The financial situation of the typical Canadian aged 65 and older has changed significantly during the past 20 years, according to the Ontario Securities Commission’s (OSC) Seniors Strategy.
Major challenges facing seniors
Major challenges facing seniors
1. Incomes from potentially volatile sources
Older Canadians’ incomes are less likely to come from government benefits or defined-benefit pension plans than 20 years ago, and more likely to come from more volatile sources, such as home equity, continued employment and defined-contribution pension plans. Between 1995 and 2015, the median after-tax income of families with a primary earner aged 65 and older increased by 32%, according to Statistics Canada, but the median income from government transfers grew by only 7%.
The percentage of “highly indebted households” (with debts of more than 350% of household incomes) aged 65 and older almost doubled to 5.5% during 2012-14 from 2.9% during 2005-07, the Seniors Strategy says.
Lower interest rates in the wake of the global financial crisis 2008-09 have created incentives to take on higher debt and reduced incentives to save. Some savers may respond by engaging in a search for yield, moving their savings out of low-yielding products such as savings accounts and GICs into higher-risk, more volatile investments. The search for yield may also make savers more susceptible to fraudulent “get rich quick” scams.
Older Canadians are more likely to live in their own homes, and less likely to live alone, than was the case in the past. Between 2001 and 2016, the proportion of women aged 80 and older living alone fell by 7.5 percentage points according to Statistics Canada, while the share of those living as part of a couple rose by 7.7 percentage points.
A 2014 Statistics Canada study found that women aged 65 and older had the lowest financial knowledge scores out of women of any age group and that men aged 65 and older had the lowest financial knowledge scores out of men of any age group other than 18- to 24-year-olds.
Low financial knowledge makes the roles of registered firms and their representatives even more important in helping older Canadians meet their financial goals. However, many firms and advisors may feel ill-equipped to address the significant challenges, such as aging minds and bodies, facing older investors.
