Research finds low prevalence of retirement wealth among Ontarians

Some 61 per cent of Ontarians said they have or anticipate having low liquid retirement assets, according to new research by the Canadian Institute of Actuaries.

Its research, prepared by Saisai Zhang, Mary Hardy and David Saunders of the University of Waterloo’s department of statistics and actuarial science, looked at the anticipated concerns of those between the ages of 50 and 80 who have retired or are close to doing so. Its definition of low liquid retirement assets is less than $200,000 for single people and $300,000 for married or common-law couples.

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One in 10 respondents said they have or expect to have less than $25,000 in liquid retirement assets and don’t own property. Another 40 per cent of survey participants said they have or expect to have liquid retirement assets under $100,000.

Among respondents who hadn’t yet retired, most said they expect to do so at a later age than previous retirees, with a median projected retirement age of 65. Those who had already retired did so at a median age of 60.

“Overall, when compared to retirees’ experience, pre-retirees have reasonable expectations regarding income in retirement from a variety of sources,” wrote the paper’s authors. “Fewer pre-retirees (than retirees) have defined benefit workplace pensions, mirroring a shift away from DB arrangements. Pre-retirees’ expectations for social insurance pensions are quite strongly related to the highest level of education attained, which is positively correlated with financial literacy. Certain pre-retirees may underestimate public pension benefits due to a lack of knowledge of the Canadian retirement income system.”

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Overall, the four most important concerns when making decisions about retirement planning and spending, according to the research, are liquidity, consumption and income smoothing, inflation and longevity. 

“Concerns vary according to retirement wealth levels: high wealth respondents are more concerned with meeting home care or nursing home expenses than longevity risk; extremely low wealth respondents are more concerned with consumption/income smoothing. Female respondents, in general, are found to be more concerned than male,” noted the paper’s authors.

The research also found those in retirement are more risk-averse than pre-retirees. In addition, female respondents, as well as those who have lower incomes and less education, tended to be more risk-averse.

Survey participants also “profoundly undervalue life annuities,” according to the research, which noted that they showed very low interest in purchasing annuities, citing concerns such as the provider defaulting, a loss of flexibility and control and losing financial security.

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