Are Canadians prepared for retirement? Short answer is yes

Fidelity’s 2021 Retirement Report suggests that COVID has had a major impact on how Canadians prepare for retirement. Shifts in global culture have affected both pre-and post-retirement respondents brought about by the COVID-19 pandemic according to data collected in 2021. Twenty-one percent of pre-retirees surveyed said that the pandemic would delay their plans to retire, while 30 percent of pre-retirees surveyed cited boredom as a major factor that prevented them from retiring as early as they’d like. While financial factors remain a major concern for those looking to retire, the fear of being stuck at home with nothing to do — not even work — is causing many Canadians to push their retirement back a few years and continue working.

Uncertainty over future financial events looms over the head of Canadian pre-retirees. Fidelity’s report found that 56 percent of pre-retirees were concerned with the impact of rising costs of living on their retirement savings. Despite fears about future inflation, actual pensions have been performing incredibly well recently. In December, the average solvency index of pension plans rose slightly to a whopping 112 percent, while the pension expense index dipped to 77.6 percent. The first measure tracks the ratio of assets held in a pension versus expected payouts, while the second track the expense of maintaining a pension account. Both trends suggest pensions will be stable in the short-term future, and some account holders may even benefit from cashing out some extra assets while still maintaining a solvency index of over 100 percent.

As a country, Canada places an unusually top priority on pensions. Not only is Canada one of only six OECD countries that spend over one percent of its GDP on tax expenditures for retirement savings, but it also maintains one of the six highest pension-asset-to-GDP ratios among OECD nations.

Fidelity’s report suggests that the key to preparing for retirement is having a written plan. Eighty-five percent of pre-retirees with a plan felt financially prepared for retirement, compared to 46 percent without. Respondents with a written plan felt better emotionally, socially, and physically prepared for retirement as well. The report found similar boosts among respondents who worked with a financial advisor. Of the 25 percent of respondents with a written plan for retirement, 86 percent worked on that plan with their financial advisor.

Retirement is likely to change in a post-COVID world and some of the prep that Canadians will have to do isn’t of the financial sort. Snowbirds, COVID travel restrictions profoundly impacted the demographic of mostly older people who travel to warmer climates during the winter months. Not only did their lack of travel opportunities cause huge financial ripples in both their Canadian homes and their winter abodes, it triggered a cultural shift in the expectations that Canadians have for their post-retirement lifestyle. Financial advisors are comparing the latter stages of retirement to a COVID lockdown, giving pre-retirees a glimpse of what life is like as age catches up and travel feels like a chore. Factors like being close to family, having parks within walking distance, and having magnificent views out of your windows become a lot more important when you can’t winter in Florida.

Overall, Canadian retirement preparedness is a mixed bag. Fifty-six percent of Fidelity’s respondents were concerned with rising costs of living, and 53 percent felt like they hadn’t saved enough to feel comfortable. Despite this, financial data suggests pensions are stable and performing well, while strong national support for pensions continues. Having a written plan for retirement seems like one of the most effective ways to help feel prepared about how the changing culture of global travel may affect your retirement plans. Even after the virus is long gone, the communications technologies, delivery services, and lifestyle changes we adopted to survive the lockdown will remain. It might be difficult for the newly retired to travel the world, but it’ll be easier than ever to bring the world to them.