For many Canadians, retirement represents a time of freedom, when they can be rid of the daily responsibilities of work and focus on themselves instead. They can spend more time with grandkids, go travelling, work on passion projects, volunteer or simply just relax and enjoy their new-found freedom.
But what exactly is the Canada retirement age? Knowing when to retire (or the best age to retire for you) is an essential question to answer for comprehensive retirement planning. Other questions you’ll want to ask are: What’s the average Canadian retirement age? Is there a mandatory retirement age in Canada? Is the retirement age for women the same as men? And can a retirement age calculator help? Let’s take a look.
The average retirement age in Canada
There is no longer an obligatory Canadian retirement age. Until 2009, there was a mandated Canada retirement age of 65, by which time Canadians had to retire (and you could always retire earlier, if you could afford it). The law changed in 2009 to prohibit mandatory retirement, meaning Canadians could effectively work indefinitely (except in a few rare cases, such as judges and commercial airline pilots).
According to Statistics Canada, the average Canadian retirement age is 64.4 years old. This coincides very accurately with workers’ assumptions of their own retirement age in Canada: the average Canadian expects to retire at 64 years of age. However, that age changes depending on your gender and where you work.
The average retirement age for women is a little younger, at 63.8 years. The average Canada retirement age per sector is:
- Public sector: 4
- Private sector: 8
- Self-employed: 6
So, if you work for yourself, you could end up working five years more than your friend who works for the government. The problem with looking at the average retirement age in Canada, however, is that it is just that: an average. The best age to retire for your friends may not be the best age to retire for you.
Your earliest possible retirement age will depend on a number of factors: your company pension plan, government pension benefits and any extra retirement savings you might have, such as RRSPs. The kind of retirement you had in mind will also have an impact (will you go travelling or spend more time with the grandkids?). This is where retirement date calculators come in handy and we will take a look at those in a moment.
The Canada retirement age for CPP and OAS
In Canada, the retirement age to receive government pension benefits is often considered to be 65. However, it is a little more flexible than that. While 65 is the minimum age at which you can receive Old Age Security, you can defer receiving it until you reach 70. The Canada Pension Plan is even more flexible, allowing you to draw its pension benefit any time between the ages of 60 and 70.
There is a catch, however: for each year below 65 that you draw your CPP pension, you will lose 7.2% of its value. Therefore, if you start drawing CPP at age 60, it will be worth 36% less than if you wait until you’re 65. Conversely, if you wait a few years to draw CPP, you will draw more money. Your CPP benefit increases by 8.4% every year you defer it: if you wait to draw it at age 70, it will be worth 42% more than if you draw it at age 65.
While you cannot draw OAS early, the payment increases by 7.2% for every year you defer receiving it, to a maximum extra amount of 36% more at age 70 than at age 65. There is no further financial incentive to delay receiving CPP or OAS after age 70, so that is the latest Canadian retirement age that many retirees choose.
What is the best retirement age in Canada?
While we’ve seen that the average retirement age in Canada is 64, that may not be the best, the most practical or most desirable retirement age for you. A retirement date calculator can really help in planning for when you will actually be able to retire. A popular option is this federal government retirement age calculator.
It takes into account your government pension benefits, your employer pension, RRSPs and other retirement savings. It can then give estimates of how much income you will get from all of these sources, at different ages, so you can work out roughly at what age you can afford to retire.
Knowing at what age you can draw your full company pension is also important. Some federal pensions, for example, allow you to draw a full pension if your age plus your years of service are equal to or greater than 85. If you’ve been working in a federal job since age 25, for example, you could in theory retire with a full pension at 55.
Contact your employer’s HR department to discuss the retirement date that has been specified in your company pension plan, and how much income you will receive. Then, talk to your financial advisor to see how much income you will receive from your investments, RRSPs and other savings. This should give you a good idea of if you can retire earlier than the average retirement age in Canada or if you’ll have to wait until you’re older.
Retirement by age category
Here are the various retirement ages you can consider, and what you should be aware of for each one:
Early retirement (below 60)
This would normally require an excellent company pension, a very robust retirement plan, a high salary and/or a large inheritance. It would typically require a very disciplined savings schedule, with a high percentage of your salary saved during your working life. For some people, sacrifices made at a younger age are worth making to have so many years of freedom in retirement.
The average Canadian retirement age (60 to 70)
This is the age category that is typically attainable and desirable for most Canadians. A decent company pension plan, substantial retirement savings and/or modest retirement living expenses can all combine to make this happen. Most Canadians will have retired by this age range.
Late retirement (70-plus)
For those people who haven’t got enough in retirement savings or retirement pension and/or are worried that they could outlive their savings, late retirement may be necessary. In fact, over half of Canadians worry that they may have to go back to work after they officially retire. Others love their job so much, they are happy to work later in life: 6% of Canadians don’t plan to ever retire.
How can you avoid having to take late retirement?
If you’re one of the 53% of Canadians who fear that they may have to go back to work after retiring because they don’t have a sufficient pension or retirement savings, there is a way you could avoid having to retire well past the average Canadian retirement age.
If you’re a homeowner aged 55 and over, a CHIP Reverse Mortgage from HomeEquity Bank can provide you with the extra income you need to retire when you want to, rather than when you have to. You can borrow up to 55% of your home’s value and receive the payment either in a lump sum or in monthly payments. Those regular payments can help you to cover all your costs and have an earlier and more enjoyable retirement.
Also, you don’t have to pay back what you owe until you move out or sell your home, so you won’t have to worry about how you’ll manage to make monthly mortgage payments.
Call us today at 1-866-522-2447 to find out how much you could borrow to help you retire early.