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November 2018



Post-retirement depression and the social shift 


Financial concerns rank high for members planning their retirement. Thankfully, pre-retirement planning education can help alleviate money-related anxiety and depression. Defined benefit pension plans can also assist with the transition to retirement by offering careful plan design that allows for a variety of options.

However, finances are not the only part of retirement that should be considered during planning. Other aspects of retired life, such as diminished social interaction after leaving the workforce, loss of identity tied to one’s profession, change in routine and excess free time, are also important planning considerations. Still, they are often afterthoughts.

Post-retirement depression

Retirement is a big life change and, as with other common life stages like marriage or having children, it comes with a host of challenges in addition to excitement. More free time can contribute to boredom, and retirees can suffer a lack of identity after leaving the workplace. Physical activity, which provides mental health benefits and relieves stress, can also decline in retirement. Currently, retired Canadians are spending less time on active pursuits than ever before.  

Both married and single retirees may find the transition to retirement disrupts existing friendship groups. In a time when social support can matter the most, the consistent socialization of the workplace is no longer available.

According to a study from the University of Alberta, “retirement can also bring on decision paralysis, diminished self-trust, the search for meaningful engagement in society, the confluence of aging, death anxiety and self-actualization.”

So, what can be done to ward off, or cope with, the depression that can come at this stage of life? Some retirees are expanding their social networks, using new technology and meeting animal friends.  

Friendship is key

When navigating the challenges of life transitions like retirement, it’s best to connect with others going through a similar experience. Meeting people through local events, seniors’ centres, support groups and regular activities such as volunteering help reinvigorate a sparse social life. Belonging to social groups also improves self-esteem and mental health; may encourage healthy habits; and can provide structure to daily life – some studies suggest its benefits are as positive as exercise.

Just a click away

The seniors’ centre isn’t the only way for retirees to foster a healthy social life. Today’s tech-savvy retirees are turning to social media, and dating and friendship apps.

According to a recent study by Ryerson University’s Social Media Lab, “three-quarters of those 55+ years old are on Facebook. In fact, this is the only platform where the oldest generation crosses the 50% adoption and monthly usage mark.” Many retirees use Facebook to keep in touch with family and friends, meet new friends in seniors’ groups, and converse with others about common interests (i.e., partake in discussions on pages related to gardening, travel, local history, etc.).

Senior-specific social communities and friendship apps are also gaining popularity. Stitch connects people over 50 who are looking for friendship. Though not exclusively for retirees, Bumble BFF also offers a mobile solution to finding friends. For pet people who want to meet other dog owners, Meet My Dog is an app that facilitates friendship at the dog park.

Of course, many retirees are looking for more than friendship, and luckily for them, a host of dating sites and apps exist to help put the sizzle in senior life.

Apps and social communities allow retirees to expand their networks quickly and easily, which is especially helpful for retirees who move house, change provinces or even move abroad.

Four-legged friends

A furry friend can also help retirees struggling with loneliness. Pets provide companionship, lower blood pressure and help with stress. Dogs also offer a good excuse to get outside and stay active; seniors who own a dog are active, on average, twenty-two more minutes per day than their dog-less peers.

People with cats also report mental health benefits. Data from a UK charity showed 70 per cent of the people over age 55 surveyed said their cat helped them become more social and made them laugh at least once a day.

Recognition of the benefits of owning a pet in retirement is growing, with some rescue organizations now offering a “seniors to seniors” service, matching senior people with senior pets. This helps older people who do not want to take on the responsibility, and life span, of a young animal find older pets left behind when their previous owners either moved into an assisted living facility or died.

In the end, it’s important that new and soon-to-be retirees take time to evaluate what they want from retirement. By joining new activities, meeting new people (and pets) and using new technologies, the post-retirement blues are more likely to become sunny days filled with connection.



Is Freedom 55 still relevant?  

If you were watching Canadian television in the early 1990s, you would have likely seen a commercial of a man in a suit running to catch a bus in the dead of winter suddenly transported to the future next to his retired self, who is happy, healthy, jogging on a tropical beach and, most importantly, 55 years young. It was the London Life “imagine visiting yourself in the future” ad campaign and it drew a golden line in the sand between the “rat race” (work) and the ideal retirement future – freedom at 55. Flash forward a few decades and London Life’s new ad campaign says nothing about age or early retirement, asking instead, “What does your freedom look like?” Does this shift reflect the new reality? Is Freedom 55 still relevant anymore?

Certainly, the pressures of 21st century life suggest retirement at 55 is now an unrealistic goal for most people. We’re living longer – in 1992, life expectancy after age 65 was 18 years; in 2017, it was 21; and by 2050, it’s expected to be 23. Housing is more expensive – Morneau Shepell, a Canadian human resources consulting and technology company, says house prices in Toronto rose 500 per cent between 1980 and 2010, while the Canadian consumer price index only rose 154 per cent. University tuition is rising to record levels, on average 40 per cent more than 10 years ago. There are low investment returns and rising divorce rates, and 58 per cent of Canadian boomers are still providing for their adult children.

A CIBC poll shows 32 per cent of Canadians between ages 45 and 64 have no retirement savings. Instead of thinking Freedom 55, people are asking, “Can I ever retire?”

The reality is people today are retiring later – at an average age of 63.6 – and employees aged 55 and older make up the fastest growing segment of the labour force. (No doubt the graying of the workforce is assisted by technological advances as jobs become less physical and work options become more flexible.)

Delayed retirement is the new trend, and it’s not only being driven by necessity. People want to stay mentally and socially engaged, and they don’t want to get bored. With increased health, people are asking, “Why should I retire?”

You can see this attitude reflected in the values of millennials, now the largest generation in the workforce in Canada. These adults were once kids growing up in the middle of the Great Recession. They have more student debt, higher rent and relatively lower wages than their parents, and more than half are carrying credit-card debt. Millennials are delaying traditional life milestones (such as getting married and buying a house) and looking for work–life balance right now.

Retirement in the traditional sense is slowly shifting to a kind of “non-retirement retirement.” The concept is becoming more fluid. “Forget work–life balance,” says Morag Barrett, co-author of The Future-Proof Workplace. “The future is that it is all life, with work as a part of it.” People aren’t looking for a golden line in the sand anymore; they’re looking at more gradual transitions, working to fund a series of sabbaticals and talking about “life plans” rather than “retirement plans.”

But despite this fresh attitude and inspired freedom, the reality in our new reality is that, at some point, everyone will need to slow down. It’s still a good idea to imagine yourself in the future and plan what you want your retirement to look like. Pay yourself first. Start saving 10 to 15 per cent of your pre-tax income and set up automated deposits to your retirement savings account. And if you’re contributing to a defined benefit plan, you’re well on your way as it allows you a simple and convenient way to save for your future.

The shift away from Freedom 55 also affects us as public sector pension plan administrators. To align with the mood of the newest generations, we need to help shift the dialogue from early retirement to security for the future, and continue to educate people on what they need to do today to help with their retirement tomorrow. Because in this new reality, freedom can be a part of the present, but freedom from financial worry should be our goal for the future.



Who’s number one? North American pension protests and the “me” factor


“… there’s only one way to get things done.
You’ll find out the only way to the top
Is looking out for number one.
I mean you; keep lookin’ out for number one.”
“Lookin’ Out for # 1” by Bachman-Turner Overdrive

Back in 1975, when Bachman-Turner Overdrive told us to “keep lookin’ out for number one,” they probably weren’t referring to the “me first” member attitude toward pension plan changes. But, a closer examination of recent pension protests in North America shows the sentiment might apply.

Around the globe, when a significant change is initiated by a pension plan’s governing body (whether a board of trustees, a government or an employer), the impetus for that change is almost always the threat of the plan, or an element of the plan, collapsing. In some cases, the situation is so dire that impending collapse also threatens the governing body’s existence. Still, despite the logical rationale behind most pension plan changes (i.e., reduce the plan’s benefits to preserve the plan), the changes frequently lead to member protests.

In writing this article, welooked at select pension protests in North America and uncovered two themes. First, some protests are driven by selflessness, others by selfishness and some by something in between. Second, no matter the driving force, all protests feature a bit of push and shove between those that govern the pension plans and those who participate in them.

Read the following three examples to see how the push and shove played out and whether the pension protests were driven by the “me first” attitude, by the selfless aspiration to protect the future or by something in between.

Quebec 2014

The push:
With its municipal employee pension plan reeling under a multi-billion dollar debt and some employers contributing 70 per cent of total contributions to the pension plan, Quebec’s National Assembly introduced a bill that called for equal contributions into the pension plan from employees and their employers.

The shove:
The bill met with fierce opposition. Thousands of unionized workers across the province took to proverbial arms. Some protestors trashed Montreal’s council chamber, while some blockaded public services. Others took part in demonstrations, strikes and on-the-job action, such as the donning of irregular uniforms (an action that was so pervasive, it continued as late as 2017 and had to be banned by law).

Daniel Boyer, president of the Quebec Federation of Labour, publically addressed Premier Philippe Couillard during the protests. “One word: never,” Boyer said. “Never will we allow you to trample upon our pension rights. We have a pension plan that we want to keep. Every Quebecer has the right to live a pleasant life in retirement.”

End result:
The bill passed.

Lookin’ out for #1?:
Changing the plan so members pay half of pension contributions may seem sensible to those in public sector pension plans that even split contributions between employers and employees, but an external observer can’t underestimate the blow this bill dealt to some already budget-challenged plan members. Still, short-term pain meant long-term gain: without the reform, future municipal employees may not even have had a defined benefit pension at all. The protests, if they had been successful, could have hurt future generations of municipal workers.

Kentucky 2018

The push:
Kentucky’s state pension debt was spiralling out of control, eventually reaching a point in 2017 where its funded ratio—less than 40 per cent—was the worst in the United States. So, the government proposed pension reform.

The effect of the proposal on current members, the most vocal of whom were teachers, would be relatively negligible; one notable example was a proposed change that would simply alter how sick days were calculated for pension purposes (this alone would save the system USD$25 million per year).

However, future members would no longer have a defined benefit plan after the reform. Instead, a future member participate in a hybrid system with the government, as the employer, supporting their 401(l), a tax-qualified, defined contribution pension account.

The shove:
Throughout Kentucky, teachers and their supporters were furious at the introduction of the reform bill. Educators walked off the job, schools closed around the state when teachers called in sick en masse, and thousands protested in front of the state’s legislature in Frankfort.

End result:
The bill passed.

Lookin’ out for #1?:
No. The member protests were supporting future generations of teachers. While the changes negatively affected existing plan members to a small degree, they significantly affected future members, who would have a less-generous pension plan.

However, as with the Quebec protests, a successful outcome for the protestors (i.e., the bill not passing) could have perversely meant the collapse and bankruptcy of the state’s entire pension system.

Carleton University (Ottawa) 2018

The push:
As part of the contract renewal bargaining process for administrative, technical and library staff at Carleton University, who are members of Canadian Union of Public Employees (CUPE) 2424, the university introduced a provision removing restrictions on its pension committee and board of governors from changing aspects of the pension plan at will.

The shove:
CUPE members took action in winter 2017/18, fearing the provision would lead to the pension committee and board of governors arbitrarily changing aspects of the pension plan, such as making the plan defined contribution instead of defined benefit. More than 800 CUPE workers at the university went on strike, disrupting classes, upending health and counselling services, delaying transportation to and from campus and hobbling administrative services. The strike, supported by CUPE on a national scale, lasted four weeks.

End result:
With the help of a mediator, the contract dispute was resolved. “New language in the contract guarantees the university’s commitment to a defined benefit plan and CUPE’s continued position on the pension plan committee,” said Rob Thomas, assistant vice-president (human resources) at Carleton, in a news release. “It also guarantees that union representatives will continue to comprise 50 per cent of the pension plan committee.”

The deal also included the addition of a pension benefit formula to the collective agreement, making the pension plan much more difficult to change in the future.

Lookin’ out for #1?:
Perhaps. The CUPE protestors expressed concern that while the provision could lead to the diminishment or eradication of their own pensions, it could affect future generations of workers even more.

Humans are biased toward the present. And though no plan member would consciously deprive their child or grandchild of the same pension benefits they receive, some protests fighting for a change in the present do just that.

The challenge for plan governors and administrators is to work closely with members to increase their understanding of the issues surrounding plan sustainability. (In doing so, plan governors and administrators mitigate protests that can lead to significant financial loss for both members, in the form of a strike, and the employer, in the form of reduced productivity or, in extreme cases, physical damage.) This challenge can be met through better broad engagement and change-specific consultation, stronger graphical representations (e.g., a collapsed pension plan might lead to impoverished seniors dying on a street corner) or consistent and persuasive language in communications materials. No matter the method, however, it is essential members and administrators treat the plan as a collective possession.

Plan governors have an ongoing responsibility to maintain the health of their respective pension plans, despite what errors may have been made in past generations. It is their job, their duty and their obligation. Protests that ignore a pension plan’s future viability should never stop governors from, again in the words of Bachman-Turner Overdrive, taking care of business.

“And I'll be taking care of business (every day)
Taking care of business (every way)
I've been taking care of business (it's all mine)
Taking care of business and working overtime, work out.”

“Takin’ Care of Business” by Bachman-Turner Overdrive


Stats-at-a-glance 


Canada’s aging population and health care

In case you hadn’t heard, the Canadian population is aging! For the first time in history, the 2016 census showed there were more seniors than children in Canada. With this increase in seniors, it is no wonder everyone is asking: what does this mean for health care in Canada, and will we be able to meet the needs of our aging population? The Canadian health industry is trying to answer these questions the best they can. Here are a few studies that look at what the future may hold.

Commonwealth Fund’s 2017 International Health Policy Survey of Seniors

In February, the Canadian Institute for Health Information released the results of the Commonwealth Fund’s 2017 International Health Policy Survey of Seniors. The survey interviewed seniors (age 65 and older) in 11 developed countries on nine areas relating to their current health and interactions with their health system. So, how did Canada compare to the other 10 countries?

When it came to personal health, Canadians had the second highest self-perceived health rate at 81 per cent. New Zealand had the highest at 88 per cent; the survey average was 75 per cent. Here is how BC compared to the rest of the Canada and the survey average.

While Canadians may have a high rate of self-perceived health, the survey showed 85 per cent of Canadian seniors have one or more chronic conditions. This is second only to the United States with a rate of 90 per cent. The survey average was 81 per cent.

In addition to this, 32 per cent of Canadian seniors take five or more medications on a regular basis. This is the third highest percentage, behind the United Kingdom at 35 per cent and the United States at 42 per cent. The survey average was 26 per cent. Here is how BC compares to Canada and the rest of the world:

While Canadians rated interactions with their personal health care provider quite high at 74 per cent, only 67 per cent were satisfied with the overall quality of health care provided in Canada. This is the lowest across all 11 countries; the survey average was 76 per cent. Saskatchewan had the highest rate of overall satisfaction at 75 per cent, Quebec had the lowest at 55 per cent and BC was in the middle at 64 per cent.

The survey also found cost to be a significate barrier to seniors, especially those on a low income. In the past 12 months, 5 per cent of Canadians did not fill a prescription, 3 per cent did not visit a doctor, 4 per cent skipped medical tests or follow up and 18 per cent did not visit the dentist when needed, all due to costs. Here is how BC compares to Canada and the survey average:

Canada is below the survey average of 56 per cent when it comes to timely access to primary health care. Only 41 per cent of Canadian seniors (46 per cent in BC) can get same or next day access to their primary health care giver. Interestingly, BC has the second highest rate of access compared to other provinces in Canada; Quebec has the lowest rate at 32 per cent.

The survey goes on to look at all aspects of Canadian health care—from access to specialists to end of life care—and provides a good perspective on how well the system is meeting the needs and expectations of Canadian seniors.

Meeting the Care Needs of Canada’s Aging Population

In July 2018, the Conference Board of Canada (CBoC) released a study on behalf of the Canadian Medical Association (CMA) called Meeting the Care Needs of Canada’s Aging Population. This study took a close look at Canadian health care needs and how our aging population will affect it. Here are the key messages from the study:

  • The portion of seniors (ages 65 and older) in the Canadian population will rise from 16.9 per cent  to 21.0 per cent in 10 years
  • This increase in seniors will add $93 billion to health care costs
    • this is roughly equivalent to 1.8 per cent of all provincial and territorial government spending
  • The annual cost of health care for a senior is $12,000, compared to $2,700 for the rest of the population
  • Seniors consume nearly half (47 per cent) of all health care dollars
  • The 2017–18 public health care cost was $167 billion, with federal funding accounting for $37 billion (22 per cent)
  • Unless adjusted, the federal share of health care funding will fall below 20 per cent by 2026
  • When Medicare was introduced in 1966 (5 decades ago), the median age of a Canadian was 25.5, in 2017, it was 40.6, and it is expected to hit 42.4 in the next decade.

Sizing Up the Challenge: Meeting the Demand for Long-Term Care in Canada

The CBoC and CMA also teamed up in 2017 to release Sizing up the Challenge: Meeting the Demand for Long-Term Care in Canada. This report looks at the affect our aging population will have on long-term care in Canada. Here are the report highlights:

  • Current demand for long-term care beds is 263,000 beds
  • By 2035, Canada will need an additional 199,000 beds
  • The new beds would require $64 billion in capital spending and $130 billion in operational spending between 2018 and 2035
  • While this cost is significant, it will support an average of 123,000 jobs a year and generate 71 billion in tax revenues

Debt and retirement

The golden years used to be a time to sit back relax, collect your pension and live a relatively debt-free life. However, as housing prices across the country continue to increase, employer-sponsored pension plans close and people live longer, more Canadians than ever are retiring with some sort of debt. From 1999–2012, household debt among seniors (ages 65 and over) increased by 15.1 per cent, according to Statistics Canada. The median debt among seniors was $18,000 in 2012, compared to $8,500 in 1999. But, where are we now?

Sun Life Financial Barometer

In 2017, Ipsos and Sun Life Financial teamed up to create the Sun Life Financial Barometer. The survey found 25 per cent of retirees (ages 55–80) live with non-mortgage debt, and two thirds of these retirees carry credit card debt.
According to the survey, retired Canadians carry an average of $11,204 in non-mortgage debt, compared to $18,660 for working Canadians. The top seven reasons for retiree debt are as follows:

  • Credit cards
  • Car payments
  • Mortgage
  • Health care
  • Home renovations
  • Holiday expenses
  • Vacation properties

In addition to the debt carried by retirees, the survey found 24 per cent of working Canadians dipped into their retirement savings for the following reasons:

  • 63 per cent, heath expenses, debt repayment, etc.
  • 24 per cent, first-time home buyers plan
  • 13 per cent, use it for things such as a vacation, new car, etc.

Joe Debtor Bi-Annual Bankruptcy Study

The 2017 Joe Debtor survey out of Ontario shows seniors (ages 60 and older) make up 12 per cent of insolvencies. This compares to 10 per cent in 2015, continuing a trend that started with the 2011 study. While the number of seniors filing for insolvency is increasing, the unsecured debt to income ratio has dropped. Here is how the numbers stacked up:

Debtors, ages 60 and over

2017 Joe Debtor (2015–16)

2015 Joe Debtor (2013–14)

Percentage of all debtors

12%

10%

Unsecured debt

$64,379

$69,031

Debtor income

$2,141

$2,215

Unsecured debt to income

251%

260%

Own home

17%

25%

Use payday loans

11%

9%

Payday loan debt

$3,593

$3,693

The use of payday loans among seniors is on the rise, with seniors having the highest payday debt of all age groups in the Joe Debtor survey. The survey also found seniors were among the most financially at risk, with 59 per cent living in a single person household, up 6 per cent from 2015. Compared to the 2015 survey, today’s seniors are also more likely to be:

While debt among seniors is on the rise, and the survey anticipates this trend will continue to grow because the debt load among pre-retirees (ages 50–59) is second only to seniors. Here is how the two groups compare:

Personal information

Senior debtor
(ages 60 and over)

Pre-retirement debtor
(ages 50–59)

Male

52%

55%

Female

48%

45%

Marital status

 

 

Married or common law

40%

38%

Divorced or separated

30%

36%

Widowed

17%

3%

Single

13%

23%

Average family size

1.5

1.7

Likelihood of having dependent

6%

24%

Average monthly income

$2,141 (net of deductions)

$2,388 (net of deductions)

Total unsecured debt

$64,379

$62,815

Personal loan

$20,628

$22,043

Credit card

$25,596

$20,984

Taxes

$12,895

$12,122

Student loan

$177

$769

Other

$5,083

$6,897

Unsecured debt to income ratio

251%

219%

Likelihood they own a home

17%

21%

Average mortgage value

$173,799

$181,241

 

With debt being more acceptable than ever and with many Canadians carrying debt into retirement or accessing pre-retirement saving to help make ends meet, we have to ask: will retiree debt continue to increase as we live longer?