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May 10, 2022 – Canadians nearing retirement age have seen a doubling in the median value of both their assets and net worth since 1999, and real median family incomes were up 1.2 times, making retirement prospects seem rosier – but not equally for all, according to a new C.D. Howe Institute report.

In “The Evolving Wealth of Canadians: Who Is Better Fixed for Retirement? Who is Not?” author Bob Baldwin looks at wealth of Canadians approaching retirement from 1999 to 2019. At a general level, one can’t help but be impressed by the substantial increase in total assets, net worth and retirement wealth of age groups approaching retirement age, writes Baldwin, who is Chair of the Pension Policy Council at the C.D. Howe Institute. “Even though much of this increase is offset by the rising cost (to date) of a dollar of retirement income, it is not totally offset. Thus, it is reasonable to believe that retirement incomes will improve for many from current levels that are certainly satisfactory – but not perfect.” Adds Baldwin: “It is equally clear, however, that there are subsets of the population for whom this generalization does not hold.”

Baldwin warns that a full one-quarter of Canadians aged 45 – 64  have no private retirement assets and the median RRSP and TFSA wealth accumulations for people who are not participating in workplace pension plans (WPPs) is low. “These realities suggest that a minority of the future elderly may have trouble maintaining their standard of living in retirement,” says Baldwin.

The noticeable spike in assets and net worth of Canadian families over the last two decades is largely a result of an increase in the value of retirement wealth and of principal residences. “Home ownership for older Canadians not only brings happiness and satisfaction, but provides rent-free housing services and potential for additional income flow (through home equity line of credit, reverse mortgages or downsizing) – pivotal to supplement retirement income that falls short of needs,” says Baldwin. Perhaps surprisingly, however, Baldwin finds that home equity is seldom used by retirees to supplement their retirement income.

In addition, the decline in interest rates and increases in life expectancy mean that it now takes more wealth at retirement for pensions to last over an entire retirement for the average Canadian. As Baldwin explains: “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.”

Low workplace pension participation rates in the labour force and particularly among small businesses also continue to be a chronic problem, he adds. Solutions to address low levels of retirement wealth require clear objectives as well as provincial and federal governmental coordination. Policy proposals needed to address the issue would do well to utilize the available data and analytics in creating a sensible strategy in response.
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For more information contact: Bob Baldwin, Chair of the Pension Policy Council; or Andrew Logan, Communications Officer, alogan@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.