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November 2003     Vol. 4, no. 11

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Finances in the golden years

Cara Williams

Over much of the 20th century, a substantial amount of attention focused on the economic conditions of Canada's seniors (those aged 65 and over). In the past, many seniors had to work their whole life, and retirement was virtually unheard of. Those who were unable to save any money or to work because of illness and who had no family or friends to rely on spent their remaining years in poverty.

Economic conditions for today's seniors are very different. Since the early 1980s, incomes have risen faster for those 65 and over than for those under 65 (Lindsay and Almey 1999). In fact, between 1981 and 1997, income rose about 18% for seniors while declining for those aged 15 to 64. Nevertheless, seniors still have lower average incomes—not surprising given that most are no longer in the labour force and have no employment income.

However, the financial well-being of seniors is not determined by income alone; wealth also plays a part. While non-seniors are trying to build up their stock of wealth (buying homes, building up RRSPs or other investments), many seniors have already accumulated substantial wealth to draw on in times of need. This subject is certain to remain under close scrutiny as the proportion of seniors increases. Policy and program development centering on this group will no doubt figure prominently in forthcoming years, so it will be crucial to have a complete financial picture that highlights their needs.

Using the 1999 Survey of Financial Security (SFS) (see Data source and definitions), this article examines sources of income and wealth among Canada's seniors. It also looks at their debts and preparedness for unexpected expenses. Additionally, two groups of seniors that potentially face financial insecurity are examined: unattached women and those whose expenses exceed their income.

Government transfers the major source of income for most seniors

Particularly during RRSP season, Canadians hear that they must save for retirement and not rely on government to meet their income requirements in old age. note 1  However, for the majority of today's seniors, government transfers are the principal source of income (Chart A).

In 1999, seniors had four main sources of income: government transfers, private pensions, investment income, and employment income. For two-thirds of senior families (67%), government transfers made up the largest portion of income. Private pensions were the principal source for another 20%, and employment income for another 6%. While almost half (49%) had some type of non-pension financial investments, note 2  investment income was the main income source for only 6%. This is perhaps surprisingly low given the media attention paid to the importance of investing for future retirement income.

How much income is enough?

Ensuring that seniors have enough income during retirement was an ongoing policy issue for most of the 20th century. But determining what constitutes an adequate income is difficult. For example, if seniors are no longer in the workforce, saving for retirement, paying for children, or making mortgage payments, is it reasonable to compare their income with that of non-seniors who may be trying to do all these things? At the same time, do seniors incur significant expenses that younger Canadians do not have? For example, private health care expenses probably increase with age. But on balance, some experts believe that seniors can have significantly lower incomes than non-seniors yet still maintain a similar standard of living (Hamilton 2001).

Various pension and income support programs have been developed and modified over the years in an attempt to ensure that seniors have adequate income (see The evolution of public pension plans in Canada). In 1998, about 2.5 million note 3  Canadians received retirement pensions from the Canada Pension Plan (CPP). note 4  The average monthly payment for these individuals was $407 (HRDC 2003). Additionally, about 3.7 million received Old Age Security (OAS), of whom 1.4 million also received the Guaranteed Income Supplement (GIS). Based on 1998 rates, a senior living alone and relying solely on OAS and GIS would have an annual income of just under $11,000. For senior couples with no other income source, annual income would be about $17,400 (Statistics Canada 2001). note 5 

It is difficult, if not impossible, to determine whether income from government transfers alone is adequate since seniors are not a homogenous group and their expenses vary. However, the income of a senior family no longer saving for retirement, paying off a mortgage, or supporting young children is much more likely to go further than that of a young family with all these expenses. Indeed, according to some actuaries, a mortgage-free retired couple living solely on CPP, OAS, GIS, and tax credits would have a 'consumable income' of $24,000—the equivalent of a middle-income family earning $63,400 after factoring in tax, retirement savings, and mortgage payments (Hamilton 1999). The 1999 SFS indicates that almost 80% of senior couples and 56% of all senior families had an income of at least $24,000.

Although the comparison of senior and non-senior incomes is not straightforward, it provides a jumping-off point (Table 1). According to the SFS, the median income of senior families in 1998 was about 40% lower than that of non-senior families—$26,400 compared with $44,400. Income comparison is complicated since a family's income varies not only by stage of life but also by the type of family. For example, in the non-senior population, female lone-parent families had a median income in 1998 of about $21,000, compared with $60,000 for couples with children. In the senior population, unattached women had the lowest median income of all family types at about $16,000; men in 'other' types of families had the highest at $47,400. Even within family types pronounced differences can be seen. This is especially true for unattached seniors where widows and widowers are in a more advantageous financial position. note 6  This is no doubt partly a function of the economies of scale associated with having lived with a spouse and of possibly having had two incomes. In addition, the widowed may have a survivor pension.

A further complication arises from the age of seniors. Even though income is lower, research shows that the expenditures of seniors decrease as they age. For example, the Survey of Household Spending has shown that younger seniors have higher expenditures than older ones (Hamilton 2001). Just as income and expenditures differ, so also does the financial picture (see Young and old seniors). Such variations exacerbate the difficulty in determining just how much income is enough.

Some saving continues into old age

The life-cycle hypothesis states that income and wealth accumulate until retirement. At this point, the individual or family begins to live on the proceeds of their wealth and dissaving occurs. Recent analysis for the Netherlands shows that for many seniors, dissaving does not occur; that is, many seniors are able to live off pensions or interest from investments without having to liquidate financial assets or sell their home or other sources of wealth (Alessie, Lusardi and Aldershof 1997). The 1999 SFS supports this notion. Almost one-half (46%) of Canada's senior families reported that their income exceeded expenses—that is, for many senior families, some type of savings continued after the traditional age of retirement. note 7  However, declines in interest rates since 2000 have resulted in very low yields for many investments. Coupled with this has been the large decline in the stock market, which has eaten away at the value of mutual funds and dividends. It is reasonable to assume that the rate of dissaving fluctuates with the market, and has likely increased since the SFS was conducted in 1999.

At the other end of the spectrum, about 10% of senior families reported that expenses were greater than income (Chart B). It is important to determine if these individuals are just dissaving as the life-cycle hypothesis contends or if they face financial insecurity.

Home is where the assets are

Because of the stage of seniors within the life cycle, a discussion of their financial well-being is not complete using income alone. Assets—type and value—are also part of the equation.

The SFS collects information on three types of assets: financial, non-financial, and business equity. Financial assets are relatively easy to convert to cash and include GICs, stocks, bonds, and RRSPs. Non-financial assets include the principal residence, vacation property, vehicles, house contents, and collectibles. Business equity is the value of a business after outstanding debts have been deducted. note 8 

Neither senior nor non-senior families had substantial financial assets. The median value of financial assets for all senior families was about $35,000 in 1999, compared with about $14,000 (less than half) for non-senior families. As with income, financial assets varied by family type. Senior couples had the highest median value at almost $53,000, while unattached senior women had the lowest at about $26,000. The value of employer-sponsored pension plans was not included because they are not cashable. However, the actuarial value of these plans can be substantial. For seniors with such plans, the net present value was almost $116,000 (see Private pension savings).

The largest source of assets for seniors is non-financial. Not surprisingly, for the more than two-thirds of seniors who were homeowners, the home was the most valuable asset—a median value of about $120,000 in 1999. Most senior families owning their principal residence were mortgage-free (Table 2). About 61% owned their principal residence outright, and 7% had a mortgage. While a home is not as quickly convertible to cash as financial assets, it can be sold or the family can downsize to another and live on some of the net proceeds. Recently, reverse mortgages have become an option for seniors whose wealth is concentrated in their home. note 9 

Few seniors have debts

Looking at debt in relation to assets can provide a better indication of a family's financial situation. For example, while young families who buy a home may carry a substantial amount of debt, the debt level becomes more reasonable when looked at in relation to the home's value. Concern arises when debt is high and assets and income are low, as may be the case for seniors living on a fixed income.

Few seniors have debt: about 73% of senior families in 1999 reported having no debt. Indeed, the median value of debt for all senior families was zero, compared with $14,000 for non-senior families. For the 610,100 senior families carrying debt, the median value was about $6,500, compared with about $32,000 for non-senior families. However, the amount of debt most seniors carry is relatively low. About 16% of senior families with debt owed less than $500, while about 25% owed more than $25,000.

Seniors also carry the lowest debt-to-asset ratio. Senior families owed an average of $3 for every $100 in assets, compared with $31 for every $100 for those under 25.

Net worth

The net worth (wealth) of a family is the total value of its assets minus debts. note 10  Even though a family may have substantial assets, a lot of debt may mean that net worth is low, zero or even negative. For example, an unattached individual just out of school may have few assets and a student loan, and therefore a negative net worth. While income and net worth are positively related, the relationship is not always perfect. For example, a family who has low income but substantial assets and little debt may still have a relatively high net worth—often the case for seniors. note 11 

The median net worth of Canada's seniors is fairly substantial. In 1999, it was about $155,000 compared with $69,000 for non-senior families. Not surprisingly, just as income varies by family type, so does net worth. Unattached senior women had the lowest median net worth at about $77,000, while senior couples had the highest at about $216,000.

Seniors more comfortable than non-seniors with their level of debt

Having examined the dollar value of income, assets, debts and net worth, the next step is to investigate some of the behaviour senior families exhibit with respect to their finances. This can provide a self-reported measure of financial comfort. While individuals and families budget for a variety of reasons (to save, track expenses, or pay for necessities), seniors living on a fixed income might be expected to need to adhere to a monthly budget (Table 3). However, only about 3 in 10 senior families reported following a budget, compared with about 5 in 10 non-senior families. This finding was relatively constant regardless of family type.

Discomfort with the amount of debt can bring financial worries and indicate financial instability. Conversely, if debt is low and payments are manageable, debt may not be of concern. This appears to be the case for seniors. Only about 27% of senior families had some debt, and the vast majority (82%) were comfortable with their level.

Falling behind in bill payments can be stressful and is another indication of financial insecurity. Only 2% of senior families reported being behind two months or more in a bill, rent or mortgage payment in 1998, compared with about 16% of non-senior families.

Having enough income to pay for day-to-day expenses or to make debt payments provides some indication of financial security. However, the means used by families to pay for unexpected expenses provides a fuller picture of financial security. Often families may be able to pay for small expenses but unable to cope with those that are large or unforeseen. Only a handful of senior families felt unable to pay for an unexpected expense of $500 (Table 4). When asked about an expense of $5,000, almost one-half stated that they would use savings, compared with only 18% of non-senior families. Another 5% said they would sell an asset, while 33% said they would borrow from a friend or bank, or use a combination of savings and borrowing. Indeed, senior families were half as likely as non-senior families to borrow from a financial institution (24% versus 50%). About 8% of senior families and 9% of non-senior families stated that they would be unable to make such an expenditure.

Unattached senior women and seniors whose expenses exceed their income: financial insecurity or dissaving?

While in general the financial position of Canada's seniors is one of relative well-being, two senior groups deserve further investigation—unattached women and families whose expenses exceed their income. note 12  Unattached senior women are traditionally thought to be among the most financially disadvantaged family types. Of all senior family types, unattached women have the lowest income, assets and net worth. Additionally, while they are more likely to own a home than many non-senior family types, they have the lowest likelihood within the senior population (48%).

Given that unattached senior women have less income and wealth than other senior family types, one might assume that they live on a budget. However, at 32%, they were less likely than non-senior families (48%) and no more likely than other senior families to follow a budget.

Another measure of the financial stability of this group is their ability to pay for unexpected expenses. Most felt able to handle an expenditure of $500, and only about 11% stated that they would be unable to handle one of $5,000—only slightly more than in the general senior population (8%).

The SFS also allows an examination of seniors whose spending exceeds their income. About 1 in 10 senior families (216,000) fell into this category. At first glance, these families may appear to be facing financial instability. But if examined within the life-cycle hypothesis, they may have begun to dissave as the theory suggests. Are these families more likely to have lower incomes than other senior families, or are they just drawing down their wealth? How does the value of their assets compare with other senior families? Also, how do they handle unexpected expenses?

Senior families whose spending exceeded income had only a slightly lower median income than other senior families ($25,500 versus $26,500). However, the median value of assets showed a greater difference-$147,300 compared with $164,000 for other senior families. Again the largest share came from the value of a home. Median net worth was about $35,000 less ($121,500 versus $158,000).

Since expenses of these families surpassed income, one might expect a large number to be unable to pay their monthly bills. However, 9 out of 10 were able to pay their bills on time (compared with 98% in the general senior population). note 13  This suggests that many of these families may have begun to draw down their assets. A relatively large proportion had to be careful with their money—about 43% followed a budget compared with 30% of other senior families.

Unexpected expenses can be a problem for senior families living on a fixed income, particularly if expenses exceed income. However, only about 10% in this position stated that they would not be able or did not know how to deal with an unexpected expense of $5,000—about the same as in the general senior population. Some 35% stated they would use savings, and the remainder indicated other means. note 14 


Although income is often used as an important indicator of financial well-being, wealth can be equally important—particularly in the case of seniors, who are in a unique financial position within the life cycle.

Income support programs for seniors in Canada are fairly extensive. The Canada and Quebec Pension Plans, Old Age Security, and the Guaranteed Income Supplement all provide a measure of financial security. Additionally, some provinces have their own income supplements. These programs play an important role in the income for seniors. Indeed, the 1999 Survey of Financial Security indicates that government transfers were the major source of income for two-thirds of senior families. Moreover, almost half of senior families stated that their income exceeded spending, indicating that some savings continued past the traditional retirement age.

Not surprisingly, the major asset of senior families is their home. Almost three-quarters had no debt and few followed a budget. However, as with younger families, large unforeseen expenses can be crippling for seniors. Indeed, about 8% of senior families and 9% of non-senior families felt they would be unable to pay for an unexpected expense of $5,000.


Data source and definitions

The Survey of Financial Security (SFS) was conducted from May to July 1999. The sample represented all families and individuals in Canada except residents of the Territories, members of households on Indian reserves, full-time members of the armed forces, and residents of institutions. Data were obtained for all family members aged 15 and over.

Family unit: economic family or unattached individual

Economic family: two or more persons living in the same dwelling and related by blood, marriage, common law or adoption. Types of senior economic families are based on the characteristics of the major income recipient who is 65 or older.

Unattached individual: person living alone or with unrelated persons.

Total income: income from all sources (including government transfers) before deduction of federal and provincial taxes. Total income is also known as income before taxes (but after transfers). It includes market income and government transfer payments.

Employment income: wages, salaries, and income from self-employment.

Government transfers: all direct payments to individuals and families by the federal, provincial and municipal governments: Old Age Security, the Guaranteed Income Supplement, Spouse's Allowance, Canada and Quebec Pension Plan benefits, Child Tax benefits, Employment Insurance benefits, workers' compensation benefits, credits for the goods and services tax or harmonized sales tax, provincial or territorial tax credits, social assistance payments, and other payments.

Assets: financial assets (registered retirement savings plans (RRSPs), other registered plans, deposits in financial institutions, mutual/investment funds, stocks, savings bonds and other bonds, and other financial assets) and non-financial assets (principal residence, other real estate, vehicles, other non-financial assets, and equity in a business). The net present value of employer-sponsored pension plans is not included.

Debts: mortgages, lines of credit, credit card balances, student loans, vehicle loans, and other debt.

Net worth (wealth): difference between total assets and total debts. Excluded are the value of work-related pension plans, and future entitlements to social security provided by the government in the form of Canada or Quebec Pension Plan benefits and Old Age Security. Also excluded is human capital, measured in terms of the value of the discounted flow of future earnings. Those with no net worth have debts equal to or greater than assets.

Bootstrap methods were used to calculate the standard errors and coefficients of variation for the SFS.


Young and old seniors

Just as the non-senior years entail various life stages, the senior years are also not uniform. For example, the income and attitudes of young seniors (65 to 74) may be quite distinct from those of seniors 75 or older.

The median income of older seniors was about 25% less than that of young seniors ($22,800 versus $30,000). The same pattern holds true for assets. Older senior families' assets were about 25% less than those of their younger senior counterparts. Although assets of the older group declined, debt does not appear to have been an issue for them. The median value of debt for senior families, regardless of age, was zero.

Since the value of older senior families' assets was lower than that of younger senior families, it is not surprising that the median value of their net worth was also about 25% lower ($132,400 versus $174,700). However, even with lower income, assets and net worth, older families were less likely to follow a budget and more likely to have income in excess of their spending. This is not surprising since research shows that as seniors age, expenses decrease (Hamilton 2001). Indeed, about 50% of older senior families stated that in 1998 their income exceeded expenses (compared with 43% of younger senior families), indicating that some older families continue to save for a rainy day.


Private pension savings

Private pension assets offer another layer in a multi-layer retirement income plan. These assets include individual savings in RRSPs and RRIFs, the value of benefits earned through employer-sponsored pension plans, as well as other pension savings such as annuities and deferred profit-sharing plans.

In 1999, two-thirds of senior families had some type of private pension assets. The median value of such assets for those 65 and older was $115,700—second only to those aged 55 to 64. This is not surprising given that those aged 55 to 64 are in pre-retirement or early retirement and at their peak in terms of pension wealth, while those 65 and over have begun drawing down their pensions.

For more information on private pension savings see Statistics Canada (2001) and chart.


The evolution of public pension plans in Canada

At the beginning of the 20th century, the situation for seniors was bleak. For most, retirement was not an option. If a person became ill and unable to work, the prospect was to rely on family for support or else face living the remainder of life in poverty. By 1908, in response to the demand to help the elderly poor, the government began a program of annuities. It was built on the belief that individuals must plan for their future and shoulder the cost of their retirement. However, the program was not successful since those for whom it was designed did not have the means to purchase the annuities.

It was not until 1927 that the first public pension legislation (the Old Age Pensions Act) became law. The pension was available to those who passed a means test. It was also restricted to British subjects aged 70 and over who had lived in Canada for at least 20 years. The maximum pension amount was $20 per month.

Old age pensions became increasingly restrictive during the Depression. In addition to the means test, provinces passed their own legislation to limit those who could qualify.

After World War II the economy began to boom, and most individuals saw an increase in their standard of living. However, because old age pensions did not allow for cost of living increases, their value eroded over time. Many seniors again found themselves living out their last years in financial hardship.

In 1952 the Old Age Security Act became law, establishing the first universal, federally funded pension for all men and women aged 70 and over. An Old Age Assistance allowance was also introduced. The allowance was designed for seniors between the ages of 65 and 69 whose income was below a certain threshold.

Despite these programs, many seniors still had little. During their working years, most had not had jobs that offered an employee pension plan. Even those who had paid into such a plan were often unable to collect because the contributory periods were very long or the plans were not portable from one employer to another. In response, the federal government introduced the Canada Pension Plan (CPP) in 1966. (The Quebec government had previously launched its own Quebec Pension Plan [QPP].) This was a compulsory, contributory program for both employees and the self-employed between the ages of 18 and 70. The plan provided a source of income for seniors as well as insurance for families in the event of death or disability of the principal wage earner.

The next year the Guaranteed Income Supplement was established. It was tied to the Old Age Security pension for those who retired before they could take advantage of the C/QPP.

Between 1968 and 1989, the CPP underwent a variety of modifications designed to recognize changes in society as well as in economic conditions. Some of these included the lowering of the age of eligibility, the indexing of benefits, and the clawback of Old Age Assistance beginning in 1989. As a result of concerns about the long-term viability of CPP, the system moved in 1998 from pay-as-you-go to fuller funding. This resulted in a phase-in period of increasing contribution rates.

Today's income support programs for seniors have changed enormously from the original 1927 Old Age Pensions Act. For example, in 1998 just over 2.5 million seniors received a CPP retirement pension averaging $407 per month. In the same year, almost 3.7 million received Old Age Security benefits averaging $398 per month; about 1.4 million of these received an average monthly payment of $293 under the Guaranteed Income Supplement program. In addition, some provinces have their own income support programs. For example, Alberta and British Columbia provide such benefits to seniors who qualify.

For more information on the history of Canada's public pension plans see the Canadian Museum of Civilization's Web site at www.civilization.ca/hist/pensions/cpp1sp.html. Current OAS, GIS and CPP rates and beneficiaries are available in The ISP Stats Book (see HRDC 2003 in the references).


  1. RRSPs have probably been less important as a retirement strategy for older seniors (75+) than for younger seniors (65 to 74) and non-seniors.
  2. These do not include term deposits, GICs, or the value of deposits in chequing or savings accounts. The value of RRSPs is contained in the private pensions category.
  3. Another 400,000 Canadians received a combination of retirement and survivor pensions.
  4. Individuals in Quebec belong to the Quebec Pension Plan (QPP). In 1998, about 870,000 individuals received an average of $365 per month in QPP retirement benefits.
  5. This does not include C/QPP retirement benefits.
  6. One example of the difference within this group is net worth. Widowed unattached seniors had a median net worth more than 70% higher than that of other unattached seniors. Detailed financial breakdowns of widowed unattached seniors are not possible because of small sample size.
  7. It is not possible from SFS data to determine if senior families who are saving are going without or whether they are forcing down their expenses to ensure savings.
  8. The estimates for business equity are not sufficiently reliable to be released.
  9. A reverse mortgage, through the Canadian Home Income Plan (CHIP), allows Canadian homeowners 62 and over to convert a portion of the equity of their home into an income stream while living in and owning their home. The amount that can be obtained is between 10% and 40% of the assessed value of the home, depending on the age of the owners—the older the owners, the larger the percentage. For more information on reverse mortgages, see the CHIP web site at http://www.chip.ca.
  10. Does not include the value of employer-sponsored pension plans.
  11. For more general information on wealth and net worth see Augustin and Sanga (2002).
  12. These two groups are not mutually exclusive. About one-third of senior families whose expenses exceed income are unattached women.
  13. These individuals responded no when asked if they were two or more months behind in payments.
  14. This includes borrowing, a combination of savings and borrowing, selling an asset, or some other means.


  • Alessie, Rob, Annamaria Lusardi and Trea Aldershof. 1997. "Income and wealth over the life cycle: Evidence from panel data." Review of Income and Wealth 43, no. 1 (March): 1-32.
  • Augustin, Baudelaire and Dimitri Sanga. 2002. "Income and wealth." Perspectives on Labour and Income (Catalogue no. 75-001-XIE) 3, no. 11. November 2002 online edition.
  • Hamilton, Malcolm. 1999. "Hard working and hard up: Who's broke in Canada?" MoneySense (October).
  • ---. 2001. "The financial circumstances of elderly Canadians and the implications for the design of Canada's retirement income system." In The state of economics in Canada: Festschrift in honour of David Slater. Edited by Patrick Grady and Andrew Sharpe. pp. 225-253. Montreal: McGill-Queen's University Press.
  • Human Resources Development Canada (HRDC). 2003. The ISP Stats Book 2003: Statistics related to income security programs. Internet: www.hrdc-drhc.gc.ca/isp/studies/trends/stats_e.shtml.
  • Lindsay, Colin and Marcia Almey. 1999. A portrait of seniors in Canada. Third edition. Catalogue no. 89-519-XPE. Ottawa: Statistics Canada.
  • Statistics Canada. 2001. The assets and debts of Canadians: Focus on private pension savings. Catalogue No. 13-596-XIE. Ottawa.


Cara Williams is with the Labour and Household Surveys Analysis Division. She can be reached at (613) 951-6972 or perspectives@statcan.gc.ca.

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