Retirement can bring freedom, but it also takes away several things Canadians may have relied on for decades.
Employer health benefits
While Canada’s provincial plans cover your basic physician visits and emergency hospitalizations, your employer’s extended health care plan has likely been subsidizing everything else.
When you retire, coverage for prescription medications, dental visits, physiotherapy, and even routine eye exams disappears overnight (except if you are in a low income bracket and covered by some government benefits). If you don’t purchase private retiree health insurance out of pocket, those increasing health care costs will come directly out of your savings.
Group life insurance
Many Canadian professionals don’t think past their employer-provided basic life insurance, often equivalent to one- or two-times annual salary. The minute you tender your resignation, your group coverage expires.
Purchasing a private life insurance policy in your 60s will cost you more than if you were 25. This can also make tying up loose ends on your estate a headache if you have debt.
Regular paychecks
When you work a regular, salaried job, you live off a stable biweekly income. You have your payments automated, and your money is spent, saved, and budgeted accordingly. Once you retire, you don’t simply replace that one payroll deposit with a new source.
Now you’re faced with Canada Pension Plan (CPP), Old Age Security (OAS), Workplace Pensions, and Registered Retirement Savings Plan (RRSP) withdrawals to piece back together your income. It’s a tricky transition that changes your financial mindset from accumulation to decumulation.
Workplace social circles
Your coworkers provide you with most of your daily interactions, small talk, and mental challenges. When you retire, you no longer have that immediate network of people surrounding you.
It’s common to feel isolated if you haven’t already plugged into other areas of the community. Make sure you’re getting involved with local clubs, volunteer organizations or recreational sports leagues.
Professional identity
In Canadian culture, “What do you do?” is our social anchor question and one of our largest sources of pride. When you retire, you lose your title, your professional authority and your daily reason for feeling like you’re contributing by helping solve intellectual puzzles at work.
Filling this void will take you down emotionally if you haven’t already established who you are outside of your work history.
Corporate discounts
There are all sorts of subsidies you don’t realize you get when you work for a big company. Some examples are corporate gym memberships, discounted cell phone plans, corporate travel perks and tech hardware deals.
When you turn in your ID card, you have to pay full prices for all these normal services. You’ll get senior discounts eventually, but they don’t come close to matching corporate bulk buying rates.
RRSP contribution room
Building tax-sheltered savings through your Registered Retirement Savings Plan is conditional on earning “earned income” from employment. When you retire, you stop earning additional RRSP room, and your RRSP accounts are frozen at their current maximums.
Canadian tax law also requires you to convert your RRSP into a Registered Retirement Income Fund (RRIF) by December 31st of the year you turn 71, forcing you from a savings mode to taking mandatory withdrawals.
Easy credit access
Canadian lenders and mortgage underwriters adore steady employment income. When your pay cheque is high, you can qualify for virtually any mortgage, auto loan, or Line of Credit your heart desires.
The day you retire, and your income becomes fixed pension income, underwriters will consider you a completely different risk profile. Want to downsize, renovate, or get a Line of Credit for unexpected expenses? It’s best to get those loans prior to retiring.
Structured routines
The Canadian work week provides a rigid structure to your time. It defines when you sleep at night, when you work out in the morning, and when you veg on the weekend.
When you retire, you are given 168 blank canvas hours each week. It’s easy to become directionless and sloth-like without forcing some type of schedule on yourself. Hobbies, working out, and spending time with the family are great ways to create a schedule.
Career challenges
The adrenaline rush of meeting deadlines, resolving operational emergencies, and becoming fluent with new equipment gives you a certain state of mental acuity that vanishes when you step away from work.
Your career, by its nature, pushes you beyond your comfort zone with evolving targets and industry improvements. Once you retire, this natural impulse for brain growth grinds to a halt.
Sources: Please see here for a complete listing of all sources that were consulted in the preparation of this article.
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