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The combined forces of the retirement of the Boomer Generation, rising life expectancies, and falling birth rates will seriously strain, and could possibly rupture, our retirement and health care systems in the next 30 years.
Most people now realize it’s important to prepare for retirement. But do you really appreciate just how important? Look around at today’s retirees, and consider what lies ahead.
- Average life spans are increasing. In relative terms, those over 85 are the fastest growing part of Canada’s population.
If you’re in reasonable health, you will likely live longer than today’s typical retiree. And, you will likely retire earlier; Statistics Canada says few people now wait till 65. Consequently, your money will have to cover
more years.
- Thanks to medical advances and lifestyle changes, you will likely have more years of good health than today’s retirees. So, you will be able to enjoy more active pursuits. Think about what you would like to do in retirement – and what that would cost.
- You will get less government support. Cutbacks are already underway because key parts of Canada’s social safety net – Old Age Security pensions, the Canada/Quebec Pension Plans and medicare – were designed during the 1960s using demographic and economic assumptions that made sense then, but which later proved to be flawed. Significantly, revenues from active workers were supposed to support retirees. There were 16 workers for each retiree as the first Boomers entered adulthood in 1966. But Boomers have had fewer children than their parents, immigration has not filled the gap and seniors are living much longer. As a result, there are now just four workers per retiree. And, that ratio is expected to fall to 2-to-1 by 2030, when all Boomers will be at least 65. Meanwhile, the needs of an aging population are straining medicare, which was designed before the development of today’s costly drugs and hightech treatments.
- There are fewer people in employer-sponsored pension plans. Membership peaked in 1991 and now covers just 41% of Canada’s workers – many of whom will, no doubt, change jobs and leave their pension plans well before retirement.
Federal officials recognized these trends in the 1980s and concluded that middle and upper-income Canadians will have to rely more on themselves. So, they substantially increased retirement savings opportunities for those with less than topnotch pension plans. When the current rules were proposed in 1989, the Department of Finance said they were needed "to encourage the increased private saving that is required now to meet pension needs later." Providing for the future is not merely prudent; it’s a social responsibility.
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Economic life cycles
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We urge you to make wealth accumulation for retirement one of your top investment priorities. The choices you make today will significantly affect your future ability to make choices about personal comfort and fulfillment. National Bank Financial prepared this web content to help you better understand retirement planning and the vital role of a retirement savings plan (RSP). We hope you find it useful. Please don’t hesitate to call your National Bank Financial Investment Advisor with any questions
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