Last week I wrote about retirement. It was an upbeat article, with a few remarks about my experience as a long time retiree, and some links to other blogs and articles. It was well received, with many readers offering their positive experiences. But a couple of readers took me in a different direction—to a less comfortable place, which I’ve always known about, but didn’t really want to acknowledge.
What was pointed out to me was the other side of retirement. While I was writing about the people who were having a happy and successful retirement, I was ignoring the thousands who were not enjoying it at all.
What makes the difference in retirement?
It turns out, what makes the most difference in retirement, is not how you spend your time, or where you travel or even whether or not your health is good. It’s something else much more basic—it’s the amount of money you have. And that is deeply influenced by how you have fared while you were working.
In this country (Canada) many retirees live from paycheck to paycheck during their working lives. Lack of education and lack of opportunity, especially in the case of women, keep them at the lower end of the economic scale. Some never earn enough to pay into the Canada Pension Plan (CPP), a contributory, earnings-related social insurance program, which working Canadians pay into throughout their working lives.
If they work at low paying jobs, or have long periods of unemployment, their CPP benefits will reflect this—if their contributions were low throughout their working life, their payment will be small. People who have worked at good paying jobs and contributed top percentages, get the maximum monthly payment allowed.
To help ease financial uncertainty, Canada also offers a guaranteed income in the form of Old Age Security (OAS), regardless of past participation in the labour force. The OAS is universal, so people who qualify for the CPP, also automatically qualify for the OAS when they reach 65. These amounts, in the case of high levels of income, are subject to clawbacks.
The poorest older people in Canada, with no CPP and no other income, are able to draw the maximum OAS amount, supplemented by the Guaranteed Income Supplement. The maximum combined payment from OAS plus GIS is currently $1,344.12 ($570.52 OAS + $773.60 GIS) per month, for a single person. GIS payments are reduced if there is income from pensions, investment and employment.
Living on low-income during retirement
Living on this low level of income is challenging, yet thousands of people in this country do it. The Broadbent Institute reports these statistics:
New Statistics Canada (2014) data shows that 12 percent of older people in Canada live in poverty, amounting to almost 600,000 people. Older people living alone are particularly hard pressed financially—in fact, one in four single seniors, most of whom are women, live in poverty, qualifying for and receiving GIS.
Alarmingly, the seniors’ poverty rate (people living on a low income—defined as having an income of less than one half the mid-point income of a household of the same size.) has increased from a low of 3.9 per cent in 1995 to 11.1 per cent, or one in nine, in 2013.
While the Canadian system leaves many older people with little to live on, it is considered one of the most generous in the Western world. In the US. the basic pension, Social Security, like our CPP, is income based—relying on what people have earned throughout their working life. People who are age 65 or older, with limited income and value of resources, may be eligible to receive monthly payments under the Supplemental Security Income (SSI) program as well.
It appears that the Federal SSI benefit can also include Disability Insurance, and is adjusted periodically according to the Consumer Price Index. I can’t report on the amount of pension awarded to individuals accurately—this is a complex system, and not at all clear to me.
I’ve compared the status of older people receiving GIS in Canada, and the situation for people in the US receiving SSI benefits. What they have in common is an inability to qualify for the standard (and more lucrative) pension available to most of the working population— CPP (Canada) and Social Security (US). Consequently, they receive a greatly reduced amount.
In Canada, we feel quite secure that our pensions are stable and will not be threatened. Last year, just before an election, the sitting Conservatives proposed that they would change the retirement age from 65 to 67. Since then, to the relief of older people in Canada, the age limit has been rolled back to 65 by the Liberals, who won that election. No surprise there.
Meanwhile, the news in America is full of politicians openly discussing cutting back Social Security programs and raising the retirement age, upsetting older persons, and putting their advocacy groups on alert.
Non-contributory pensions for older persons in Canada, although they don’t ensure a comfortable retirement, are considered among the best among developed countries. My research suggests that many other countries (Australia for one) have a much harsher system in place for their older citizens. Here is a chart illustrating this:
Two things stand out about poverty rates among the elderly:
• They tend to be highest among women, particularly widows over the age of 75.
• The popularity of defined contribution plans (in which people receive only what they put into the plan, plus whatever that investment earns) deeply affect those with unsuccessful work lives.
In some countries, what used to be an old age benefit provision for all has been gradually rolled into plans for the best employed. According to The European Centre for Social Welfare Policy and Research,
“Systematic reforms have changed the nature of pension provision from defined benefit type provisions to defined contribution type provisions.”
This has resulted in a greater risk of poverty in retirement for people who have earned less while working. Senator Hubert H. Humphrey, expressed his concern for working people in this speech to Labor in 1977:
“The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; those who are in the shadows of life; the sick, the needy and the handicapped.”
It is terrifying to think of living in poverty as one ages. Since we are living longer than ever before the problem becomes more difficult. Many of my friends choose to work longer and live leaner now in order to save more for retirement. We want to be as financially fit as possible.
Living longer means we will have to make our money last longer—which is why having a base pension, even a small one, is so important.
Diane, this is the elephant in my (blog) room as well. Sometimes when I talk about certain issues, like what to do after retirement, or the way the brain ages, or fashion/hobbies/passions in older age, I whistle past the graveyard of knowing that so many of my readers don’t have the luxury. I struggled economically as a young adult. I know what it felt like to drive an undependable car to work, to vow that my coworkers and new friends would never see my house, or to have a banker cut up my credit card with a big pair of scissors in the middle of a bank lobby filled with coworkers on a crowded Friday afternoon. I’ve known economic struggle, and I don’t want to add to anybody’s burden by pretending it isn’t real. Thanks for raising the issue.
I can always depend on an enlightened response from you, Lynne. My compassion for people who suffer economically springs from experience too. Many bloggers, and writers of all stripes, come from a place of privilege, so they focus on other issues such as the ones you mention. I’ve done that as well, since quite honestly, this is a difficult subject, easily avoided. I don’t mean to imply that some of the issues we write about aren’t important—they are, and it’s necessary to keep the anti-ageist movement going. Thanks so much, Lynne.
A little known fact – in fact most Americans do not now this – California teachers do not receive Social Security at retirement. Nor do they pay into it. The reasoning is that they are paying into their state teaching pension and that when they retire, that will be sufficient. I know because I taught in California for five years – not enough to be vested for pension payments so I took a lump sum of what I had put in and what the state had contributed int hose five years.
Social Security sends workers yearly accounting information in the years before they retire so they can have an idea of where they stand – and sure enough every year after I left teaching I’d get my statement and those years were blank. My Ny teaching years were listed but not CA. I believe they it is the only state like this.
You are all educating me! As you could tell, I have a very shallow understanding of the American system, and would love to learn more. I paid into my teacher’s pension and the CPP—it was a lot to have taken off of my salary each month, but I feel it was worth it. Hope you ended up with a great pension! Thanks, Virgina!
I’m with you — my heart goes out to seniors with limited income. Especially when the government wants inflation to be at least 2% for the sake of the economy while it’s keeping interest rates low, again for the economy, with no regard for people struggling financially.
Inflation is a big worry for older persons on a very limited income. Indexing never seems to keep up.
I have lived on a limited income for decades – and now just recently retired, certain things have increased from the nationwide NZ superannuation – but it still has “hooks” and it does mean that a budget (or at least a knowledge of expenses) is necessary.
I haven’t been able to afford either to buy a car or run one for some decades – somehow I manage with friends when I need to do something/buy heavy – occasionally go for a delivery. I’m close to services and public transport and I’ve got good walking shoes 🙂 recently bought a rain poncho for the princely sum of $3 and it’s folds up just like a small umbrella (how long it lasts, who knows…)
I have policies in place that relate only to me – in where I make the cuts and shortcuts on a weekly basis. They wouldn’t suit everyone but it is the way I keep a little above. Once or twice I have got into $$ trouble, which has meant a severe pruning but usually that just makes me stronger.
I seem to acquire gifts, when I need them – especially art-related things – or I work with what I’ve got and make it happen…
You sound very resourceful, and grateful for what you do have. I wish you the very best, Cathy, and I am so relieved you have such good health. I’m sure walking and a good attitude help!
Dianne, It is true that many, many retired individuals are living at the poverty level. I often feel as Lynn Spreen when I write articles that some of the suggestions I am making are out of the economic reach of most retired individuals. There is a wonderful group in California that are addressing this issue with low cost housing that encourages quality living for retirement age people. Take a look at Engage Blog. Unfortunately it is only a minuscule effort to solve this problem. On a personal note, I usually don’t make political statements, BUT if we only took a small part of the military budget in the U.S. and spent that money following Hubert Humphries directive, there would be no need for me to write today.
Oh, Bernadette, don’t get me started on the money governments waste! It’s for sure they don’t spend it to look after people! But it is up to us to keep them in line with political action and votes. My time for protesting is past, so I’m always glad to see younger people take on that responsibility. I’ll look at the ‘Engage Blog’.
Thanks for that.
Thanks Diane- Some things I was not sure of as I hurtle towards 60. There is a very good film out, “Women and Poverty in Canada”. Ought be required viewing to all girls.
Good information! I’ll see what I can find out about it on the ‘net. Thanks!
I am not from the US or Canada, but find this discussion very valuable. The tendency to talk of people as if they are all of the same socio economic class can surely be offensive to those who feel excluded from a comfortable retirement. I am involved in setting up groups of retired persons in Israel and try throughout to adopt the sensitivity required to create an inclusive discussion . This is true not only of financial issues but of family status too. For example all the blogs and tips about spending time with grandchildren is surely painful to seniors who have no grandchildren or even those who have but the latter are overseas, or distant emotionally. It is no easy task to ensure that our thoughts about this stage in life take into account diverse life situations that we are not aware of or cannot even imagine. I consider myself privileged with a decent pension after many years of professional work, and with grandchildren at a reasonable distance. I know I must never take these blessings for granted. I appreciate the consciousness raising this discussion promotes.
Thank you for that wise comment. I have been writing for some time about people who are older, many of whom are retired. Whenever I write about the downside of being older—ageism, poor health, poverty, I get some feedback about how I should focus only on the positives, that the negatives are a downer.But I believe in being realistic and a certain amount of truth telling, so I’ll continue to present both sides of situation. So, I’m glad for your support!
Diane, I am very impressed by your article and by the amount of research you did to write the piece. I tip my hat to you.
It’s nice to be appreciated! That piece took more research than usual, since I tried to be very careful to be accurate in presenting facts and figures. I’m continuing it somewhat, and extending my research on pension to other countries. What little I did revealed that Canada’s pensioners were among the most privileged. I found that quite upsetting, since it means others have so much less to live on.
There really is no “one size fits all” when it comes to describing the retirement years, aging, health, any more than there has been when I’ve addressed individuals I treated in rehabilitation. We all have some commonalities but appreciating the differences is important. There’s likely some positive information for everyone in what you write — we just pick out what is applicable for us, but isn’t that true of what most of us do when we read others words? Thanks for your Canadian perspective and educational nation graph. I think it’s helpful to understand systems in countries other than my own to consider for possible adoption in mine (U.S.).
I’m not sure how relevant that graph is now—after all it’s a few years old. I’m continuing my research about what is available in other countries for older people who, for whatever reason, have not had a good income throughout their younger years. It’s important in order to work on what needs to be done going forward. Thank you, Joared, as usual your comments are very helpful!
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