing for, however, is unexpected expenses, according to the report.

Specifically, 49% among those who currently save for their retirement have considered it but have not incorporated it into their retirement savings plan, while 12% don’t think this is something they need to consider.

About a third (32%) have addressed this in their retirement plans, including 22% who have done so by increasing the amount they anticipated needing.

At what point do you retire?

Saving up for the unexpected is a must, especially because, for some, the time of employment can be cut short.

Specifically, 44% of retirees retired earlier than expected, and health related concerns or issues including disability (33%) is the top reason.

Meanwhile, 12% retired later than expected. And while enjoying working and wanting to continue working longer than they had planned (47%) is the top reason, many were forced to do so because of financial issues:

Among late retirees, about one in 10 say:

  • their income declined and they needed to work longer to save enough for retirement (11%)
  • their investments lost value and they needed to work longer to save enough for retirement (10%)
  • they were concerned about inflation (10%)

Canadian employees could need $1.7million in order to retire, according to a previous report.

Helping workers save for retirement

Here’s how employers can help workers save for retirement, according to ADP’s David Rodeck:

  • Use workplace retirement plans.
  • Promote health savings accounts for retirement.
  • Offer financial wellness classes.

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