Back in the 1980's, the London Life Insurance company had a marketing campaign called Freedom 55. The campaign ads showed middle-aged couples climbing mountains and sailing into the sunset. The sun has set on that vision to be replaced by Freedom 68.
The Freedom 55 campaign reflected the optimism of the long bull market. However, in 2007 things changed. After the economic meltdown, savings dwindled and jobs disappeared, while debts soared. A recent survey by Sun Life Financial shows that the average Canadian now expects to retire only at 68. This is a year later than was recorded even in last year's survey. There are a number of reasons why Canadians expect to retire at a more advanced age than earlier.
Canadians are living longer. A person who retires now at 65 can expect to live about 20 years longer to 85 on average. Back in 1995, life expectancy was lower at 75. The cost of retirement will more than double.
Canadians lost many of their savings in the economic meltdown. Many company pension plans are experiencing shortfalls and registered retirement savings plans lost much of their value. However, there has been a considerable recovery from the market bottom. After 2029, the age of eligibility for Canadian Old Age Security benefits will advance from 65 to 67.
Average household debt in Canada is now 164% of annual income. As the enclosed video shows, many Canadians are having trouble putting money aside for retirement when they have many other financial obligations.
In 1990 the saving rate for the average Canadian was 13% but that has fallen to just 3.5%, as more income must be used to pay down debt or to purchase the latest gadgets. Canadians have until March 1st to sock some money away in a Registered Retirement Savings Plan that shields income from taxes.
Regardless of education levels, workers are retiring later than in the 1990s. A worker with less than a high school education, 50 years old in 2009 could expect to work a further 14.3 years before retiring, which is two years longer than in 1998. For those workers with a post-secondary degree the gap even increases. A 50 year old with this level of education could expect to work another 14.6 years, considerably more than the 12 years in 1998. About one quarter of all retirements are involuntary as a result of health, layoffs, or having to care for a family member.
While our life expectancy is increasing, so is the cost of our golden years, and we may need to work longer to enjoy them.