Nearly half of Canadians retiring early, Manulife warns and urges to plan early

Julie Seberras, head of wealth planning at Manulife Wealth, joins BNN Bloomberg to break down a new report looking at how different generations are preparing for retirement as society see the average life span surpass 100 years old.

Canadians may end up spending as many years retired as they do working, according to a new report from Manulife, which is urging individuals to “stress test” their financial plans.

The report provides insight to prepare for a 100 year lifespan, where 40 years are spent in retirement.

But things don’t always go according to plan, says Julie Seberras, head of wealth planning and practice management at Manulife Wealth.

She points to the report, which shows that 44 per cent of Canadians are retiring earlier than expected often due to illness, caregiving responsibilities or job loss.

“When we’re doing retirement planning, it’s really important to look at those ‘what if’ scenarios,” Seberras said in an interview with BNN Bloomberg.

With a typical working life lasting 35 to 40 years, many Canadians entering retirement today could spend an equally long stretch out of the labour force, and while many Canadians have aspirational plans about their retirement, they should also consider economics and health.

“What if inflation is higher? What if there’s an impact to my health or mobility? What if I can no longer live in my home? What if expenses rise? And then we need to stress test that plan,” said Seberras.

Canada has a rapidly aging population. Baby boomers account for approximately 40 per cent and millennials account for nearly 23 per cent of the population, according to Statistics Canada data from 2023.

Gen Z feeling the most financially insecure

Gen Z stands out as the most financially strained in the report.

Their top concerns are day-to-day expenses and saving for a home, with retirement falling lower in the priority list.

Retirement is the top financial focus for millennials, Gen X and baby boomers.

Gen X does not have much savings

One of the most surprising findings, Seberras said, was how unprepared Gen X is for retirement.

The report shows that roughly one-third of Canadians between the ages of 44 and 58 have less than $50,000 saved for retirement.

“Some of these are really on that cusp of retirement, and close to that age where we were seeing that people were retiring early…..so they’re probably not on track to retirement if they have less than $50,000 saved," said Seberras.

Those behind on savings can pull different levers like saving more money, reducing retirement income expectations or delaying retirement.

But for workers forced out early, there’s only one lever they can pull, which is reducing their retirement age or retirement income goal, said Seberras.

“You can’t push it out, and you can’t save more at that point in time,” said Seberras.

Boomers concerned about debt

Despite rising home equity and decades of strong real estate gains, boomers expressed concerns about debt.

“I was actually really surprised to see the amount that they were concerned about debt,” said Seberras.

The report shows that 40 per cent of boomers prioritize being debt free, which is consistent with the younger generations.

“Generally in financial planning, we don’t want people to be going into retirement with debt. We don’t want them to be going into retirement, ideally with a mortgage,” said Seberras.