When picturing the traditional idea of retirement, you may think of a lucky person blowing out the candles on a cake, getting a gold watch as a parting gift and heading off to the golf course.
Although, for many, that’s not what retirement looks like — it’s also not what a growing number of future retirees prefer.
Vanguard recently published an article titled "Retirement is changing – Are you prepared?" which addresses how people are changing their mindset about retirement.
While it was written by one of the company’s European executives and is based on a survey of British savers and investors aged 50 to 70, many Canadian retirees will be able to relate.
So, what is the big change Vanguard is talking about? Retirees no longer want to quit working cold turkey. They want to retire gradually for a mix of financial and social reasons.
Unfortunately, while this may be the dream for many, it’s not always the reality.
According to a study from Manulife, 47% of Canadian retirees ended their careers earlier than they had planned. Future workers must be prepared in case it turns out their ideal vision for retirement ends up being just an illusion.
Workers hope retirement will be a more gradual process
The Vanguard report revealed how a majority of future retirees are not interested in just completely stopping work on a set date, with only 24% intending to adopt the cliff-edge view of retirement, working one day and then being retired the next.
Instead, most professionals either plan to scale back hours slowly at their existing job (27%), "mostly" stop work on a set date (21%), or switch to a different job (14%). The reasons cited include: not feeling ready to completely retire, to top up their income and social reasons.
This finding is very similar to that reported by the Government of Canada’s Survey of Older Workers, which said that 47% of retirees would work part time during retirement if they’re able to.
These plans for part-time work mean that life could look very different for tomorrow’s seniors — but it’s also worth noting that making your financial plans based around this dream could lead to problems.
Retirees must be prepared in case a phased-in retirement isn’t the reality
Vanguard has an important warning for those who plan to retire gradually — it’s not always going to happen.
It found that of those who had already retired, only 38% retired gradually, much lower than the 62% of non-retired people who plan to retire gradually. According to the Labour Force Survey of 2023, a record high 15% of adults aged 65 and older in Canada participated in the labour market.
This makes it very important to prepare for the reality that you may not be able to retire gradually as planned and be mindful of the following:
- Saving enough money to support yourself by the traditional retirement age of 62 even if you hope to retire later
- Considering your health status and job skills when deciding whether a phased-in retirement is likely to be possible
- Focusing on finding an "age-friendly" employer who has plenty of older workers on staff and who appears to value experience as much as youth
- Taking good care of your health with exercise and regular preventative care to maximize the chances you’ll be healthy enough to phase into retirement gradually
- Setting realistic expectations for your retirement, which likely means working until 70 is probably not in the cards
Retirement doesn’t have to look like it once did — you can try to set yourself up for the gradual retirement so many dream of but find a way to pivot if those plans do not come into fruition as you may have hoped for.
Sources
1. Vangard: Retirement is changing – Are you prepared? By James Norton (July 1, 2024)
2. Manulife: Manulife Retirement Report Highlights Generational Preparedness and Financial Resilience as Longevity Increases (Oct 22, 2024)
3. Government of Canada: Age-friendly workplaces: Promoting older worker participation
4. The Vanier Insitute of the Family: More older adults are working 25 for pay and retiring later
This article What are the income tax brackets for the 2024 tax year?originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
