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Retirement today looks very different than it did a generation ago

Canada’s population is aging, and our average life expectancy is on the rise. These two factors are drastically changing our retirement landscape. Here’s what today’s retirees can expect.

Live longer, work longer

In 1997, the average Canadian man spent 11.2 years in retirement, while the average woman spent 16.4 years in retirement. As of 2011, those numbers had jumped to 18.8 and 21.7 years, respectively.* Today’s retirees enjoy an extra five to six years of retirement because they are living longer.

To fund those extra years of retirement, Canadians are also working longer. Men and women spend an average of 3.5 more years in the workforce now than they did 20 years ago.* And some people are not leaving the workforce at all.

The new retirement

Two pieces of advice are usually given to people who need to stretch their retirement dollars: spend less or save more.

Let’s look at the first option. Retirees are spending most of their money on home, food, transportation, travel and recreation, and health care costs. There really isn’t much discretionary spending on that list.

How about saving more while you’re still in the workforce? Good advice, but, again, often there aren’t that many areas of discretionary spending available to cut back on.

It’s not surprising that 25% of seniors continue to work after officially retiring.* Some might worry about the implications of working in retirement, but it’s possible to earn an income while receiving Canada Pension Plan and Old Age Security (OAS) benefits.

If your post-retirement income is higher than a certain threshold amount, you’ll pay a tax on your OAS payments (the OAS “clawback”) but, for 2015, that retirement income amount was set at a fairly high $72,809. Keep in mind that all sources of income are part of that threshold amount, including any company pension benefits you may receive.

One more thing to consider is that any additional income you earn in retirement will affect what you pay in taxes each year.

Please contact our office today to learn more ways to plan for your retirement.

* Source: Statistics Canada, 2011