Future retirees face a steep drop off in their financial well-being in the last eight years of retirement because of inadequate savings plans, says a new global study.
A survey by HSBC of 15,000 consumers in 15 markets around the world found that, on average, respondents expect to run out of retirement savings a little over half-way into their retirement.
Globally, the average retirement period is expected to last 18 years – 19 in Canada – but the average retirement nest egg is expected to last only 10 years internationally and 11 years in Canada, according to the survey.
Under such circumstances, funding extra living expenses in later retirement, such as long-term care, would be a challenge, the report says.
The poll results indicate that 56 per cent of working respondents in the 15 countries and 55 per cent of Canadians surveyed say they aren’t fully preparing for a comfortable retirement.
Fully 42 per cent of Canadians polled said they have never saved for retirement, including 47 per cent of 55- to 64-year-olds.
“Higher debt levels are pushing Canadians to prioritize immediate needs and wants above longer term financial health. This focus on the short-term will result in many retirees being forced to cut back in later life unless they take action to make up the shortfall while they can,” said Betty Miao, head of retail banking and wealth management at HSBC Bank Canada.
Despite these challenges, 43 per cent globally and 41 per cent in Canada say they are willing to prioritize saving for a vacation over saving for retirement, says the report.
The survey indicates that, in 60 per cent of Canadian households, daily expenses prevent saving.
The average yearly household income respondents in Canada said they needed to be comfortable in retirement is $48,300.
The data for Canada is based on a survey of 1,000 people conducted in July and August 2012.