Tomorrow's retirees are sleepwalking towards a drastic fall in their standard of living in their final eight years of retirement due to highly inadequate savings plans, according to research.
Based on a recent survey of over 15,000 consumers in 15 markets around the world, studies found that, on average, people expect to run out of retirement savings just over half-way into their retirement.
The average retirement is expected to last 18 years globally and 19 years in Canada, while average retirement savings are expected to last for just 10 years globally and 11 years in Canada. This would leave people potentially unprepared for any additional living expenses in later retirement, such as funding long-term care.
Currently 56% of working respondents globally and 55% of Canadian respondents say they are not preparing adequately for a comfortable retirement, with 19% of global respondents and 23% of Canadian respondents not preparing at all. In fact, 42% of Canadian respondents have never saved for retirement, including 47% of 55-64 year olds.
"Higher debt levels are pushing Canadians to prioritize immediate needs and wants above longer term financial health. This focus on the short-term will result in many retirees being forced to cut back in later life unless they take action to make up the shortfall. The prediction is that the situation is only likely to worsen as life expectancy continues to rise around the world.
Financial concerns were cited by those yet to retire as their greatest fear about living in retirement, with 57% globally and 55% of Canadian respondents saying they feared financial hardship, and 46% globally and 34% of Canadian respondents worrying that they would be unable to afford good healthcare provision. Yet in spite of this, when asked to choose, almost half (43% globally and 41% of Canadian respondents) of those not yet fully retired are willing to prioritize saving to go on holiday over saving for their retirement.
Households in Canada are struggling to meet their day-to-day expenses — with 60% claiming that daily expenses prevent them from saving. Only 15% of respondents are optimistic that they will make up the shortfall once the economy improves.
The study also showed how vulnerable retirement savings are to being raided to cover shorter term needs, with 29% globally and 25% of Canadian respondents yet to retire admitting they would dip into their retirement pot to cope with life events such as buying a home or paying for children's education.