More Quebecers are considering postponing their retirement. What motivates you?
In fact, people increasingly need the ability to retire, as Canadian women live an average of 22 years past age 65 (19.5 years for men), according to Statistics Canada. But longevity isn’t the only reason to postpone retirement. Expected returns on investments have been declining for several years.
And for many taxpayers, there are no savings: One in four Canadians (26.3%) contributed to an RRSP in 2020, averaging $3,600 in contributions.
A study by Professor Luc Godbout of the University of Sherbrooke confirms that the average RRSP contribution increases with age. It is $1,100 for those under the age of 19, $9,900 for those aged 55 to 59, and $11,000 for those aged 60 to 64. While those under the age of 45 are monopolized by their family and financial obligations, the elderly theoretically have more leeway to save.
Hence the idea of postponing retirement.
Especially since only 41% of Quebec’s private sector workers (100% in the public sector and construction) participate in a pension plan, according to the Régie des rentes du Québec (RRQ).
And 17.7% of private sector workers benefit from a defined benefit plan (that guarantees a predetermined fixed pension until death), compared to 62% who have a group RRSP and 19.6% from a defined contribution plan plan (their pension). is not guaranteed).
Debts
General debt does not help future retirees. The Canadian household debt ratio was 181.7% in the second quarter of 2022 (i.e. they owed $1.82 for every dollar earned).
Worse, four out of ten older Quebecers would be in debt and interest rates on delinquent mortgages for the over-65s have been rising steadily for years.
Is it worth it?
While some have no choice but to postpone their retirement, others have the luxury to consider it. Here’s an old financial planner trick: Divide your capital by 20 to get your approximate retirement income. Example: $100,000 equals an annual pension of $5,000.
Consider a person whose net income is $40,000. If she puts off her retirement a year and saves half of her income, she will add about $1,000 to her annual pension, subject to return assumptions and the tax rate.
For an after-tax savings of $35,000, we’re talking about $1,750 per year. For the rest of your life
ADVICE
- You can delay your retirement to pay off your debt, especially credit card debt, which is toxic.
- Postponing retirement is often not easy. Many experts suggest pushing back the date by a year and thinking about it for 12 months, rather than deferring it by three or five years as a defensive reflex.