Canadian retirees who left the workforce before age 65 did so at 56 on average, according to a Manulife Wealth longevity study. Those who retired as planned or later did so at an average age of 62.
More than half of early retirees did so involuntarily — 33% experienced a health issue, 13% needed to care for a loved one and 10% were laid off and couldn’t find work, the survey found. Only 31% had retired early because they saved up enough money or received a severance package.
When a client is healthy, mobile and travelling, it’s hard for them to imagine being forced to retire early, said Julie Seberras, head of wealth planning and practice management at Manulife Wealth. But a contracting labour market can lead to sudden and involuntary job loss. Advisors should speak to their clients about what-if scenarios in case things don’t go as planned, she recommended.
On the other hand, those who retire later don’t always do it for financial reasons, the survey found. While 42% of respondents said they did so to save money and 24% needed to pay off debt, 33% said they wanted to stay socially connected, 27% liked being productive and 22% felt fulfilled.
Canadians who retire earlier than expected tend to cut back on spending. The survey found that 62% of respondents who were forced to retire early had to change their lifestyle, compared to 43% of those who retired as planned or later than planned.
“If you can’t achieve your goal, what are you willing to trade off? And that’s a very individual decision,” Seberras said. “Chances are, [those who retire early] are more likely to look at something like reducing their retirement income goal.”
Advice for workers
The survey asked baby boomers and Gen X respondents what advice they had for those who were still working. The most common comments were to make retirement savings a priority and to begin saving as early in life as possible.
However, younger Canadians are likely to have more pressing and competing goals, according to the poll. This includes paying day-to-day expenses, which was ranked as a financial priority by 64% of Gen Z Canadians, followed by saving to buy a house (61%) and emergency savings (57%).
Retirement savings don’t become a priority until people enter their 30s. Among Gen Z respondents, 42% identified retirement savings as a financial priority. Meanwhile, saving for retirement was the top priority for Millennials (61%), Gen X (68%) and baby boomers (79%).
Some Canadians start off with DIY retirement planning, but they might just focus on a retirement savings target without considering life events that could force an early retirement, or how inflation risk and market risk impacts long-term savings, Seberras said. But advisors can add value by helping clients understand their insurance and emergency savings needs, she added.
The bilingual survey involved two samples from Angus Reid’s research panel: a sample of 1,680 Canadian employees contributing to an employer-sponsored retirement plan as well as a sample of 514 Canadian retirees. It was conducted in May.
This article has been updated for clarity.