Monday, October 17, 2016

Seniors income is dropping

Did you feel you have less income since you retired? 

If you live in Canada you may be correct. Poverty rates were very high in the late 1970s. But after a steady decline, by this measure, low income among Canadian seniors has been steadily rising from a  low of 3.9 per cent in 1995 to 11.1 per cent, or one in nine, in 2013. 

Over the same period, the rate has risen sharply from nine per cent to 28 per cent—almost one in three persons—for single women seniors, and from six per cent to 24 per cent for single male seniors

But since 2013, BC senior families saw their annual median income fall 5.7% and for a BC single senior, the decline is even steeper, with a 6.3% drop since 2013. This compares to the national averages, which show a 1.9% increase for senior families and a 2.3% increase for single seniors. 

BC’s single, working-age individuals, by comparison, saw a 4.7% increase and working-age couples in BC with children saw a 9.7% increase in their income.

This exceeds the national averages, which saw a decrease of 2.0% and an increase of 4.5%, respectively. 

Nationally, the percentage of Canadians aged 65 and over living on low incomes rose to 12.5%. In particular, 30% of single, elderly women are considered low income—triple the level of two decades ago.

The seniors’ advocate said reliable median income data shows that the median income of seniors is shrinking in the face of unhelpful stereotypes that all seniors are rich.

“We know that seniors have the lowest median income of any age cohort over 25 and now we know that, in B.C., seniors’ incomes are actually shrinking while other age groups are experiencing significant increases,” said Mackenzie, in a news release.

Record-low interest rates, life expectancy exceeding the time frame of a Registered Retirement Income Fund (RRIF), and the inability of private pensions to provide cost of living increases are all contributors to senior poverty, she said

Another report An Analysis of the Economic Circumstances of Canadian Senior (pdf file) also provides evidence that seniors income is in decline. The following is from the Executive study for the full report click on the link given above.

The Old Age Security (OAS) and Guaranteed Income Supplement (GIS) guarantee levels are falling behind: For single seniors, they have fallen from 76 per cent of median incomes in 1984 to about 60 per cent now. For senior couples, the OAS/GIS maximum benefits have declined from 53 per cent to 40 per cent of median incomes. •

Trends in income sources for seniors suggest that poverty rates will increase rather than decline into the future because OAS and GIS benefits are indexed to the Consumer Price Index (CPI), while average earnings rise faster than the CPI over extended periods. 

The spread between the OAS/GIS guarantee levels and the LIM for 2015—the spread that seniors need to fill using the Canada Pension Plan/Quebec Pension Plan (CPP/QPP), private pensions and private savings—is about $5,600 for single seniors and $4,700 for couples.

The proportion of the population receiving the GIS is higher for single seniors than couples, and higher for single women (between 44 per cent and 48 per cent) than for single men (between 31 per cent and 37 per cent).

Roughly half (47 per cent) of those aged 55–64 have no accrued employer pension benefits. The vast majority of these Canadians retiring without an employer pension plan have totally inadequate retirement savings. For example, roughly half have savings that represent less than one-year’s worth of the resources they need to supplement OAS/GIS and CPP/QPP. Fewer than 20 per cent have enough savings to support the supplemented resources required for at least five years. 

The overall median value of retirement assets of those aged 55– 64 with no accrued employer pension benefits is just over $3,000. For those with annual incomes in the range of $25,000–$50,000, the median value is near just $250. For those with incomes in the $50,000–$100,000 range, the median value is only $21,000. 

Only a small minority (roughly 15–20 per cent) of middle-income Canadians retiring without an employer pension plan have saved anywhere near enough for retirement. The vast majority of these families with annual incomes of $50,000 and more will be hard pressed to save enough in their remaining period to retirement (less than 10 years) to avoid a significant fall in income. 

The seniors’ poverty gap is $2.5 billion in aggregate annually, due to the 719,000 poor seniors (469,000 singles and 250,000 living in an economic family). The average gap per year is $2,400 for single seniors and $5,500 for seniors in a family. A 10 per cent benefit increase in the GIS to address this gap would cost $1,628 million, and would reduce the number of poor seniors by about 149,000.

The good news is that overall, Canadian seniors do well compared to seniors in other developed countries. The Organisation for Economic Co-operation and Development (OECD) recently reported that, in 2010, 7.2 per cent of Canadians aged 65 and over lived in poverty.

While this is still below the OECD average of 12.8 per cent, the OECD notes that the rate has increased by two percentage points since 2007, and that single elderly women in Canada were especially vulnerable to poverty.

Statistics Canada produces poverty statistics using the OECD measure, which is called the low-income measure (LIM) after tax. This measure tells us what proportion of persons have after-tax incomes that are less than half of the median or mid-point after-tax income of comparable families.

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