Live long and prosper by revisiting retirement plan

Q

: My husband and I wonder if we might have a problem brewing in our future. We’re both 76 years young and in very good health. We have two grown children; our daughter has given us two grandchildren and our son is married, but he and his wife chose not to have kids. My mother just turned 101, lives in a retirement home, and has some initial-stage dementia concerns (although she takes no medications and brags about having all her teeth). We both retired before age 65 because we thought we had saved enough. The guaranteed income from our private and government pensions covers our regular monthly expenses and our retirement savings take care of all the extras, like travelling (before COVID), gifts, helping our kids, and a new car every 10 years or so. But what if we live as long as mom — or even longer? How can we be sure that we’ll have the money to take care of ourselves?

A

: Your family is living proof that Canada is going through a massive demographic transformation. And, as you have seen, that has tremendous financial implications for everyone, especially retirees.

As Canadians, we are living longer and healthier lives. And centenarians, like your mother, will become more commonplace. Her generation has seen dramatically increased life expectancy through better nutrition, lower child mortality, vaccinations, public education, and even things that seem ordinary and mundane to the current generation, like indoor heating and plumbing.

My maternal grandmother had nine children, but two died at birth and one in infancy. This was not the least bit unusual and was simply a sign of the times. But, as our country became more prosperous and educated, both child mortality and birth rates declined. In my immediate family, it’s just my brother and me. He has two children and I have none, and you have seen a similar pattern in your family. A country needs a birth rate of 2.1 in order to sustain its population. In Canada, our birth rate is closer to 1.5.

This means that as our population continues to age, there will be more individuals drawing on government-funded programs, such as health care and pensions, and fewer income-earning taxpayers to support them. Immigration will help supplement the declining birth rate and decreasing workforce, but it will not entirely solve our problem.

Canadians are also retiring younger than previous generations did. In my family, both of my grandfathers retired at 65 and both grandmothers were full-time homemakers (and essentially never retired because they “worked” until the day they died). However, my father retired at 58 and my mother worked part-time, and then retired when my dad did. You and your husband echoed their early retirement.
Canadians are also retiring younger than previous generations did. In my family, both of my grandfathers retired at 65 and both grandmothers were full-time homemakers (and essentially never retired because they “worked” until the day they died). However, my father retired at 58 and my mother worked part-time, and then retired when my dad did. You and your husband echoed their early retirement.

These demographic shifts will make for significant challenges at all levels of government: federal, provincial and municipal. We can expect increasing income taxes, property taxes and consumer taxes, such as the HST.

It will become more and more critical to be financially independent over an increasingly extended lifespan. Inevitably, we will need to rely less on government support and programs and to self-fund more of our retirement income and perhaps even our own health care.

This article was written by R.F.P. Thie Convery, and first appeared in the Hamilton Spectator, on November 10, 2021

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