 | | Pedro Antunes
Director
National and Provincial Forecast |
 | | Brent Dowdall
Manager, Communications |
Canadians make their final RRSP contributions for 2010 next week. Yet, for most, the dream of retiring at 55 is over, squashed by the effects of the recession. The baby-boom generation, a huge cohort that is currently entering its prime retirement age, was hard hit in the portfolio by the Great Recession. They may have to delay their golden years—at least for a while.
While the Toronto Stock Exchange composite index has recovered to pre-recession levels, boomers still seem to feel cheated by the loss of growth in their nest-eggs. Indeed, the Great Recession took more than a bite out of Canadians’ retirement savings; it made them reconsider whether or not they could afford to retire when they had planned to.
The Conference Board of Canada surveyed 2,000 Canadians in January about their retirement plans.1 The survey found that 21.1 per cent of respondents indicated that they’ve been forced to delay retirement by at least one year. This result is a small decline from 21.9 per cent 12 months ago, when the effects of the recession were, perhaps, much fresher in Canadians’ thoughts.
One-third of the baby-boomers, roughly defined among survey respondents as those aged between 45 and 64, report that they are forced to delay retirement by at least a year—an important result considering the size of this cohort in the Canadian labour market.
Some regional differences emerged from this survey. Compared to the rest of the country, fewer Quebec and Atlantic Canada residents said they intend to delay retirement than in Ontario and the Prairies. The share of workers planning to stay in the workforce longer peaks in British Columbia at 25 per cent. And, Canadian households earning high incomes are more likely to have saved enough despite the impact of the recession on wealth, which corroborates findings that the Conference Board Inc. (our sister organization) has found for U.S. households.
From 1976 to 2000, the average retirement age in Canada has trended down steadily, from 65 years to roughly 61.5 years. In the tight labour market years that followed from 2001 to 2008, efforts at keeping older workers—including perhaps higher wages—helped stem the tide and the retirement age stabilized. One outcome of the recession may be an upward trend in the retirement age. Statistics Canada estimates that the average retirement age inched up to just over 62 years in 2010. When the setback in growth in baby-boomers nest-eggs is coupled with a fundamentally tight labour market, this upward trend may continue.
The impact of delayed retirement could be significant – and timely – as it may help Canadian employers adjust to the exodus of baby-boomers from the labour market. The Conference Board estimates that a one year increase in the average retirement age could add as much as one per cent to the labour force. Of course, this increase wouldn’t occur in just one year, but even if it takes place over the next decade, it would have a significant effect on the supply of labour.
Another factor showing up in the survey results corroborates previous Conference Board research that aside from health, wealth is a key factor in the retirement decision. And earlier studies suggest that other factors may also play an important role in people’s decision to retire.2 Offering part-time work, flexible hours, more holidays and increased wages are factors that should entice some workers to stay on longer.
Over the past two years, many employers have had a temporary reprieve from the very tight labour market conditions that were plaguing them in 2007 and 2008. As the economy slowly returns to normal and the labour market tightens, employers are likely to be more amenable and flexible in order to keep their workers. Of course, every situation is different. For some occupations (such as teachers and nurses) retirement typically comes early, and good public pensions are seemingly recession-proof. For other industries, keeping boomers working longer will be a plausible option.
So, Boomers, not to worry – employers will still want you, and it’s a workers’ market if you plan on asking for more days off and flexible hours. Besides, it seems that working longer keeps you healthy, so that extra year at work may not be lost at all.