The golden years of retirement are turning out to be more stressful and less comfortable than ever before. According to the latest family finances report by the Vanier Institute for the Family, Canadians older than 65 are facing the highest insolvency and bankruptcy rates in the nation.
“The good news is that we’re all now living longer,” says Vanier Institute executive director Nora Spinks. “The bad news is that we’re not financially prepared for it.”
Canada’s senior population, those over 65, has nearly reached 5 million, growing by 14.1 percent since the last official count, according to Statistics Canada. Seniors were 17 times more likely to become insolvent in 2010 than they were in 1990, the Vanier Institute report notes.
In the past, retiring at 65 meant needing enough income for another three to five years, maybe an additional seven for women. Nowadays, a worker retiring at 65 could live another 20 to 30 years, but few companies offer a defined-benefit pension with a fixed monthly income one can depend on.
“You could be looking at a 30-year retirement, but one that you only planned for 10 years,” Spinks explains. Adding to the longer life spans is the financial instability many of us have experienced recently. “Housing costs have gone up, while housing values have gone down,” she adds.
Seniors are also dealing with rising living costs, depleted nest eggs, and additional expenses like supporting aging parents and college-age children who can’t find work and move back home.
When today’s seniors started planning for retirement, the landscape was different. Many held one job or worked for one company for years, decades, or their entire career. That sort of job security is now a thing of the past, says Spinks.
She emphasizes the importance of building up every possible support while workers are still young enough to do so, including improving their health. Chronic conditions like diabetes, heart disease, and osteoarthritis can significantly impact a fixed retirement income.
“The diagnosis of diabetes is free, but the insulin you pay for is not,” she points out. Additionally, every province reimburses differently for ongoing care and pharmaceutical costs.
With diabetes and arthritis now affecting Canadians as early as their 30s and 40s, these costs can drain savings and reduce earnings for decades, she warns.
However, there is still time for a course correction, according to Spinks.
“The next good news is that more and more people in mid-life have older people in their lives now. They see what’s coming, and it’s a wake-up call,” she says. “They realize, ‘I better start saving more than I thought.’ There is a lot more conversation now about saving money, not just investing it.”