Canadian Retirement Stats: Do Employed or Self-Employed Retire First?

Nearly four in 10 (38 per cent) Canadians age 55 or older — and 14 per cent of those 65 or older — participated in the labour force last year, the highest participation rates among older Canadians since the collection of comparable Statistics Canada data began in 1976. But who exactly are these stalwart workers, and at what age are they retiring?

According to StatsCan’s 2016 Labour Force Survey estimates, Canadians who reported they retired the previous year had a median age of 63.3. But drill down by sector — public, private or self-employed — and the numbers vary considerably.

The median retirement age was 61.2 for public sector employees, compared with 64.1 for private sector employees and 66.9 for self-employed workers. (The median retirement age was even higher— 68.3 — for self-employed men, compared with 64.6 for self-employed women.)

With the recent government proposals to eliminate income sprinkling from Canadian Controlled Private Corporations, it’s important to note that unpaid family workers are included among the statistics for the self-employed. According to the Guide to the Labour Force Survey, these are individuals who work without pay on a farm or in a business or professional practice owned and operated by another family member living in the same dwelling. Unpaid family workers represented approximately 1 per cent of total self-employed individuals in 2016, or 23,700 unpaid family workers among Canada’s 2.77 million self-employed.

So, why are self-employed Canadians retiring more than five and a half years later than public sector employees, and nearly three years later than those in the private sector?

Well, it’s possible they aren’t; it may just be that older Canadians choose to start their own businesses or become self-employed professionals after they leave their public or private sector employer.

However, it is also true that many employees, particularly those in the public sector, have excellent employer-sponsored Retirement Pension Plans (RPPs), which may make it easier for them to retire sooner. For example, more than 3.2 million Canadian were members of a public sector RPP in 2016, and 90 per cent of these were in coveted defined-benefit plans. (In contrast, only 41.7 per cent of the 2.9 million Canadians who were members of a private sector RPP last year had a defined-benefit plan.)

In addition, Canadians receiving income from an RPP have the tax advantage of being able to split that pension income with their spouse at any age and, therefore, pay income tax at a lower rate, whereas RRSP/RRIF income cannot be income-split until age 65. So it would make sense that pensioners with an RPP may be in a better financial position to retire younger.

Either way, it’s clear the trend is for self-employed Canadians to work longer than their employed counterparts, even if it’s in the form of a second act.

Additional Educational Resources:

Tax-Efficient Retirement Income Planning course

Tax Efficient Retirement Income Calculator

Income Tax Estimator (free trials available)

©2017 Knowledge Bureau Inc. All Rights Reserved.

Refer a Friend	Research	Calculators	Course Trials