When Can We Retire?

In the last chapter, we learned that looming shortages in the labour force will impel governments and employers to take away incentives to retire early. In 20 years' time, the economy will run better if we retire around age 66 or 67 instead of the current average of 62.

You might think: “I'll retire when I can afford to retire, or perhaps a little later when I feel like retiring.” This chapter tries to estimate when we can afford to retire about 20 years down the road. We will use actuarial calculations to do this rather than worrying about what is good for the economy. We will consider the question from a national perspective, that is, if everyone saved the same percentage of earnings and retired at the same age, what is that age likely to be in 20 years? It is important to know this because it will be a struggle to swim against the current. If our external environment is going to force the average Canadian to work a lot longer, it will also make it harder for each of us as individuals to retire early.

Even before we start, we know from Chapter 4 that the retirement age is going to be higher than the current average of 62 because demographics and capital markets are starting to work against us. Making a good actuarial estimate for the entire Canadian population is not easy. One complication is that saving currently takes place in all four pillars, as described in Chapter 2. Each pillar entails a different retirement age, a different funding approach, and ...

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