retired women

Despite the fact that net worth and assets for those approaching retirement have grown significantly over the past 20 years, the prospect of a comfortable post-work life still looks distant for many, according to a new paper from the C.D. Howe Institute.

The Toronto-based think tank examined the evolving retirement picture for Canadian households. For those approaching retirement, it found that median assets, net worth and retirement wealth essentially doubled between 1999 and 2019.

However, it also found that about 25% of those in the age 45 to 64 cohort have no private retirement savings at all. And for people without workplace pensions, savings in RRSPs and TFSAs remain low.

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“These realities suggest that a minority of the future elderly may have trouble maintaining their standard of living in retirement,” said the report’s author, Bob Baldwin, chair of the think tank’s pension policy council, in a release.

Moreover, the paper noted that even for the households with bigger retirement war chests, the picture isn’t entirely rosy.

Low interest rates and increased life expectancies mean a bigger nest egg is needed to last through retirement.

Indeed, the paper noted that Statistics Canada estimates the lump sum needed to provide annual retirement income has risen by 150% to 180% between 1999 and 2019, nullifying much of the gain in wealth over that time period.

“Improvement in the median wealth accumulation of Canadians approaching retirement age is good news. But its ability to translate into higher retirement income will be tempered by the higher costs of a dollar of annuity income,” the paper said.

Additionally, it found that many households have proven reluctant to use their home equity to generate retirement income, which they could do through downsizing, a reverse mortgage or home equity lines of credit. So, while a potential source of retirement income may have increased in value, many prefer to stay in their homes, leaving that option untapped.