Monday, October 7, 2013

Retirement Age

According to Statistics Canada average life expectancy has increase from around age 60 in 1920 to around 80 in 2009. Why would anyone not expect that the retirement age would not increase also?

Actually, the retirement age has decreased for government workers from around 65 to 55. We have a situation here that some people are collecting pensions for more years that they have worked and this problem is just going to grow. Pension plans were not designed to do that and no wonder lots of pension plans are in financial difficulties. (Of course, there is also the problem, especially in the US where the pension plans have not been properly funded either.)

I have recently read a couple of columns that I think have rather a negative view on older people, their finances and working after what used to be thought of retirement age. If average life e expectancy is around 80, why would people of good health not work into their 70's? There was an article in the financial post about how older workers are changing the face of labor in the US.

There was also an article in the Globe and Mail about how living longer and five financial realities Canadians need to face. I think that people should plan to life and work longer than in the past. This is the only thing that makes any sense.

Currently, if you expect to retire at 65, you would have to fund at least 15 years in retirement. If you expect to retire at 55 you would have to fund 25 years in retirement. And, this is only average longevity. Do not forget with an average life expectancy of 80, it means that while half the people are died by 80, half the people are still alive.

Actually there are more problems. The average life expectancy at birth and at 65 is different. See another chart from Statistics Canada. This one points out that if you are 65, your life expectancy changes and on average you have some 20 more years to live. Here again, it means that only half of the 65 years old will be dead in 20 years and half would still be alive.

I doubt that many people are going to be able to fund 20 plus years in retirement. Therefore retirement expectations are going to have to change.

On my other blog I am today writing about WiLan Inc. (TSX-WIN, NASDAQ-WILN)...continue...

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