New NIA study says we may need to work longer before retiring

New research from the National Institute on Ageing (NIA) entitled Improving Canada’s Retirement Income System sheds some new light on the age-old question of when to retire.

Writing about the research for the Advisor, James Langton sums up the study, by noted retirement experts Keith Ambachtsheer and Michael Nicin, this way – “greater pension coverage, higher savings and longer working lives will all be needed to ensure an adequate retirement for Canada’s aging population.”

The paper, reports the Advisor, warns that “retirement is getting more expensive and harder to achieve.”  The research found that the cost of long-term care in Canada will “triple to $71 billion in the next 30 years.”

So the costs of looking after older folks are going through the roof at a time when “pension coverage has steadily declined, and private saving is proving harder to achieve amid rising costs for housing, education and childcare,” the Advisor notes, again quoting the NIA paper.

The authors of the study also note that even those who do save are doing so in less favourable conditions, the Advisor tells us. “Today, we face historically low bond yields and uncertain equity returns in the face of climate change and political turbulence across the world. This means retirement savers may not get as much help from favourable financial markets as they did in the post-World War II decades,” the Advisor states, quoting from the paper.

The paper reaches the conclusion, the Advisor reports, that three important public policy considerations need to be met. Pension coverage must be increased, savings rates need to be boosted, and there needs to be thought given to ways to incent people to work longer.

Commenting on the same report in a Globe and Mail opinion column, the NIA’s Dr. Bonnie-Jeanne MacDonald elaborates further on these ideas.

“Canada can better keep up with the retirement income systems of other countries by improving the labour-force participation of older workers,” she writes.

“Having more older Canadians working will also increase tax revenue. With Canada’s aging population, it will help ease shortages in labour and skills supply as baby boomers contemplate their exodus from the work force over the coming decade.”

Working later also has an impact on saving, she notes. “If you work longer, you’ll need to save less for retirement. Every year you delay your retirement is one fewer year you’ll need to draw on your savings, and one more year for those savings to grow,” she explains in the Globe article.

The takeaway here is this – you may live for a long time. If you don’t have a workplace pension, you will have to save on your own for retirement. If you haven’t saved enough, you will have to work longer than you planned.

A step you can take on your own to address this problem is joining the Saskatchewan Pension Plan. This is a great resource if you don’t have a workplace plan or are not sure how to invest. SPP does the heavy lifting for you, growing your savings at a very low cost (and with a great track record) and then turning those savings into an income stream at the time you leave the workforce. It’s never too late to get cracking on saving, so check them out today.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

The National Institute on Ageing at Ryerson University recently prepared a report entitled The Future Co$t of Long-Term Care in Canada. The report predicts long-term costs may more than triple by mid-century.

Save with SPP reached out to the NIA’s Executive Director, Michael Nicin, to ask a few questions about how future increased care costs will impact the finances of retired Canadians.

Q. Your study shows that the cost of long-term care will jump to $70 billion by 2050, from $22 billion today. That’s a more than 300% increase. Should pension plans and retirement programs be factoring this possible huge cost increase into their design so people can pay their share in the future?

Depending on the pension plan type and member profile, pensions already act as a bulwark against this type of late life expense. Indeed, one can argue that that the costs to individual Canadians and public coffers would be assisted by more widespread pension coverage.

The bigger financial risk applies to Canadians without a robust pension or sufficient personal savings.

A 2016 report by Richard Shillington, for example, shows that Canadians with pension coverage have significantly higher income than Canadians who don’t. In 2011, median income for senior families with pension income was $55,400, compared to $31,400 for households without pension income.

The same report shows that median personal savings for Canadians aged 55-64, without pension coverage, is only $3,000.

So, while all Canadians could put more income to good use, the bigger issue with respect to long-term care costs is the two-thirds of Canadians who have no pension coverage at all, and haven’t saved enough on their own. Herein lies the bigger personal and social risk on long-term care affordability.

Q. There is also an indication that the burden on unpaid caregivers (such as family members) may nearly double to eight hours a week. I think there are tax credits and so on for this work, but is that enough? Could other things be done to help the caregivers?

The federal government, and a number of provincial governments, have indeed acted to provide some level of support to caregivers – ranging from tax-credits and work-leave protection for employed caregivers.

Federally, for example, Canadians caring for eligible spouse or dependant over 18 years of age, can claim up to $6,883 annually. At the moment, however, the tax credit is non-refundable, and as such doesn’t help caregivers who have no reportable income.

Some provinces offer work-leave protection, respite programs, and other sources of support to caregivers. For a full assessment of government support programs, Dr. Samir Sinha’s report, Why Canada Needs to Better Care for Its Working Caregivers, provides a good overview.

The bigger picture painted in our report on the future costs of long-term care shows that additional support will certainly be needed, but the fundamental challenge will be the availability of Canadians to continue to provide the level of support we’ve seen historically. Younger baby boomers had fewer children than previous generations of Canadians, which may mean fewer available family members to provide care. Likewise, Canadian families live farther apart from each other, making it impractical to physically support older family members. Women have also typically provided the bulk of unpaid care, but with women increasingly entering the workforce, there will again be fewer traditional sources of unpaid care. Indeed, at this level, concern for caregivers extends beyond the seniors’ care spectrum; it increasingly will affect economic and personal productivity.

To start then, governments should look to expand existing programs for caregivers. The federal government can start by making the tax credit refundable.

Employers may also need to step-up. Caregivers often juggle work obligations with providing care. And for those that have to leave work, the employer suffers the loss of an employee and the employee loses income. Caregivers tell us that they would like more flexible work arrangements, for example, so they can step away from a full workload without sacrificing the job altogether.

Q. From personal experience, the cost of LTC even today is pretty high. Here in Ottawa, it is about $2,000 a month for a publicly funded long-term care spot and around $5K plus for a private nursing home. Does your research say anything about the expected future costs of such services so we can show it on an individual basis (might make it easier to understand).

Our projected costs are actually rather conservative, in that they show what the status quo will look like if extended to a larger, ageing population. But in discussions with experts and in reviewing Canadian and global literature, the big cost risk associated with the future of long-term care is labour. Personal Support Workers are the front lines of health professionals who care for seniors, in their own homes and in nursing homes. Canada is already facing a shortage of PSWs and isn’t alone. Globally, there’s a shortage of PSWs, which likely means that a short supply and high demand will increase labour costs over time. This could certainly implicate costs for Canadians in the future, as recruitment and retention become more difficult in an ageing world. In the medium and long-term, then costs for care in the home and in nursing homes may grow beyond our projections.

Q. Would increased government funding for additional “subsidized” spots help stave off a future crisis? What else can be done today to prepare us for the future?

The NIA structured these reports as a series of three. The first two look at the current state of long-term care and project costs into the future, if we don’t shift practices, funding methods, and other aspects of how we deliver care to an ageing population. The third and final paper of the series is in progress now. In the final report, we’re working with a broad range of experts, government officials, and other stakeholders to identify real and potential means of delivering better care as lower or more contained costs.

But looking at best practices around the world, the countries that seem to be doing better than Canada have flipped spending in recent years and decades, pouring more resources into home and community care, as opposed to building more nursing homes, which cost more to build in the first place, and typically cost more to operate.

Q. What results from this research surprised you the most, and why?

Amongst the eye-opening projections on the future cost of long-term care and the current lengths of waitlists for home and nursing care, we can’t lose site of the fact that Canadians are already living longer, healthier lives than ever before. Centenarians are the fastest growing cohort in Canada. This is an incredibly positive trend that’s worth noting and celebrating. In a sense, the challenges we face now and on the horizon are partially the result of great gains in population health and longevity. We’re living longer, healthier lives. That can be surprising to anyone whose job it is to focus on problems and solutions, as we do at the NIA.

We thank Michael Nicin for taking the time to answer our questions.

It’s clear that we can all expect long-term care costs will be more than they are today when, in the future, we need them. If you have a retirement arrangement at work, be sure you are contributing all that you can towards it. If you don’t, consider setting up your own savings program. The Saskatchewan Pension Plan offers an end-to-end way for your to turn savings into future income; check them out today.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22