“Canadians are less prepared for retirement because of COVID-19.”
That’s the grim assessment of the study done for the Canadian Institute of Actuaries which found that nearly one in four non-retired Canadians report that the pandemic has impacted their timeline to retire or their spouses’.
Of those, 69% say they or their spouse will have to work longer than planned because they need the income.
Another 18% said they or their spouse would work longer than planned because at least one of them was working at home and could avoid the health risks of going into the office.
But 8% said they would retire sooner because they were concerned about the health risks of going back to work.
And 7% said they were retiring earlier because they or their spouse had lost their job or been laid off.
The pandemic that started in March 2020 “has fundamentally changed how Canadians are thinking about and preparing for retirement,” says CIA.
According to Statistics Canada, the average retirement age in 2019 was 64. In the CIA survey 14% of Canadians said they did not expect to ever retire. Twenty per cent said they expected to retire between 65 and 69 and 40% said they didn’ t know.
Many Canadians don’t have high expectations of their golden years, according to the survey. Nearly half of non-retired Canadians do not think or don’t know if they will be able to live comfortably during their retirement.
That may be a reflection of another finding: More than half of Canadians do not have a financial plan for retirement.
The outlook is better among Canadians who are already retired, with 84% saying they live comfortably. However, 27% of retired Canadians say they live modestly in order to leave as much to their beneficiaries as possible.
But the survey also reveals a worrying lack of saving and investments among some retirees. “Survey responses indicate that many retired Canadians may not have enough savings to live comfortably throughout their retirement,” said the study. Almost 20% of Canadian retirees report having less than $25,000 in savings and investments and 34% report having less than $100,000. Another 16% say they don’t know how much they have.
So how much do you need? The CIA estimates that someone retiring at 65 will need $900,000 in savings to achieve a retirement income of $50,000 a year with 2% inflation and 3.5% post-retirement return for 20 years.
Two thirds of non-retirees were not sure how much income they will earn in retirement, while retired Canadians reported an average income of $4,320 a month. Almost one in three retirees, however, did not know how much income they are receiving.
If they run out of savings, 44% of Canadians say they will live off either the Canadian or Quebec pension plan and Old Age Security.
COVID-19 also appears to have changed our expectations of how long we will live. In the survey those who had not had their retirement timelines impacted by the pandemic expected to live longer (83 years) than those who had (81 years).
“The actual impact of COVID-19 on mortality and morbidity, in both the short and long term, will be source of scientific and statistical analysis for years to come,” said the study. “The CIA is studying the impact on mortality in Canada .”