June 14, 2007 – CPBI, Winnipeg
Has Retirement Outlived
Its Usefulness?
Malcolm Hamilton
Toronto
The papers are filled with stories
about the demise of retirement as we
know it…
Fidelity
Investments
BMO Podcasts
Marty Sims
EVP, HSBC
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
2
“Retirement: it’s a word without meaning…
the current group of retirees and soon-to-be-retirees are
redefining the way people stop working—if they end their
careers at all. Statistics Canada studies show more people
are choosing to work longer.”
Toronto Star
November, 2006
“Nearly half of those in their 40s and 50s expect to continue
working for as long as possible”
The Globe & Mail
May 23, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
3
Those zany boomers – determined to
work forever; eager to stay in debt.
“Canadians told us it was about time to retire
the word retirement.
Retirement for this generation is different in
that it is a more ‘fluid’ transition. And they aren’t
going to wait until they pay off the mortgage.
About two-thirds of Canadians expect they will
still be in debt when they quit working.”
Tina Di Vito,
Director of Retirement Solutions
BMO Financial Group
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
4
Older workers a drain? Not a chance,
study finds…

“The HSBC survey found that older Canadians perform
more than $3.1 billion worth of volunteer work each year”
The Globe & Mail
May 23, 2007

“According to Statistics Canada’s 1998 General Social
Survey on time use, 3.2 million retirees spent about 5
billion hours doing unpaid productive work. The economic
value to our communities is thought to be $60.2 billion
each year.”
Seniors at Work
National Advisory Council
on Aging, 2005
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
5
Worried about population aging?
“In fact, through taxation, volunteer work and the
provision of care to family members, HSBC has
found that those in their 60s and 70s are the
foundations upon which their nations build.”
The Globe & Mail
May 23, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
6
The secret life of Canada’s senior
citizens…
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
7
Seniors have half the income of
working Canadians, yet they appear to
be doing quite well…
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
8
According to recent studies…

Poverty rates for Canadian
seniors are among the lowest in
the world

Poverty rates for Canadian
seniors are substantially lower
than poverty rates for other age
groups
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
9
Canadian seniors are frugal, not poor.
They…

save prodigiously

give more to others than they
receive from them

spend less and less as they age, even
as their gift giving and savings increase

spend relatively little time in institutions

leave surprisingly large estates
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
10
Surveys suggest that…

seniors are relatively satisfied
with their financial
circumstances

they worry more about health
and loneliness than money

they believe that their quality of
life is better than the quality of
life enjoyed by their children or
grandchildren
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
11
Surveys also suggest that…

the transition into retirement is
easier than people expect

retired Canadians feel that they
have more control over their
lives than working adults and
value the additional leisure time

retired Canadians miss work,
and the employment income
derived therefrom, less than
they thought they would
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
12
To understand why seniors are
satisfied with small incomes while
boomers are dissatisfied with large
incomes, one must look not at the
incomes, but at the demands placed
upon them…
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
13
When you look at both incomes and
expenditures, seniors enjoy a standard
of living comparable to working
families, without having to work…
Median Working
Age Couple
Median Senior
Couple
Income
$69,700
Taxes
(18,600)
(5,000)
Mortgage
(6,100)
(200)
Retirement Savings
(6,100)
(0)
Dues and Daycare
(1,000)
(0)
Provision for Children
(9,800)
(0)
Adult Consumption
$28,100
$35,600
$30,400(1)
Source: 1997 Survey of Consumer Spending;
probably 30% higher today
(1)
Seniors saved or gave away about $6,000 of this
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
14
and seniors exhibit a higher level of
satisfaction with their lives than
working Percentage
people…
of Canadians Reporting
High
Levels of of
Satisfaction
withReporting
Their Lives
Percentage
Canadians
High Levels of Satisfaction with Their Lives
40%
38%
36%
34%
32%
30%
28%
26%
24%
22%
20%
20
30
40
50
60
70
80
Age
Aging Well: Time Use Patterns of Older Canadians
July, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
15
Finally, despite the HSBC’s
protestations, seniors are not large
contributors to paid or unpaid work…

Seniors account for
– 17% of the adult population
– 3% of the workforce
– 2% of employment income

the average senior spends about 0.5 hours per
day on volunteer work, virtually the same as the
average non senior
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
16
Despite living longer, Canadians are
retiring earlier…
Average Retirement Age
Late 1970s
2000 to 2004
Public Sector
Private Sector
 Employees
 Self Employed
65
58.6
65
65
61.8
65.1
Overall
65
61.1
Statistics Canada
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
17
And the smarter they are, the earlier
they retire…
Highest Level of
Educational Attainment
Average Retirement
Age: 2000-2004
Elementary School
64.8
Some High School
63.0
High School Graduate
60.3
Some Post Secondary
60.6
University Graduate
59.4
Overall
61.1
Statistics Canada
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
18
Once they stop working, what do
elderly Canadians do with their spare
time?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
19
Canadian men over the age of 75
did 4.4 hours per day less paid work
than Canadian men between the ages
of 55 and 64. The extra time was spent
as follows…
Hours Per Day
Watching TV
Other and “Unreliable”
Sleep
Leisure
Housework & Shopping
Eating
Volunteer Work
1.2
1.1
1.0
0.5
0.4
0.3
(0.1)
4.4
Aging Well: Time Use Patterns Of Older Canadians,
July 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
20
Good health is the characteristic that
has the greatest influence on
satisfaction. Among healthy older
Canadians, those who were highly
satisfied spent…

less time working (paid and unpaid)

more time watching TV, sleeping and in active
leisure
The differences, however, were not large
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
21
But what of the future?
Will retirement be redefined or will people
simply retire earlier or later depending on
what they can afford?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
22
To change retirement patterns, or the
meaning of retirement, several things
must happen…

people must be capable of working longer,

people must want to work longer, and

employers must want to attract and/or retain older
workers.
Are these things
about to happen?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
23
Can People Work Longer?
Aging, Longevity and Retirement
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
24
“100 Year Olds Bust Ad Myths”
Calgary Herald, September 10, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
25
Jeanne Calment – the Oldest Known
Human
1875 – 1997
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
26
What is aging?

20 years of maturation

60 years of senescence(1)
(1)
the process of gradual physical and
mental deterioration as people age
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
27
What we read...
“Thanks to modern medicine
and better nutrition, old
people are not getting old as
quickly as they used to. The
idea of settling into a rocking
chair the day you turn 65
doesn’t appeal to today’s
active senior citizens…”
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
28
What we learn in the real world…
“There are no lifestyle changes, surgical
procedures, vitamins, antioxidants,
hormones or techniques of genetic
engineering available today that have
been demonstrated to influence the
process of aging.”
Position Statement On Human Aging
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
29
Why are people living longer?


Because better nutrition, public health, a reduction
in warfare and advances in the treatment of
disease have allowed people to live longer.
NOT because the aging process has been
retarded or reversed.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
30
Put another way,

we have prolonged life by more than we have
prolonged the onset of old age.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
31
The question…

should retirement be tied to longevity or to
senescence?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
32
Of course, boomers want to believe
that they, unlike earlier generations,
are not growing old…

and there is no shortage of people who are
prepared to tell them what they want to hear.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
33
What we read…
“I’ve seen a huge change over
the last few years. When I
started at this job 25 years ago
most of the patients were in their
60s and 70s. Now there are
days when I don’t see anyone
under 90.”
Dr. Barbara Paris
September 30, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
34
What we learn in the real world…
Aging population putting
pressure on ER, study finds
“The need for better community health care services
is increasingly urgent because much of the pressure
on emergency rooms is due to the rapidly aging
population, the report noted. People age 75 or older
have the highest—and fastest growing—rate of
emergency room visits. Their problems are complex
and in many cases require hospitalization in
institutions that are already full to bursting.”
National Post
October 3, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
35
What we read…
“In terms of how people feel and
what they are capable of, we
believe that 70 can be said to be
the new 50.”
The Future of Retirement
HSBC
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
36
What we learn in the real world…
“You always say you don’t want
to be like your parents but this
particular generation won’t be
much different from the older
people 40 years ago.”
David Foot
Hamilton Spectator
March 1, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
37
Changing attitudes – do people really
want to work past 65, or do others
want them to believe that they do?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
38
What we read…
“Let workers stay on the job past age 65 – Bank of
Canada governor.”
Canadian Press
March, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
39
What we learn in the real world…
“I turn 65 next year. I’m going to take a bit of a
rest after 40 years of working without a break.”
Dave Dodge
Financial Post
April, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
40
What we read…
“In the old days, Don Dewees, 65,
would have been cleaning out his
office and getting ready for
retirement. But in today’s world,
where 60-somethings are the new
40-somethings, the University of
Toronto professor has no plans to
slow down”.
December, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
41
What we learn in the real world…
Estimated number of Ontarians
expected to take advantage of the
abolition of mandatory retirement
4,000 per annum

If each works an extra 5 years, the total
increase in Ontario’s workforce
0.3%

Extent to which the abolition of
mandatory retirement is expected to
mitigate the impact of population aging
during the next 25 years
1%

Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
42
What we read…
“The boomers are saying,
‘I’m not going to Florida
to sit at the pool and play
cards all day’.”
September 30, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
43
What we learn in the real world…


Increase in Florida property prices: 2000 – 2005
Average price of a single family home in Victoria,
B.C.: $520,000 in October 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
44
What we read...
“The trend toward early
retirement, which
peaked in the late 1990s,
has ended…”
May 29, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
45
What we learn in the real world…
Average Age
at Retirement
Late 1970s
65.0
1995 to 1999
61.0
2000 to 2004
61.1
Statistics Canada
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
46
What we read...
“Baby boomers are
increasingly redefining
retirement, by looking at it as
a career change rather than
an extended vacation plan,
research suggests.”
September 24, 2005
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
47
What we learn in the real world…
% of Canadians Who Want
to Spend Time Doing This
Activity
in Retirement
Travel
Crafts & Hobbies
Family & Friends
Volunteer Work
Sports
Continue to Work
Consulting/Small Business
58%
48%
25%
18%
14%
1%
1%
BMO Retirement Trends Study
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
48
And, of course, there are many
examples of people who are working
for as long as they can…
Kirk Kerkorian
Billionaire
90
Stephen Jarislowsky
Billionaire
80
Clint Eastwood
Actor/Director
77
Mercer Human Resource Consulting
Warren Buffett
Billionaire
76
Benedict XVI
Pope
80
Elizabeth II
Queen
81
CPBI Winnipeg Jun14-2007
49
Are employers interested in attracting
and/or retaining older workers?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
50
According to a recent survey by
Manpower Inc.(1)

“Canadian employers are failing to prepare for the
looming loss of older workers that will occur as
the Baby Boomers retire during the next 10
years.”

17% have a plan to recruit older workers (50+)

24% have a strategy for retaining older workers
(1)
The New Agenda for an Older
Workforce: April, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
51
According to a recent (American)
study by Boston College’s Center for
Retirement Research…


Roughly one half of employers
might consider steps to retain as
many as one half of those who
want to keep working past normal
retirement age for an extra 3 years.
“This is not good news. It suggests the possibility
of a messy and uncomfortable mismatch with
large numbers of older workers wanting to stay
on(1) while employers prefer that they do not.”
(1) Employers believed that 25% of their employees would not be
prepared for retirement at the normal age
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
52
What about the “war for talent?”
“If employers don’t act
soon they will fail to win
the war for talent as older
adults will be relied upon
as one of the most
important sources of
talent for the future
workforce.”
“An aging workforce nearing
retirement means employers
are having to compete for
talent as never before.”
Globe & Mail
March, 2007
National Post
April, 2007
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
53
The truth about the “war for talent”…

there has always been, and
will always be, a war for talent

labour shortages today are largely
dictated by industry not demography
– no shortage of paper or auto workers
– shortages of health workers and oil workers

while the number of children born in Canada each year is
about 30% lower than at the 1960 peak, the number of
university graduates has been increasing

if demography was calling the tune, we would be reading
about a glut of highly-qualified managers and business
leaders
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
54
It is difficult to reconcile the prevailing
stereotypes of Canadian boomers…
Stereotype #1
Bumbling, irresponsible wastrels
incapable of managing any
aspect of their personal finances
Stereotype #2
Skilled, experienced workers
essential to the success of
Canadian corporations
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
55
The boomers’ perception of older
workers has been changing

When the boomers were young,
they viewed older workers as poorly
educated, unmotivated, overpaid
impediments to the success of the
business.

Now that they are older, they
perceive older workers (themselves)
to be well educated, energetic,
highly motivated, uniquely talented
dynamos whose continuing
employment is essential to the
success of the business.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
56
It is difficult for employers to project
their manpower needs ten years into
the future…

Will the economy grow quickly or slowly?

Will the business falter or flourish?

Will there be a shortage of skilled workers,
or a glut?

Will skilled workers immigrate or emigrate?

Will jobs move abroad, or come home?

Will employees retire early or late?

Will elderly employees maintain their skills, energy and
enthusiasm?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
57
For all of these reasons…

It is premature to conclude that most corporations
will want to attract and retain older workers.

It is hazardous to commit to a course of action
that locks corporations into retirement incentives
or retention incentives for long periods of time.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
58
Finally, what about public policy?

What if employees want to retire and their
employers want them to retire, but the
government can’t afford to have them retire?
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
59
Governments are understandably
concerned about the trend toward
longer lives, lower fertility and earlier
retirement. Who will do the work? Who
will pay the taxes?…
“Public early retirement schemes should
be gradually phased out…”
Recent OECD Report
Countries must mobilize “all available
labour reserves in order to sustain economic
growth.”
Recent OECD Report
The government of Canada is conducting a review “to ensure that
pensions don’t serve as a disincentive to older workers
remaining in the workforce.”
Diane Finley – Minister of
Human Resource and Social Development, 2006
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
60
Bureaucrats advocate incentives to
head off labour crunch.
Globe and Mail, December, 2006
“Canada needs a new strategy to help older workers stay
on the job until they are ready to retire, one that includes
restructuring the country’s inflexible pension plans,
government documents say.”
“Optimizing older worker participation is the
best means to offset labour market declines.”
“The bureaucrats in HRSDC who wrote the policy paper say
that the average retirement age within the public sector is
57 (1) and it’s time to get our own house in order.”
(1)
versus 62 in the private sector
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
61
Labour shortage spurs Ottawa to ask
boomers to work past 65
Toronto Star – January, 2007
“The federal government is pleading with aging
boomers to work past retirement to offset a serious
labour shortage in Canada. ‘We need them’,
Human Resources Minister Monte Solberg
told the Toronto Star yesterday.”
“It’s an imperative for the country. We just have to
do it. The countries that do it will succeed. And if
we don’t do it we won’t. And the truth is, the
government can’t do it all.”
Monte Solberg
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
62
Government concerns are now being
echoed by others…
“Governments, private-sector corporations and
communities in general really need to be mindful of
this demographic trend, to make sure policies are
being put in place that allow these older Canadians
to be as active as they want to be, or are able to be,
in terms of contributing to society as a whole.”
Marty Sims
EVP, HSBC
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
63
The slippery slope…

Allow people to work.

Persuade people to work.

Encourage people to work.

Compel people to work.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
64
The federal government appears
disinclined to lead by example…

2005 changes to civil service pensions
– higher contributions
– higher pensions
– encourages earlier retirement

2006 changes to pensions of correctional service
officers
– 25 and out (parity with the RCMP)
– lower member contributions
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
65
The federal government has a
formidable challenge…

Encourage other Canadians to retire after 65
while federal civil servants retire in their 50s
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
66
To this end, Canadians are being
encouraged to believe that…

unlike earlier generations, they
are not growing old, and

continuing employment gives
meaning to their otherwise
meaningless lives
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
67
Conclusions

As a matter of public policy, Canadians should not
be expected to retire later simply because they
are living longer and having fewer children.

Retirement ages should increase
if the age up until which older
Canadians can successfully
compete for work increases.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
68
Predictions…

Low interest rates and increasing
life expectancies will make early
retirement more expensive and
this will naturally lead to later
retirement.

Future generations will retire later
in part because they had their
children later.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
69
Predictions…

Most Canadians will continue to want a
viable option to retire in their early 60s.

Of those who are able to retire in their
early 60s, most will choose to do so.

Retired Canadians will live active and productive lives;
many may choose to work part time for social or economic
reasons; however, they will prove a poor substitute for
young workers.

Phased retirement makes sense, but individuals are as
likely to use it to retire early as to retire late.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
70
Predictions…

Most employers will continue to want
older employees to retire at or before age 65.

Given their inability to foresee workplace needs 10 years
in advance, employers will move to “retirement age
neutral” pension plans and use targeted cash incentives to
selectively encourage older employees to stay or go as
the times demand.

Poorly targeted phased retirement programs, as
envisioned in the federal budget, will be rejected in the
private sector in favour of targeted rehiring.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
71
Suggestions…

As regards the merits of persuading Canadians to
stay in the workforce, governments should shut
up or lead by example.

Taxpayers should not be expected to pay 20% or
30% so public servants can retire in their 50s
while the federal government looks for ways to
force/encourage those employed in the private
sector to retire after 65.
Mercer Human Resource Consulting
CPBI Winnipeg Jun14-2007
72