Study: New Frontiers of Research on Retirement

Broad social changes are forcing Canadians to rethink their traditional ideas about retirement, according to New Frontiers of Research on Retirement, a new book released today by Statistics Canada.

The baby boom generation, the vanguard of whom turns 60 this year, has caused fundamental changes in every social institution it has touched. Retirement will be no exception.

Analysts looking at the evolution of society expect that the wave of retirements that the baby boom generation is about to unleash will trigger key institutional and cultural changes. This book sheds new light on adjustments that may be needed in consequence. Several studies highlight differences in the way men and women retire.

The report centres on four main themes.

First, there are gender differences in retirement patterns. The behaviour of baby boomer women will greatly influence what retirement in Canada looks like in the future. Women are much more likely than men to see retirement as involving more than just getting a pension or stopping paid work.

Second, joint retirement is becoming an issue for many couples. The growing number of women with substantial pension benefits is having a major impact on decisions about retirement in Canadian families. For more and more couples, decision-making is becoming much more complex.

Third, maintaining a standard of living in retirement is also becoming an issue. Amid growing uncertainty about their future financial security, an increasing number of people do not know when they will retire. Others have simply delayed their retirement.

Lastly, retirement paths will become more and more flexible as some workers opt for self-employment. With a massive wave of retirement looming among baby boomers, the labour supply from older workers will grow in importance. Many will likely choose to become self-employed, making flexible retirement paths more prevalent.

Unique pattern of retirement among women

Patterns of retirement from paid work among women will be much more prominent when the wave of baby boomer retirement gets underway, and their retirement patterns will be unique, the book shows.

Baby boomer women will be the first female cohort to have participated in the labour force for most of their adult lives. They will start their transitions with far higher levels of pension coverage than earlier female cohorts. The behaviour of baby boomer women will greatly influence what Canadian retirement looks like in the future.

Studies reported in the book have found that women are much more likely than men to see retirement as involving more than just getting a pension or stopping paid work. Women tend to include in their concept of work the time they spend doing unpaid work, such as care giving, volunteering, and so on.

Once they start the transition from paid work to retirement, women tend to complete it much faster than men. This is particularly the case when there has been a job loss or other involuntary job change. Women are more likely than men to retire from paid work when they experience an involuntary job change.

Among women who started the transition to retirement at age 55 to 59, roughly 50% had retired within the next four years; whereas this was true for 40% of their male counterparts.

Women also have a greater likelihood of experiencing involuntary retirement. Among those who began their transition to retirement in or after 1996, 10.4% had retired involuntarily by the end of 2001, nearly double the proportion of 5.7% among men.

Household and family matters tend to influence a woman's decision to retire much more than they do a man's. For example, in 2002, 12% of women retired to take care of a family member, while only 6% of men did the same.

Joint retirement: Decision for older couples more complex

The increasing number of Canadian women with substantial pension benefits is having a big impact on decisions about joint retirement. For more and more couples, deciding whether to retire at the same time as a spouse is becoming complex. It is even more so when the wife contributes nearly one-half of the household's total income.

In 2002, 48% of women and 46% of men said they expected to retire at the same time as their spouses. The proportion jumped to 60% among women who were the same age as their husbands, and fell to 39% among women who were five to nine years younger.

Women in their late 50s are less likely to expect to retire at the same time as their spouses or partners than those in their 40s. However, this may be explained in part by the higher percentage of persons already retired among those in their late 50s.

The expectation of joint retirement varies between salaried and self-employed workers, and among occupational groups. It also varies according to the wife's economic dependency on her spouse.

For example, two-thirds (68%) of self-employed women expect joint retirement compared to only 44% of women working for someone else, according to the General Social Survey. However, a substantial proportion of self-employed women are likely to be married to a self-employed men.

Generally, if a woman is in a managerial and professional occupation, has her own pension coverage, and contributes most of the household income, the odds are higher that she will view the timing of her retirement independently of her spouse's.

New vulnerabilities concerning standard of living in retirement

Many older workers feel increasingly vulnerable about maintaining their standard of living in retirement, the book found. There are several reasons for this.

For example, declining stocks prices after the crash of the high-tech sector in 2000 pushed many pension plans into deficit status and undermined the value of individual retirement savings.

Canadians are also living longer. That places additional pressure on pension-plan funding by requiring pension plans to pay benefits to individuals for longer than expected periods. This problem will be compounded by the huge size of the baby boom generation.

Amid growing uncertainty about their future financial security, an increasing number of people do not know when they will retire. Others have simply delayed their retirement.

Almost one-fifth of those surveyed in the 2002 General Social Survey said they did not intend to retire at all. Also, many individuals who took early retirement are going back to work, some for financial reasons.

In addition, the rising prevalence of non-standard work arrangements, such as contract, part time, or casual jobs, will worsen the financial security of future retirees. Workers in non-standard jobs generally do not have an on-going relationship with a particular employer, thus limiting their access to workplace pension plans.

Two particularly vulnerable groups are immigrants and women living alone. Employment was the major source of income for older immigrants from 1980 to 2002. This group has not benefited as much as the Canadian-born from the maturation of public and private pension systems. Workplace pension income for immigrants 65 and over was 21% lower than for the entire elderly population.

A challenge for employees of all ages is to better understand how to plan financially, how government pensions work, what kinds of pensions or retirement savings plans are available, the risks associated with different plans, and how to effectively manage personal saving and debt.

Self-employed: More likely to have a flexible retirement

In 2004, the self-employed accounted for 15% of the total employed, but over 20% of those aged 45 to 69. It is likely that with the massive future wave of retirements among baby boomers, the rate of self-employment in Canada will grow.

The book sheds new light on the degree to which self-employed and salaried workers differ in their patterns of retirement.

Once they begin the transition toward retirement, retirement within the first year is far more likely for wage and salary earners than for the self-employed. The gap between them is more than 20 percentage points for those aged 60 to 64 in 1996.

The study provides the first estimate of the size of the advantage enjoyed by the self-employed in terms of retirement flexibility. It found that the self-employed were 10 percentage points more likely than the salaried to have a flexible retirement.

Data also show that the self-employed are more likely to return to the labour market after having left it. Among those who were in their transition to retirement and left the labour market between 1996 and 1997, 29% of the self-employed were rated as having a high or medium likelihood of returning. This was double the proportion of only 13% of salaried employees.

Definitions, data sources and methods: survey numbers, including related surveys, 3889 and 4500.

The book New Frontiers of Research on Retirement (75-511-XIE, $49; 75-511-XPE, $65) is now available. A technical paper entitled New Frontiers of Research on Retirement: Technical Annex (75-512-XIE, $20; 75-512-XPE, $30) is also now available. To obtain a copy of either of these reports, contact (1-800-267-6677; infostats@statcan.gc.ca). For general enquiries call (1-800-263-1136).

For more information, or to enquire about the concepts, methods or data quality of this release, contact Dr. Leroy Stone (613-951-9752; stone@statcan.gc.ca), Unpaid Work Analysis Division.