Canada’s Looming Retirement Challenge: Will Future Retirees be Able to Maintain Their Living Standards Upon Retirement?

Abstract

A key question in Canada’s pensions debate is whether Canadians will be able to maintain their living standards in retirement, and if policy needs to respond to the risk that some will experience painful declines. To date, it has been very difficult to estimate how current trends might affect various members of the population in the long run. In this study, we used LifePaths – a sophisticated simulation tool developed at Statistics Canada which integrates a large amount of data on the socio-economic experience of Canadians – to project consumption before and after retirement for Canadians who have not yet reached retirement age. Consistent with other research, the study finds that Canada’s retirement system has supported post-retirement consumption relatively well, especially for lower-income individuals and those who reached retirement age in the last twenty years. If ongoing behavior and economic circumstances were to persist indefinitely, however, more Canadians may find maintaining their working-life consumption in retirement more difficult.

Keywords: Pension Papers, Canada, Pensions, Retirement Income, LifePaths, Statistics Canada, Registered Pension Plans (RPPs), Registered Retirement Savings Plans (RRSPs)

JEL Classification: G23, G28, J32