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For those that follow my commentaries you will know that I have spent a lot of time thinking about retirement in the past five years.  I am old enough to retire.  My brother and two sisters who are only a small fraction of a lifetime older than me have retired, half my university buddies are retired, almost all my golf buddies retired in the last three years, leaving me and Ricky hanging onto our jobs.  Ricky is counting the days.

It’s been 40 years since I left Clarkson Secondary School on a mission to become an actuary.  The end of high school is probably the peak gap between what you think you know about the world and what you actually know about the world.  After that, every year you keep learning, and you also learn a little more about how little you know.

My well documented struggle with the decision to retire is fundamentally rooted in the fact that I really like my job AND the fact that I have the maximum work-life balance one could hope for – My wife will tell you that the current arrangement might be the maximum dose of Joe Nunes she can imagine. 

I was at the CIA annual conference in June, and a friend asked me how my golf game was.  I advised that my golf game is a weekly reminder that I shouldn’t retire.

Fading Retirement Security

Also in June, HOOPP published its 2025 Canadian Retirement Survey.  In a nutshell it tells the story of the growing struggle Canadians have finding the money to save for retirement and the increasing worries Canadians have that they aren’t going to be able to retire at a reasonable age.

These findings do not surprise me one bit.  The cost of living has outpaced wages.  Although free trade is a sound economic theory to improve the welfare of the collective, free trade has depressed wage growth in Canada for the last 35 years as globalization has brought poorer countries further out of poverty.  I didn’t have any perspective or influence 35 years ago – but if I were to recommend a do-over, it would be to adjust tax and welfare policies to better balance the outcomes of winners and losers in the changing world.

The survey goes on to report that for many Canadians, home ownership is a key component of their retirement savings strategy.  I have written before on the merits of renting vs buying from a purely economic perspective and I am completely unconvinced that owning a home is an optimal investment strategy – especially at current prices vs rents.

Looking for solutions – HOOPP concludes that a good pension plan is a key part of the answer:

“Underscoring this, an overwhelming majority of Canadians (88%) would choose to pay 9% of their salary, with contributions matched by their employer, to a DB pension plan in exchange for a lifetime income in retirement. Canadians of all ages see the value of a DB pension and would opt-in if they could”

There are three problems with this conclusion.  First, there are few private sector employers prepared to contribute 9% of pay to a retirement plan.  The employment marketplace in Canada’s private sector gravitates around an employer contribution of 5%.  Second, in this hypothetical deal – employees are also expected to save 9% of pay.  In reality, in defined contribution plans where the choice is voluntary – very few workers do.  Finally, delivering retirement before age 65 with a well funded indexed pension at a combined contribution rate of 18% of pay requires taking investment risk. 

When investment risks pay off, pensions are secured.  But when investment losses arise, someone must fund the shortfall.  In the public sector, taxpayers fund some or all of these guarantees.  In the private sector employers are no longer willing to take these investment risks which is why these employers mostly sponsor defined contribution plans where the investment risks fall to the employees.

Solving the Equation

Like me, some of you loved algebra.  For those that didn’t let me remind you that when you have a formula like X=A+B+C, if you want more X, you can get it by getting more A, B, or C – or some combination.

So, in the retirement game (X), A is the rate of savings, B is the age at which you retire, and C is your replacement ratio in retirement.  Quick reminder is that the replacement ratio is how high you want your retirement income compared to your income in the few years before you retire.  I am ignoring investment return as a lever because too many workers want above average investment returns to bail out under saving and I don’t want to promote that narrative.

What HOOPP focuses on, what all the banks selling RRSPs focus on, and what the ‘retirement industry focuses on, is A – the rate of savings.  The math is so easy – more money saved directly delivers more retirement income.

But what I think we need to spend much more time talking about is B – the age at which you retire.  I wrote about this for CD Howe back in 2020 and was part of a group that published a CIA paper on pushing the target retirement ages for CPP and OAS out to age 67 back in 2019.

Maybe part of the answer is changing the narrative around retirement as a way to escape work in order to enjoy life, towards a more purposeful life where work-life balance will allow people to save more slowly and work longer.  More to say on that later.

The Mythology of Retirement

I stole my title for this commentary from this article.  It is American, so you have to convert Social Security to CPP/OAS – but the message is universal.

“The mythology of retirement promised that the fruits of labor would be neatly harvested at 65, ideally on a beach with a cocktail in hand. That this was a historical anomaly, afforded by a one-time explosion of post-war wealth and rising birthrates never registered. To the Boomers, it’s simply how things are supposed to & always will be.

And so they vote accordingly. Not out of malice, necessarily, but out of a conviction that history owes them what was promised. The problem is, that promise was a lie, or at least a short-term experiment masquerading as a permanent fixture. Now, the younger generations are left holding the bag: paying in more, starting later, inheriting less. The ship is sinking, and the people who built their lives on the upper deck are refusing to move.”

This all seems so obvious to me.  But how do we get there?  No surprise, it won’t be easy.  We need to rewire people’s expectations about what retirement looks like and especially the timelines that people should expect. 

But we also need to have employers be more forthright with employees.  For years I have been telling employers with defined contribution plans that the current rates of contributions will not support retirement much before 65 and in some cases not until 70.  Employers reply?  Shrug of the shoulders.  To the detriment of young folks trying to get started in a career – employers in a knowledge industry are happy to keep the older and experienced workers as long as they remain productive.  There is no need for an early retirement program to push these folks out the door.

In our factories – it is a different story – but for many of those workers, unions are doing the good work of negotiating the necessary contributions to pensions to make retirement a reality before workers’ bodies break down.  For these folks, we often see a real clear alignment between expectations and reality.

If we are all to work longer, we need to have jobs that we like.  Too many have landed themselves in a role that they only endure for the money.  No wonder they want to get out as soon as they can to get back to enjoying life.  This is an awful setup.  I know that I am lucky that Mercer fired me 30 years ago which set off the chain of events that helped me find the role I was meant to play.  Many are just competent enough in a role that is just ‘good enough’ to never have to make that search for better.  It is probably too late to do anything for someone age 55 – I am mostly focused on the folks 25, 35 and even 45 to get them thinking about a different path than the one their parents likely took.

Finally, I read this short article about the 4-day work week.

“Results of a new trial support the theory that employees benefit mentally and physically from a four-day workweek.” 

Having experimented with semi-retirement over the past three years, I am sure that shorter work weeks has increased my desire to work more years.  The challenge will be for employers to organize work so that it’s a possibility.