Retirement? Mortgage balance, interest rates, higher consumer prices among factors to consider

It’s the Tuesday after Labour Day, the unofficial return to work and routine for many Canadians following summer holidays. For others, leaving the workforce for retirement might be on the horizon.

And it begs the questions—how many Canadians are of retirement age, when could they punch out for good, and who can afford to do so? What will the workforce look like in the coming years as older workers retire? Let’s take a snapshot using the latest data and analysis.

More than one in eight Canadians were of retirement age in 2023

Statistics Canada estimates population by age annually. On July 1, 2023, there were close to 2.6 million persons aged 55 to 59 years, and nearly 2.7 million persons aged 60 to 64 living in Canada. Together, these two age brackets made up about 13.1% of the nationwide population of nearly 40.1 million—that’s more than one in eight Canadians.

This proportion is down slightly from 2022 (13.5%), 2021 (13.9%), and 2020 (14.0%). But an aging population and higher prices for goods and services mean that many retirement-age Canadians continue to work.

More than one in five Canadians aged 55 to 59 in June 2023 were completely or partially retired

More than one in five Canadians (21.8%) aged 55 to 59 in June 2023 reported that they were completely or partially retired, according to a Labour Force Survey (LFS) supplement. Proportions were higher for those aged 60 to 64 (44.9%) and 65 to 69 (80.5%).

More than one-third of men (35.0%) and more than one in four women (28.2%) cited financial considerations as the main factor in determining retirement. Health or disability reasons for oneself or for one’s spouse were another top consideration.

Other LFS analysis found that, among workers aged 55 and older, a small proportion (4.4%) held multiple jobs in 2023.

Just over one in five seniors worked in 2022

Just over one in five seniors aged 65 to 74 (21%) worked in 2022, recent Statistics Canada analysis found. While a higher proportion of them said they worked by choice (12%), almost half did so by necessity (9%).

 Seniors working by necessity mostly held full-time jobs, and were likelier to be renters than owners—a likely reflection of fewer financial resources and a greater need to sustain employment, as housing wealth is a significant wealth component for most Canadians.

Remaining mortgage balance, higher interest rates could affect timing of retirement

In the first quarter of 2024, Canadian households in which the main income earner was aged 55 to 64 years held a combined $315.7 billion (average of $109,337 per household) in mortgage liabilities, up from $244.2 billion ($83,551) in the same quarter of 2020.

For the 65-and-older age group, mortgage liabilities grew from $97.2 billion (average of $21,195 per household) to $141.2 billion ($27,441) over the same period.

Other liabilities, such as credit cards, lines of credit and loans, increased at a slower pace for both age groups. Real estate wealth as a share of net worth increased for both groups, as did the value of life insurance and pensions.

Canadians of retirement age who have a variable-rate mortgage or have had to renew in the last two years have faced higher monthly costs to stay in their own home, while others may have chosen to downsize or transition to renting in an effort to better manage their budgets.

Household budgets squeezed further

From July 2020 to July 2024, prices have increased significantly for owned accommodation (+25.3%), pushed upward by a 46.2% increase in mortgage interest costs. That increase was mostly due to a series of rate increases and holds by the Bank of Canada from March 2022 to April 2024.

Prices for transportation (public and private) (+23.2%), food purchased from stores (+23.0%), rented accommodation (+23.0%), and health care (including prescriptions and services) (+13.0%) also increased from July 2020 to July 2024.

In spring 2024, 4 in 10 Canadians aged 55 to 64 (40%) and nearly 3 in 10 of those aged 65 and older (28%) reported that rising prices were greatly affecting their ability to meet day-to-day expenses.

Households across Canada (all age groups) reported a record $2.96 trillion in credit liabilities in June 2024, including items such as residential mortgages, home equity lines of credit, credit cards, and automobile loans.

Pension coverage, savings

The proportion of all paid workers covered by a registered pension plan was 37.5% in 2022, down from 38.0% in 2021.

In 2022, tax filers contributed a total of $54.2 billion to registered retirement savings plans, down 3.4% from 2021.

In 2020, nearly three in five families (58.1%) contributed to one or more of the three registered savings accounts, up from 52.3% in 2009.

Household net saving (per-household value) in the lowest 60% of the income distribution remains below levels attained in the first quarter of 2022, while the opposite is true for the highest 40%. However, among households (all quintiles) in which the main income earner is 45 to 54 years of age, the net saving value has fluctuated from as low as $6,814 to as high as $15,058 per household over the same period—perhaps an indication that many households have been able to save for retirement in the years leading up to it.

Looking to the future

A Statistics Canada study released last month projects that the overall labour force participation rate, which has fallen slightly since the early 2000s, should continue trending down until the 2030s, when the last cohort of baby boomers turns 65.

The study, in which a typical scenario assumes 500,000 permanent immigrants are admitted each year, also projects that the proportion of people aged 55 and older in the labour force would remain below 22.0% until 2036 and would reach 23.1% in 2041.