02/20/2013 07:05 EST | Updated 02/20/2013 08:34 EST

Canadian Unretirement Index: Most Say They Won't Stop Working After Age 66

Forget Freedom 55 or even 65. The vast majority of Canadians surveyed in a new poll don't expect to retire before age 66.

And the number of Canadians who believe they'll be done with work in the year after they reach the traditional retirement age of 65 has fallen by nearly 50 per cent since 2008, according to Sun Life Financial's annual Canadian Unretirement Index.

The number of Canadians anticipating they'll stop working by 66 dropped to just 27 per cent in this year's survey, compared to 51 per cent in 2008. The average age of expected retirement is 68, the same as last year, but up significantly from age 64, which was the average cited in the inaugural 2008 survey.

For the first time in the five years Sun Life has tracked retirement trends, the number of Canadians expecting to be retired at 66 (27 per cent) nearly equalled the 26 per cent expecting to be working full time at that age. Another 32 per cent imagined they’d be working part-time at that stage.

The results from Canada’s third-biggest insurance company reflect those of other public opinion polls, suggesting a massive shift away from the Freedom 55 dream.

"It's being replaced by the reality that many people expect to be working beyond the traditional retirement age," said Kevin Dougherty, president of Sun Life Financial Canada.

"We think that it is the new normal," he added, citing the ageing baby boomer demographic, a persistently low interest rate environment and the continuing increase in average life expectancy.

Longer lives, economic uncertainty, volatile stock markets, low interest rates, declining pension savings and growing debt loads have each played a part in pushing up the age of expected retirement.

The potential of a looming retirement emergency is coming to the fore as the work force ages and baby boomers retire in the coming years, leaving fewer employees to pay into benefit plans and more drawing from them.

The financial crisis of 2008 roiled workplace pension plans and personal investment accounts. In the aftermath of the crisis, the Bank of Canada has opted to keep interest rates at super low levels, which has served to both diminish returns on investments and encourage borrowing (Canadians are saddled with record levels of household debt).

The survey results suggest Canadians are slightly more pessimistic about retiring early than they were last year, even though the recession is farther behind.

"We're now five years since the beginning of the crisis, on the other hand people are now five years closer to retirement, or to age 65," Dougherty said.

"I think a bit of what’s happening is the reality of it all — the challenge of living a long time is there, the crisis obviously had an impact on household balance sheets and of course the low interest rate environment also is a big factor when you think about either saving for retirement, or making your money last for a long time.”

Canadians are also living longer — with average life expectancy now at 85, according to Statistics Canada. That means workers have to set aside a bigger pot to provide for living what could be 20 or more years as a retiree.

It's a great thing that Canadians are living longer; the challenge is they're not planning for it, Dougherty said.

"For our parents' generation, it was a very short retirement past age 65, today the good news is you could have a long, long retirement," he said.

Sun Life's survey suggested that 63 per cent of Canadians are motivated to work longer out of necessity and fear of outliving their savings.

Respondents expected to require an average income of $46,000 per year for their retirement, but only expected to have saved an average of about $385,687, revealing a glaring gap between goals and reality in retirement planning. That savings level is far short of the nearly $1 million Canadians should have set aside if they want to live on $46,000 for 20 years or more.

One-third of those polled said there is a serious risk of outliving their savings.

Heightened debt loads aren't helping. Nearly half of Canadians surveyed said paying down debt was their No.1 priority, compared with just 23 per cent who cited retirement saving. Twice as many Canadians, 25 per cent, said they want the interest rate to rise this year than the 13 per cent who said they want to see it decline.

Research from Statistics Canada has found that a 50-year-old worker in 2008 could expect to stay in the labour force another 16 years – 3.5 years longer than would have been the case in the mid-1990s.

The federal government last year introduced a controversial measure to raise the age at which Canadians can collect Old Age Security from 65 to 67 beginning in 2023 in order to scale back the long-term costs of the program.

The coming retirement and pension crises are not specific to Canada — debt-strapped countries around the world are scaling back benefits, raising the retirement age or making other moves to deal with rising obligations and weak economies.

France's President Francois Hollande is risking the wrath of the French people, who fiercely cling to pension and retirement benefits, as he contemplates a pension overhaul to meet European Union budget targets.

A reduction in government assistance for retirees leaves even more of the retirement savings burden on the shoulders of individuals through vehicles like Registered Retirement Savings Plans.

The Sun Life survey was conducted online by Ipsos-Reid between Nov. 29 and Dec. 6 among 3,017 working Canadians from 30 to 65 years. The survey is accurate to within two percentage points had all Canadians adults been polled.

Such surveys are routinely done by banks, insurers or other financial companies to research their customers' views and promote financial products and services such as mutual funds and wealth management and financial planning advice.

The Sun Life survey comes just ahead of a Mar. 1 deadline to buy RRSPs and have them count toward the 2012 year.

Recent polls have suggested many Canadians wait until the last minute to make an RRSP contribution — if they do so at all.

A survey released Tuesday by TD Bank found that 60 per cent of Canadians contributing to an RRSP this year plan to do so in the next two weeks. About four-in-ten said they didn’t feel they had enough money throughout the year to contribute.

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