A new report from Manulife Group Retirement reveals a troubling and growing gap between Canadians who retire early and their life expectancy.
It finds 46 per cent of survey respondents retired earlier than planned due to personal health or caregiving needs, as the number of centenarians has more than doubled in the past 20 years to nearly.
Life expectancy in Canada was just under 83 years in 2024 but assuming the trend continues, Manulife is raising concerns that future generations are not prepared for 40-year retirements beyond the conventional 30-year retirement.
The survey finds half of Canadians of all generations feel they are behind schedule in retirement planning, and are worried inflation will diminish their savings.
If you’re forced into early retirement or plan to retire sooner than expected, here are a few things to ensure your savings outlast your life.
Speak with a financial professional
Good financial advisors prove their worth when the unexpected happens. Even if your advisor only manages a portion of your big financial picture, they probably have other clients in the same situation and could present options you never considered.
Reassess spending plans
Whether you work with an advisor or not, you will need to reassess your spending plans and determine what you need for day-to-day living expenses in retirement.
According to the Manulife survey, 62 per cent of individuals retiring earlier than expected have to make lifestyle adjustments to cut costs, compared to just 43 per cent who retired as planned or later.
The growing trend toward part-time work, or the establishment of a small business can possibly supplement those expenses if you fall short.
Eliminate debt before you retire
If you have debt, talk to your bank about consolidating high interest debt (such as credit card balances) into one manageable low-interest loan that can be paid off sooner.
For most Canadian homeowners a home equity line of credit (HELOC) provides the lowest rates because the property is secured as collateral.
Reverse mortgages are also an option for homeowners but normally charge higher interest rates. Regular loan re-payments are not required for either but you can factor regular payments on the balance if your budget permits.
Take advantage of workplace pensions
If you pay into a defined benefit (DB) pension plan with your employer, consider keeping it even after you quit. They generally provide steady income and are usually indexed to inflation.
If you are in a defined contribution (DC) plan, you probably have the option of keeping it with your employer’s administrator but consider rolling it in with your existing registered retirement savings plan (RRSP) so you can manage it as one portfolio. Either way, speak with your plan administrator.
Keep more tax dollars invested
Speak with an advisor or tax expert about the most tax efficient way to withdraw your savings in retirement. Income splitting with a spouse is a great strategy but is limited for Canadians under 65 years.
In any case, it is best to withdraw from your RRSP at the lowest possible marginal tax rate and top up any additional funds required through a tax free savings account (TFSA).
Don’t invest too conservatively
Don’t panic and sell potentially lucrative or income generating investments, or become too conservative. You still need your savings to grow in equities during retirement and resorting exclusively to fixed income probably won’t get you to your goals.
You will, however, need to keep a portion of your portfolio in cash, or near cash, to meet short-term living expenses.
Consider CPP before 65
Canadians can not collect Old Age Security (OAS) or supplemental benefits until they turn 65 but they do have the option to draw from the Canada Pension Plan (CPP) when they turn 60.
In any case, the amount depends on how much and how long you contribute to CPP during your working life. For 2025, the maximum annual CPP payout at age 65 is $17,200.
Payouts as early as age 60 are reduced 0.6 per cent for each month before 65. Either way, CPP payments are adjusted to the cost of living and that makes it a great hedge against inflation.
If you want to work through various scenarios, the Canada Pension Plan provides a retirement income calculator on its website
