Retirement, unfortunately, is not the equivalent of an all-inclusive trip where you know the cost, duration and program in advance. It’s quite the opposite, we have to prepare for it without really knowing what awaits us. This individual burden is increasingly heavy, which is not without consequences. A majority of those who stop working within 10 years will be “financially vulnerable” to the point where they will be a burden on their families.
In the next decade, three million Canadian households will leave what we call “working life”, or 14% of the population. The Deloitte firm, which called these people aged 55 to 64 “near-retirees”, analyzed in depth their level of financial preparation and the savings required to meet their basic needs.
The result is worrying, especially in the context where the cost of health care is expected to explode. This budget item is highly underestimated, and access to insurance is a problem. Currently, 75% of retirees in the country do not have access to health insurance.
However, the cost of elder care is expected to almost double by 2031 for the simple reason that demand will exceed supply, according to Deloitte. The number of long-term care patients will increase as baby boomers age, while the health system is already struggling to meet needs due to staff shortages. A third of nurses are 50 years or older.
Do you see, like me, private sector profits exploding thanks to increased demand for home care and certain surgical operations?
This observation leads Deloitte to say that it is “very likely” that a majority of retirees will lack money to cover their health costs, which will force them to ask their families for help. “This will be a significant challenge in the coming decades, as families will shoulder both the emotional and financial burden of caring for their elderly loved ones. » Ouch!
Nearly half of those aged 75 and over live with a disability that makes them dependent on certain care. It’s clearly not something that crosses our minds when we’re still working a 9 to 5 and saving for our dream retirement…
We also tend to believe that expenses will only decrease over time. This is false, according to Deloitte. Even if the budget for travel, shows and dining out decreases, total discretionary spending increases after age 83 due to health costs.
The heart of the problem is the lack of retirement savings among a majority of workers. Only 14% of households have the necessary cushion to live a very comfortable and uncompromising retirement ($900,000, pension plans included).
The majority of near-retirees (55%) will have to “drastically change their lifestyle” to avoid running out of money before they die unless they have a solid financial plan and follow it to the letter. Hurry up.
The less well off will essentially maintain the same pace of life thanks to state support.
Life expectancy, which continues to increase, also increases the level of savings necessary compared to previous generations. Today, a 65-year-old woman has a 50% chance of reaching 91 and a 25% chance of living to 96. A man of the same age has a 50% chance of reaching 89 and a 25% chance of living to 94.
Unlike the previous generation, baby boomers, those aged 55-64, are in a bad situation for many reasons. Firstly because few of them contribute to a defined benefit pension plan which guarantees them an annuity until their death. Less than 10% of private sector workers are covered by such a plan, half as many as in 2000.
As for defined contribution plans, membership is often voluntary. As a result, only 54% of Canadian workers with access to such a savings vehicle benefit from it. Half of workers therefore leave the contributions offered by their employer on the table. This is a glaring problem that must be addressed; Deloitte is also pleading in favor of “consolidation of the private retirement system”.
In theory, we should compensate by saving more. But that’s not what’s happening. The level of debt, very often, harms the accumulation of capital.
With the cost of living soaring, some are dipping into their retirement savings to repay loans. Among the G7 countries, Canadian households are the most indebted and those who devote the highest percentage of their income to repaying their debts. These are not edifying records.
“Our consumption habits have changed. We arrive in retirement with more debt,” also notes Sophie Klimos, senior director, strategy consulting at Deloitte Canada. This phenomenon is quite problematic in a context of falling income. No less than 25% of retirees have a mortgage loan, which reduces their margin of maneuver to deal with unforeseen events, in many cases.
It’s hard to say whether the report is alarmist. Only time will tell. But it gives the impression that we are moving backwards.
Comedian Yvon Deschamps has already said that his grandfather was forced to live with his children when he retired. After 53 years of toiling in a sugar factory, he had no savings or retirement plan to rely on to feed himself. We will not return to that, but it is imperative to find solutions to prevent the next generations of retirees from dragging themselves to the devil by their tails.