Let's have a moment of silence for the late, great dream of early retirement.
We're now transitioning to an era of delayed retirement, where it's common for people to work at least part time after age 65. New census data on working seniors prove it. In 2015, 53.5 per cent of men and almost 39 per cent of women who were 65 worked at some point in the year.
Too much nostalgia for the old days of early retirement affects our thinking about our post-employment lives. For a series of columns on how the personal finance milestones of life are changing, we asked readers of all generations for the age at which they expected to move out, find a first career-building job, buy a home, have a first child and retire. The 3,296 people who responded to our online survey told us their average expected retirement age was 62, with virtually no differences between the generations. Boomers said 62, Gen Xers said 61 and millennials said 62.
Anticipation of an early retirement highlights how we still expect our personal finance life cycles to conform with a baby boomer timetable. Careers starting in your mid-20s, houses and kids in your early 30s and retirement in your early 60s. Over the months ahead, I'll look at how the timing of all these events is being pushed ahead as a result of longer lifespans and shifts in the economy.
Let's start with retirement, where expectations reflect the world as it was 20-plus years ago. The percentage of working seniors declined in every census between 1980 and 1995, when it hit 10.1 per cent. By 2015, the percentage of working seniors was close to 20 per cent.
People are working longer in some cases because they want to remain engaged mentally and socially. But there's a strong sense in the latest census data that necessity is driving the delayed retirement trend as much as anything. Employment income was the main source of income for 43.8 per cent of seniors who worked in 2015, up from 40.4 per cent in 2005 and 38.8 per cent in 1995, according to Statistics Canada.
One of the reasons for this reliance on employment income generated at 65 and later is that the percentage of workers covered by a company pension plan fell over the past two decades. Responses to our online survey highlighted some other reasons why people are working longer.
Helping adult children financially: "My husband and I at this point in our lives are focused on helping our three young adult children reach their own milestones," a 60-year-old woman from Toronto wrote. "Since we aren't wealthy, this will probably mean we delay our retirement by a few years."
Low interest rates and subdued stock market returns: "Low rates of returns on investments are delaying my retirement," wrote a 52-year-old man in Mississauga.
Rising divorce rates: "I separated after 30 years of marriage, which led to postponement of retirement by a few years," a 64-year-old woman from Ottawa wrote. "Have taken on a mortgage to purchase a home on my own."
Working either full or part time until age 70 is an effective way to address the challenge of not having a pension. You build up five additional years of saving over retirement at 65, and you have five fewer years of drawing on your savings. Waiting to collect Canada Pension Plan and Old Age Security benefits until 70 allows you to benefit from higher payouts than if you started at 65.
Retiring later is bound to be seen as negative, but it's actually quite unremarkable unless you have a physically demanding job or hate your work. Previous generations may have retired at 65 and lived an extra 10 or 15 years. Retire at 70 today and you might look forward to another 15 or 20 years. A rough rule is that average life expectancy increases by three months with each passing year, although there's talk in the actuarial world that these gains may have recently slowed.
There are already plenty of examples of people working to 70. Almost 30 per cent of senior men at that age said they worked in 2015, as did 17.1 per cent of women. These people are the trendsetters for the era of delayed retirement.