The recession and a shaky global economy are forcing more Canadians to scuttle retirement plans and keep working.
Forget Freedom 55 - the new reality is Freedom 68. That's the average age at which Canadians now expect to retire - a sea change from just a year ago, when most Canadians figured they'd retire at age 65, a study released Tuesday shows.
Delaying retirement will send multiple ripples through the economy. More Canadians staying on the job or landing part-time work means younger people - whose jobless rate is now 14.4 per cent - will see fewer openings and more competition. It will force some employers to re-jig succession plans and adjust recruitment levels. There are positive offshoots, too - it could also, in the coming years, alleviate pressures as labour shortages become more acute.
"The recession did a lot of things. In addition to wiping out a lot of retirement savings … it jarred people's sense of security. If they see everybody around them losing their jobs, they feel more anxious and realize they'll have to work longer to have enough to retire on," said Susan Eng, vice-president at CARP. Tellingly, her group is re-branding itself from the Canadian Association of Retired Persons to reflect the times: Carp - Canada's national advocacy organization for older Canadians.
Nick Bacon retired at age 67 in December. After realizing how little he had to live on, he returned to a 40-hour work week this month.
"You sit in your house during those winter months, and every time you venture outside, it costs you money, which you have to conserve. So you spend most of your time reading books and watching television," says the resident of Markham, Ont. "People just can't get by with this amount."
The former general manager of an Ontario road-sign company said pensions for him and his wife amounted to $32,000 a year. Rather than scrape by, he's invested in a vending-machine business he hopes will augment his income.
He's not alone. "We used to see that the biggest factor was people wanted to work. They wanted to stay active and stay mentally fit," said Kevin Strain, senior vice-president of individual insurance and investments at Sun Life Financial Inc., which published Tuesday's study. "The big shift we've seen this year, people are saying not just [that]they want to work, but more and more people are saying they have to work."
The average Canadian now expects to retire at 68, a full three years later than a year ago, the third annual Sun Life survey found.
And it appears that the closer people get to retirement, the further away it seems to be. People in their thirties and forties expect to retire at 67. People between 60 and 65 think they'll retire at about 72.
The study found those at the higher end of the income scale plan to keep working because they want to stay mentally active, or love what they do. Lower-income workers say they need to keep working to take care of basic needs.
The findings echo a recent Conference Board of Canada survey which showed one in five respondents have been forced to delay their retirement by at least a year.
"For most, the dream of retiring at 55 is over, squashed by the effects of the recession," said Pedro Antunes, director of national forecasts at the Conference Board, in a recent blog post. "The baby-boom generation, a huge cohort that is currently entering its prime retirement age, was hard hit in the portfolio by the Great Recession. They may have to delay their golden years - at least for a while."
Freedom 55, it seems, is dead. The phrase was coined in a mid-1980s advertising campaign for London Life Insurance Co. The idea - having sufficient financial freedom to travel the world and sip wine at sunset - mirrored an age of booming stock markets and relative job security.
Nowadays - even though Canada's economy is comparably stable - people are worried about global turmoil, including instability in Libya, Europe's sovereign debt crisis and the U.S. jobless rate.
Investors were "blindsided" by the financial crisis and are now much more risk-averse, said Peter Drake, vice-president of retirement and eco research at Fidelity Investment. That means they're opting for more secure, but lower-return, investments and making other adjustments such as working longer.
For employers, that means there is a growing need to offer flexible work hours and adapt training programs to older workers, he said.
Reasons to keep working
Age at which the average Canadian now expects to retire, up from 65 in last year's survey.
Percentage of people earning less than $50,000 who say a main reason to work past 65 is to earn enough for basic living expenses.
Percentage of people making more than $100,000 who say a main reason to work past 65 is to stay mentally active.
Priority ranking given for paying down debt, including loans and credit cards (outranks other priorities such as saving for a home or retirement).
Source: Sun Life Financial's 2011 Canadian Unretirement Index