It has become increasingly important for Canadians to equip themselves with sufficient knowledge, skills, and confidence to manage their personal finances before and during retirement.
As highlighted in the National Strategy for Financial Literacy, Canadians are living longer and leading more active lives than ever before. It is estimated that the average Canadian currently approaching retirement age can expect to live until the age of 86. People who retire at the age of 65, will have to live on their pensions and savings for an average of 21 years, and possibly longer.
With the decline in coverage of workers through employer-sponsored pension plans, Canadians face an increasing personal responsibility to plan for their own retirement. In spite of this, one in three Canadian adults is not financially preparing for retirement, according to findings from the 2014 Canadian Financial Capability Survey. Furthermore, when compared to youth and prime-age adults, seniors score the lowest on objective assessments of financial knowledge, yet they rate their financial confidence as the highest of any age group.
This study seeks to determine the impact that this difference between financial knowledge and financial confidence has on seniors and their ability to meet their financial needs in retirement. This study makes use of microdata from the 2014 Canadian Financial Capability Survey to examine financial knowledge and financial confidence among seniors (aged 65 and over) and near-seniors (aged 55 to 64).
The study considers how knowledge and confidence are related to three domains of financial behaviour that are critical for retirement preparedness: money and debt management, future planning and savings, and best financial practices and protection measures. The study also compares individuals’ financial knowledge levels with their financial confidence assessments. People are classified as either under-confident, confident or over-confident according to their financial confidence relative to their financial knowledge.
Published: May 2016
Capability: Policy Research
Policy Area: Adult Learning - Financial Literacy, Income Security - Income Security for Seniors
Population: Older Workers - Seniors
Type: Full report, Executive summary