Canadians failing to financially prepare for longer lives

For all the efforts we Canadians put into prolonging our lives, from healthy eating and exercise to pharmaceutical support, it seems we forgot to follow up on one thing: saving money for those extra years.

A new survey conducted for Blackrock Canada says Canadians may be living longer, but not saving more to compensate.

“We’re calling it the Longevity Paradox – people know they have to prepare for long retirements, but they’re not really doing what they need to do to get there,” said Noel Archard, head of BlackRock Canada.

The survey shows 56 per cent of Canadians believe their savings will need to last at least 25 years in retirement, which would take them until they’re 90 years old if they retired at the traditional age of 65.

Younger investors are even more optimistic, believing they’ll need at least 30 years worth of retirement savings. (It’s not clear whether they expect to live until they're 90, or retire earlier than 65, but both would be considered optimistic).

“I guess that’s good news,” said Archard. “But the worse news is that only about 15 per cent of them have a clear idea of how much that means they will need to save.”

The survey shows investors who haven’t yet hit retirement have been good at socking away cash, but only 59 per cent have a plan. Blackrock says that number drops by about half among younger investors and those with less than $100,000 in retirement savings

“Those are arguably the folks who need a plan the most,” Archard says.

The survey comes follows a recent report from the C.D. Howe Institute which shows Canadian life expectancy has increased on average since 1950, and calls on policymakers to adapt through changes to tax and pension rules.

The Blackrock report also calls on policymakers, as well as employers and the financial industry, to help solve what it calls “defining financial challenge of our age.”

“Investors are unjustifiably optimistic and dangerously passive,” the Blackrock report states.

The survey says 70 per cent of investors believe government pension plans will be there for them in retirement and 24 per cent don't have an RRSP. Nearly two in five investors have no workplace retirement plan, including a quarter of currently employed investors, the survey says.

“There tends to be a false sense of security when it comes to planning for retirement,” says Archard. “We hope that the money will somehow be there when we need it but we’re not taking the action required to ensure it is. This is a serious problem, and addressing it must become an urgent priority.”

The survey was conducted in early May included 1,720 investors who had investment of more than $5,000 outside of real estate and workplace pensions.