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Personal Finance Pre-retirees, here’s what people already retired can tell you about your future standard of living

Working past age 65 is one of the hottest retirement trends of the moment.

It’s a smart money move to stay in the work force, it’s great for keeping your brain fit and it keeps you busy and engaged. In the most recent census, one in five people aged 65 and older were working and 30 per cent of those worked full time. But the results of a new investor survey by the Ontario Securities Commission suggest that working longer isn’t viable for many people.

The survey of 2,000 people posed a series of questions to pre-retirees and people who have already retired. The results highlight the importance of building an understanding of what’s ahead in retirement by studying the actual experience of retirees.

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In the OSC survey, 55 per cent of pre-retirees said it’s very or somewhat likely they will continue working in their retirement years, and only 13 per cent said it was very unlikely. Whether it’s to top up savings or to stay in the flow of things, the idea of working in retirement is gaining traction.

But how feasible is it? Retirees in the OSC survey suggest this option won’t be open to all who seek it. Just more than one-quarter of them were forced to retire, possibly for medical reasons, corporate restructuring or reaching a mandatory retirement age. Fifty-seven per cent said they retired voluntarily, while the rest said they reached retirement age and felt it was time to stop working (3 per cent didn’t reply).

There’s never-ending concern in this country about whether people will be able to retire comfortably. But the OSC survey results suggest that pre-retirees are largely justified in their optimism about their living standard in retirement.

One-quarter of pre-retirees in the survey thought their standard of living after leaving the work force would be much or somewhat better. The most hopeful cohort were the people under age 35: 40 per cent of men in this group and 37 per cent of women were looking ahead to a better lifestyle in retirement.

Among retirees in the survey, 25 per cent said their standard of living was much or somewhat better than before retirement. Another 49 per cent said it was unchanged, while 23 per cent said it was somewhat or much worse (2 per cent said they didn’t know).

Regionally, there were big differences in the number of people who said their living standard in retirement was much or somewhat better. Ontario retirees were at the high end at 31 per cent, compared with 12 per cent at the low end for residents of the Prairie provinces.

One of the biggest eye openers in the survey concerns retirement income. Asked about their sources of income, 78 per cent of retirees in the survey ranked government benefits like the Canada Pension Plan and Old Age Security as a Top Three selection. Nothing else came close, which is notable when you consider that the maximum combined CPP and OAS payment in late 2018 was about $20,820. Few people actually get maximum CPP – the average retirement benefit was only about 60 per cent of the maximum in mid-2018.

The importance of CPP and OAS in the lives of retirees becomes more understandable when you look at the country’s savings habits. One-quarter of all participants surveyed said they hadn’t started saving for retirement, a number that increased to 31 per cent in Quebec and 27 per cent in Atlantic Canada.

Asked about their preparations for retirement, both pre-retirees and retirees reported the use of a variety of tools. Company pensions or group savings plans along with personal saving on a preset or periodic basis were most commonly mentioned.

A further reality check for pre-retirees: Your savings and investing plans can be upset by unexpected events such as a major home repair bill, health care expenses, a layoff or the need to financially support an adult child or aged parent. Roughly half the participants in the survey said they’d experienced an event like this, and 34 per cent of this group said they responded by cashing in savings or investments.

The OSC survey results show that people’s expectations for retirement are both on and off the mark when compared with the experience of actual retirees. Pre-retirees, don’t guess. Before you leave the work force, ask a few retirees what’s working and not working for them.

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