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rob carrick

Working in your senior years is the easiest way to fix deficient retirement savings.

Staying in the work force requires less sacrifice than saving more money, increasing your investment returns or scaling back your lifestyle expectations for when you stop working. Your savings last longer when you keep working, and your mind stays engaged. Problem solved, right?

Not quite. Multiple surveys show a disconnect between the expectations people have for working in retirement and actual retirement ages. "People expect to work until a fairly advanced age, but in actual fact their retirement age is a little above 62 on average," said Fred Vettese, chief actuary at the human resources consulting firm Morneau Shepell and co-author of The Real Retirement: Why You Could Be Better Off Than You Think, and How to Make That Happen.

Mr. Vettese is actually quite optimistic about the chances that retirees in the years ahead will be able to keep working. But for now, it appears that not everyone who plans to stay in the work force is doing so.

One reason is that companies are laying off older workers or enticing them into leaving through voluntary severance programs, Mr. Vettese said. Some older workers may also find their finances are solid enough to allow them to retire at 65 or younger.

In a 2011 survey by the North American Society of Actuaries, the top reason cited by retirees for leaving the work force was health problems or a disability, at 27 per cent. But Mr. Vettese played down the risk that health problems will prevent people from working in retirement. He noted that the self-employed have an average retirement age of 66; if these people can last longer in the work force, there's no reason why private and public sector workers can't do likewise.

And yet, wanting to work in retirement doesn't automatically mean you will. In a study issued in March by the Employee Benefit Research Institute, 26 per cent of workers said they planned to retire at 70 or later, yet only 6 per cent of retirees said they had done so. "The difference between workers' expected age of retirement and retirees' actual age of retirement suggests that a considerable gap exists between workers' expectations and retirees' actual experience," the study said.

Still, there's hope for preretirees who don't want to retire at 65. In fact, Mr. Vettese said current demographic trends will actually create demand for retirees in the work force.

Much of this will be driven by the baby boom generation, which began retiring last year and represents 29 per cent of the population. Retiring boomers will shrink the work force and increase demand for workers beyond what both immigration and younger workers can supply. This would be a reversal of the situation in the 1970s, 80s and 90s, when employers took action to reduce a surplus of workers through improved pensions and voluntary early retirement programs.

Another reason why seniors will be needed in the work force is to address a mismatch between the number of people working and the number drawing retirement benefits like Canada Pension Plan and Old Age Security over periods that could last nearly as long as they spent in the work force.

It's not so much a question having an opportunity to work longer. As Mr. Vettese bluntly puts it, "We're going to have to have people work longer."

Though it's not much talked about, we have already seen a significant rise in average age of retirement from as low as 58 for public servants back in the late 1990s. Statistics Canada says the number of working people aged 65 and older has risen to roughly 629,000 recently from about 177,000 in 1976.

Later retirement is a trend with legs. Low interest rates have squeezed returns from savings down to near zero, while encouraging people to amass debts they, in many cases, won't have paid off by age 65. Weak returns from the Canadian stock market are another drag on retirement finances.

The federal government certainly wants you to work longer, thereby easing pressure on the CPP and OAS. Both programs now offer bigger payments if you delay collecting benefits for up to five years past age 65.

Mr. Vettese said the coming labour shortage offers hope to people who want to work in retirement, but adjustments will still be necessary. To stay cost-competitive in the eyes of employers, people past retirement age may need to accept lower pay and possibly reduced company benefits as well. On the other hand, they may benefit from more flexible hours and work arrangements. Such are the tradeoffs for people who want to work longer to fix the holes in their retirement savings.

When do you expect to retire? I asked this question on my Facebook personal finance page last Friday and got dozens of responses that you can read here. Click the "follow" button to join the daily conversation.

For more personal finance coverage, follow Rob Carrick on Twitter (@rcarrick) and Facebook (robcarrickfinance).