In light of the recent market fluctuations, many Canadians are considering postponing their retirement, which means the much-talked-about labour shortage might not be as bad as predicted, according to the vice-president of sales for Desjardins Financial Security.
The financial services firm polled 1,150 people in October and found 42 per cent are thinking about putting off retirement by an average of six years. This is in contrast to a survey conducted last summer that found 62 per cent of 2,217 people surveyed were confident they were saving enough for retirement and 73 per cent rated their financial security as good or better, said Desjardins’ Michael Aziz.
“There’s supposed to be this big labour shortage but if boomers continue to work, maybe we won’t have that shortage,” he said. “I think people are all of a sudden concerned. People weren’t as serious when planning for retirement as they should have been.”
If older workers are staying on the job longer, employers have to be more aware of ageism in the workplace, said Susan Eng, vice-president of advocacy at CARP, an advocacy group for people over the age of 50.
“The idea that people at a given age are either out of date or unable to do the work, that stereotype is the single greatest barrier to us providing for the financial and retirement security of people,” she said. “We have to realize that we’re not doing them, the older workers, any favours. The workplace will benefit from their expertise, wisdom and informal networks.”
To help older workers stay on the job longer, employers should look at flexible work options, which could include shorter workdays or workweeks, or working during certain times of the year, said Eng.
Desjardins’ survey illustrates the disconnect that has existed for several years between people’s confidence in their retirement savings and the actual planning they’ve done, said Aziz.
In 2005, 29 per cent of Canadian families had no private pension assets, according to Statistics Canada, and while 68 per cent of people aged 45 to 54 had registered retirement savings plans, investments only averaged $40,000. Yet in 2007, about two-thirds of workers aged 45 to 59 believed their retirement income would be adequate or more than adequate to maintain their standard of living once they retired.
“People think the government is going to take care of them,” said Aziz.
While the government provides some retirement income through Old Age Security and the Canada Pension Plan (CPP), those programs aren’t enough.
With constant media coverage of the market ups and downs, more workers are aware their stock portfolios and their homes might not get them through a long retirement, he said. But the concept of retirement has changed over the past few decades. It is no longer a static event but fluid, said Eng.
Many older workers who start receiving a pension stay in the labour market in some capacity for two to three years before they completely retire, according to a Statistics Canada study that examined post-retirement employment from 1999 to 2004. The study also found many retirees choose to return to work after taking a break.
People were retiring anywhere from age 55 to 70, with some working part time or consulting, before the market crashed in October, said Eng.
But the economic downturn is forcing their hand, said Aziz.
“They no longer have the choice to retire,” he said. “It’s a bit of bad news right now, but hopefully this will shake people up so they will give more thought to their retirement plans.”
But the roller-coaster market ride is even affecting those investments that were deemed safe or conservative, said Eng. Many defined benefit plans are facing solvency issues and the CPP lost more than $10 billion in the early days of the market crash last fall.
“This is going to be much more broad and (have) much more deep an impact than might have been the case before,” she said. “Now you have a whole shift in people’s perspective.”
The government should be doing more to help older workers whose pensions are at risk, she said. First, it should put a minimum two-year moratorium on requiring people to withdraw funds from their registered retirement income funds at age 71. In December, the federal government granted a 25-per-cent cut in forced withdrawals. But a one-year moratorium announced in the United States is a better solution, said Eng.
While companies are asking for help from the government to deal with solvency issues, the government should first guarantee pensioners’ incomes, she said.“If you’re going to provide any relief for the companies, make sure the pensioners’ rights are protected first,” she said.CARP is also advocating for a pension summit, bringing together the federal government, the provinces and the territories to develop a consistent, national approach to pensions.