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12.8% of Canadians Say They Will Delay Retirement Due to Rising Inflation

The elusive dream of a comfortable retirement is slipping away from some Canadians due to the rising cost of living brought on by inflation. Our recent survey asked over 1,200 Canadians how their long-term financial plans have been impacted by inflation. 12.8% indicated they are “Delaying retirement”, while 10.4% of respondents selected “Considering alternative retirement plans” . Faced with unpredicted cost of living increases (Canada’s inflation has increased 20.5% from May 2000 to December 2023), this group faces the inevitable task of resetting their future based on their income, and retirement plans are being revised.

 

Retirement can mean different things to people based on the definition one uses. Let’s start with the current picture of retirement as defined by Statistics Canada. As of June 2023, the percentage of Canadians that were completely or partially retired was:

  • 21.8% of Canadians aged 55 to 59
  • 44.9% of Canadians aged 60 to 64
  • 80.5% of Canadians aged 65 to 69
  • 90% of Canadians aged 70 or higher

A 2021 Canadian Income Survey found that seniors (which includes the majority of retirees) earned a family income of $69,900, slightly higher than the national average family income of $68,400. The recent double-digit inflation growth of recent years has put a dent in the purchasing power of that income. Using the LARi Insight Canadian inflation calculator, you would need $77,040.58 to purchase the same amount of goods that $69,900 would have bought just a few years ago.

“I’m already retired and trying to make our small pensions go further by cutting back on food portions and doing less travel.” –  Gayle, Toronto, Ont.

Canadians Make Sacrifices and Compromises on Retirement Plans

How do Canadians cope with diminished spending power? Many shared anecdotes of the trade-offs and compromises they are faced with. For some it was a single decision, such as not buying a larger home, or foregoing an opportunity to buy into the family cottage. Some told us they had to pause retirement and go back to work. There were many stories of simply cutting back in several areas – groceries and travel were most often mentioned. We’ve written in detail on the sharp rise of Canadian food prices.

Among the other options in our survey question on the impact of inflation on long-term financial plans, the most selected were Focusing more on debt reduction (23.5%), Switching products to reduce fees (20.7%), Increasing savings (17.1%) and Changing investment strategies (15.5%).

“I was planning on collecting my pension and working part-time, but surprise, my husband lost his job. I think we could have stayed somewhat on track with our original plan, but then gas, heating, groceries etc. all skyrocketed, so I’m working more hours than I wanted to at 58.” – Lisa, Vernon, BC.

Rising Mortgage Rates Impact Canadians Financial Plans

Mortgages account for ¾ of Canada’s household debt. Canada’s prime rate has increased from 2.45% in March 2022 to 7.2% today. Mortgage lending rates are currently in the 5-8% range. The average mortgage for a new home in Canada is $364,000 according to Statista. Using the LARi Insight mortgage calculator shows the impact of interest rate increases. Monthly payments for a 20-year mortgage have increased roughly 46% in recent years, from $1,928.85 to $2,822.09. Over the lifetime of the mortgage, that’s an additional $214,377.98 in interest.

 

Looking back to the household income averages of 2021, the Canadian average income of $68,400 would be far more impacted by mortgage interest than in years past. Over 3.5 years’ worth of income would be consumed by the growth in mortgage interest. Enough to cause someone to reset their retirement plan? Highly likely.

Canadians Are Highly Concerned About Canada’s Inflation

Given the impact that inflation is having on the long-term financial goals of Canadians, it’s no surprise that they told us inflation is a high concern. Our survey asked “How concerned are you about the current rate of inflation in Canada?”. 72.6% told us they are “somewhat” (31.6%) or “extremely” (41.0%) concerned. An additional 19.3% chose “moderately concerned”. 5.3% chose “not very concerned” and 2.9% chose “not at all concerned”.

 

This concern takes many forms: Concern over rising food prices, the ability to sustain a salary that keeps up with inflation, and the creeping impact of accumulating debt. Sadly, inevitably, it also creeps into our long-term financial plans and retirement dreams, and the future looks a little less rosy. While our recently inflated prices likely won’t ratchet back any time soon, there are steps you can take to carefully get the most from your income. Our budget planner helps you set a family budget, our tips for debt management can help you even out your balance sheet, and we’ve also created calculators for investing, mortgages, and loans to help with your planning. To figure out your starting point, try our Net Worth Calculator: Canada. And if inflation is still top of mind, you can always find the latest CPI data using our Inflation Calculator for Canada.

The Financial Impacts of Canadian Inflation

Explore our complete coverage, with original market research and analysis from LARi Insight.

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