Canada is not facing a retirement crisis, according to a new book by Fred Vettese and Bill Morneau of Morneau Shepell.
The Real Retirement: Why You Could Be Better Off Than You Think, and How to Make That Happen, just released by John Wiley & Sons Canada, says Canadian seniors are among the best-off in the world and can look forward to a better retirement lifestyle than they think.
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“There is a widespread perception that Canada is suffering a retirement crisis,” says Vettese. “But there is no crisis and our research suggests there won’t be one. That is because, for most Canadians, our real retirement income targets are lower than most of us think. The target is not 70%, but is closer to 50%. At the same time, our potential sources of retirement income are higher than we realize.”
The book shows that the poverty rate among Canadian seniors is less than half what it is for working-age Canadians. This is partly because there are four pillars to Canada’s retirement system, not three, as many think: Old Age Security and the Guaranteed Income Supplement, the Canada Pension Plan and Quebec Pension Plan, and tax-assisted vehicles such as RRSPs and workplace pension plans. The fourth pillar consists of assets outside of traditional retirement vehicles in the form of real estate, cash, stocks and bonds.
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“The assets in this fourth pillar far outweigh the sum of all the assets in the first three pillars,” says Morneau. “Canadian seniors have more assets that can be converted into retirement income than they realize.”
The authors say the next 20 years will be challenging because of lower investment returns and longer life spans. Canadians, however, will cope with this change by working longer. The average retirement age will rise from 62 to about 66.