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Freedom 55 losing its allure in Canada

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Our friends at Statistics Canada issued an interesting study this week called Delayed Retirement. It shows Canadian 50-year-old men and women can expect to work on average 3.5 years longer than they would have expected to work in the mid-1990s.

As well, a much higher percentage of 55 and older people are employed full time now, than were employed in 1996.

What does all this mean for people approaching retirement and for the workforce? Let's first explain what Statistics Canada found.

Leading up to 1996, there was a continuous trend toward younger retirements and the percentage of people age 55 or older who were employed dropped to as low as 22 per cent of that population. However, this employment rate among the 55-plus began rising in 1997 and by 2008 had risen to 34 per cent, higher even than in the mid-1970s.

This boomer retirement trend still holds in some areas, like the civil service. But, according to this study, "Freedom 55" does not have the allure it once had.

Mitigating this higher employment rate among "old" people is the fact they are working on average one less hour a week than before. This means the total hours worked by people over age 55 has actually decreased. (Personally, I'm glad to hear that, but I'm still waiting...)

Does all of this mean we will be retired for a shorter period of time? Apparently not, as our life expectancies have increased at a corresponding rate, meaning men can still expect to be retired for about 15 years and women for about 20 years.

What keeps people working longer -- is it financial concerns, or are there other factors at work?

It would be easy to blame this trend on the recent recession or the stock market correction of 2008, but since it really began in 1997, when the stock markets were booming, we have to look a little deeper.

I think it's a combination. For some people, it is a desire to be busy, feel productive and have a community of co-workers. People who have built their lives around work find retirement a scary proposition. (If you're in that position, see my blog for some tips.)

Sometimes, people retire financially secure, but then find a spouse at home who says, "Get busy, or get out!"

For these people, money is not the issue, but they need the interaction with other people to feel fulfilled. I maintain there are many Walmart greeters with over a million dollars in investments, but just need to get out there and help other people.

Intuitively, folks also realize they will be retired a long time. Some can't wait for that time to start, but it seems more are hedging their bets, both financially and emotionally, by working longer.

Back in the 1990s, there were also waves of downsizing initiatives in companies and governments, with retirement packages being offered continually. Those packages allowed -- or forced -- many people in their 50s to retire. That was certainly part of the low employment participation rate then.

Reversing this, perhaps, is the need among employers to hang on to the few people they have left who have experience and can provide the necessary corporate memory.

This might not be great news for younger people, who expected the baby boomer generation to step aside from the workforce en masse over the next 10 years, creating opportunities for a new generation of managers to step in.

My advice to you? Be aware of these trends, but focus on what is right for your situation, taking into consideration your physical, emotional and psychological needs, as well as your financial needs.

And since Statistics Canada says a lot of us "seniors" are still working... have a great weekend!


David Christianson is a fee-for-service financial planner with Wellington West Total Wealth Management Inc., a Portfolio Manager (Restricted).

Republished from the Winnipeg Free Press print edition October 29, 2011 B10

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