1 in 4 Canadian pre-retirees in poor financial shape

Majority are not considering unexpected expenses in retirement savings, finds report

BY Jim Wilson 12 Jan. 2024

Many Canadians nearing retirement are in bad shape financially, according to a recent report from the Ontario Securities Commission (OSC).

A majority (53%) of Canadians aged 50 years or older who are not yet retired report their financial situation is strong, including 6% who say it’s very strong.

However, 24% rate their current financial situation as poor, with 22% saying it’s neither strong nor poor, finds the survey of 1,500 Canadians 50 years of age or older – including 878 Canadians currently retired and 622 Canadians not yet retired – conducted from March 1 to April 18, 2023.

Comparatively, 66% of retirees rate their current financial situation as strong, including 12% who say it’s very strong. Only 15% rate their current financial situation as poor, and 18% say it’s neither strong nor poor.

About 19.5 million Canadians are currently facing financial vulnerability, according to a previous report from the Financial Resilience Institute.

What is a good savings for retirement?

OSC’s study finds that the most common financial concern for both retirees and pre-retirees are:

sustained high inflation rates (62% of pre-retirees, 56% of retirees)
running out of money during retirement (57% of pre-retirees, 37% of retirees)
increased housing and rental costs (53% of pre-retirees, 39% of retirees)
unexpected healthcare costs (49% of pre-retirees, 43% of retirees)

Pre-retirees are saving for the time they stop working in a variety of ways, including:

putting lump sums of money towards long-term savings and/or investments whenever I can (33%)
putting regular amounts of money including automatic withdrawals from bank account towards long-term savings and/or investments (31%)
making contributions to a pension plan through an employer (30%)
making contributions to a group RRSP through an employer (with employer RRSP matching) (20%)

One thing that most pre-retirees do not seem to be preparing for, however, is unexpected expenses, according to the report.

Specifically, 49% among those who currently save for their retirement have considered it but have not incorporated it into their retirement savings plan, while 12% don’t think this is something they need to consider.

About a third (32%) have addressed this in their retirement plans, including 22% who have done so by increasing the amount they anticipated needing.

At what point do you retire?

Saving up for the unexpected is a must, especially because, for some, the time of employment can be cut short.

Specifically, 44% of retirees retired earlier than expected, and health related concerns or issues including disability (33%) is the top reason.

Meanwhile, 12% retired later than expected. And while enjoying working and wanting to continue working longer than they had planned (47%) is the top reason, many were forced to do so because of financial issues:

Among late retirees, about one in 10 say:

their income declined and they needed to work longer to save enough for retirement (11%)
their investments lost value and they needed to work longer to save enough for retirement (10%)
they were concerned about inflation (10%)

Canadian employees could need $1.7million in order to retire, according to a previous report.