The economy may be lifting from the depths of the recent recession, but too many older Canadians still face constant financial insecurity and many may never recover from the losses suffered during the worst of the downturn. The Organization for Economic Cooperation & Development (OECD), which uses median household income to determine the poverty line, estimates that 4.4 percent of Canadians over 65 – almost 200,000 individuals – live in poverty. Using the Low-income Cut-off (LICO) as a measure of poverty, however, reveals that 7 percent of Canadians over 65 are impoverished, amounting to approximately 300,000 individuals – an amount almost equivalent of the entire population of Torontonians over the age of 65. Both measures reveal that an excessive number of Canadians over 65 face serious financial problems.
CARP Advocacy made its annual pre-budget submission to the federal government and focused on financial insecurity among Canada’s older and retired citizens. Three issues in particular formed the substance our submission: Financial Insecurity, Women Aging Into Poverty, and Caregiver Support. Each of the three areas of concern was accompanied by recommendations.
1. Financial Insecurity:
Financial insecurity is a complex set of problems with a number of adverse effects. A federal report from 2006 noted, for example, that for the five years from 2001-2006, the number of Canadians over age 55 who declared bankruptcy had grown steadily. In 2006, 7,797 people in this age category filed for bankruptcy and by 2009, the number had more than doubled to 15,700. The increased bankruptcy rate among older Canadians is worrisome as an individual’s ability to recover financially is reduced in advanced stages of career and life. The report cited “bankruptcy as an economic adjustment tool for the aging Canadian population.” An increasing number of older Canadians are forced to over-extend financially just to make ends meet. OAS and GIS, while important, can only help those who receive the benefits. A recent report from Statistics Canada shows that an astounding 159,400 eligible Canadians over 65 are not collecting GIS benefits. Effectively, almost 12 percent of eligible Canadians are not receiving GIS payments due in large part to the complexity of the application process and for fear that other sources of income will be negatively affected. Besides GIS rules, many Canadians struggle to make sense of the complexity of overlapping, complementary, sometimes punitive, and often contradictory pension rules.
CARP recommends that the federal government do more to ensure that current retirees and older Canadians achieve and maintain financial security as they age by:
• Increasing OAS and GIS substantially
• Placing a permanent moratorium on mandated RRIF withdrawals
(Canadian pensioners must withdraw at almost twice the rate of their US counterparts)
• Exempting small amounts of RRSP withdrawal from the calculation of OAS claw backs or reductions in GIS
• Increasing the allowable earnings band for GIS benefits
2. Women Aging Into Poverty:
While poverty is a real issue for many Canadians over 65, women are particularly hard-hit. Older women may face retirement with less income for a number of reasons: their wages were inferior when or if they worked, they live longer than men and therefore outlive their financial savings, and many women spend some of their working years providing informal caregiving services that limit their ability to accrue sufficient retirement income. Indeed, the caregiving section below also highlights the particular way that women are affected by financial insecurity. According to Statistics Canada, 18 percent of women over 65 who live alone live in poverty. Exacerbating the problem is that OAS allowance for people aged 60-64 excludes individuals who are single, divorced or separated, or married to someone who has not yet reached age 65.