The big shock

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  By Guest Blogger Sinan Terzioglu

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How long will you be living without a paycheque?

Maybe years – or decades – longer than you think, or have planned for.

Manulife’s latest Financial Resilience and Longevity Report highlights a concerning trend among Canadian retirees: nearly 44% left the workforce earlier than planned, often around age 56, due to circumstances beyond their control. With Canadians living longer and more than 70% of today’s workers lacking defined benefit pensions, many could face up to 40 years of retirement to fund. This reality underscores the critical need for proactive planning and building financial resilience well before retirement.

Health problems and caregiving responsibilities are the leading reasons for early retirement, with half of retirees citing illness, either their own or a member of their family, as the primary cause. Job loss is another key factor, pushing many out when opportunities vanish and making it difficult to find new work later in life. Only 15% retired earlier than planned because they had saved enough to feel financially secure.

Today’s financial outlook remains challenging for many workers. Forty-one percent rate their finances as fair or poor, and nearly half feel behind on savings, a sharp increase from 35% in 2021 as inflation and mounting debt continue to erode progress. While 35% plan to work longer to close the gap, Manulife’s report warns that this may not be feasible for everyone

What steps should today’s workers take to prepare?

Housing
By age 50, aim for your liquid financial assets to exceed the equity in your primary residence. This creates a healthier balance in your net worth and reduces reliance on real estate appreciation. While home prices have outpaced inflation over the past 20 years, counting on this trend to continue for retirement is risky. In many regions across the country, renting can be more cost-effective than owning, and deferring homeownership while investing the savings can significantly strengthen long-term financial security. Ideally, keep monthly housing costs under 35% of household income to maintain flexibility and support consistent savings.

Maximize Tax Advantaged Accounts
Take full advantage of TFSAs, FHSAs, RRSPs, RESPs, and RDSPs. These accounts provide valuable tax benefits and provide significant opportunities for long-term growth, so prioritizing contributions is essential. Unfortunately, many Canadians underutilize them. Nearly 50 percent of TFSA holders keep their funds in cash and low yielding GICs, missing out on the potential for tax-free growth that comes from investing in growth-oriented assets such as equity ETFs. RRSP contributions are also declining, particularly among younger Canadians, due in part to misconceptions. RRSPs remain one of the most effective tools for tax-deferred growth, and understanding their benefits is key to building wealth.

Choose Wisely When It Comes to Cars
Most people do not need a luxury car or SUV, especially if tax-advantaged accounts are not fully funded. Surprisingly, only 30 percent of those earning over $250,000 have maximized their TFSAs. Whether you lease or finance, keep total monthly costs including payments, insurance, and maintenance under 10 percent of your income. A good rule of thumb is to keep vehicle expenses below your monthly savings. If purchasing, aim for a price under 10 percent of your net worth, ideally below 5 percent, and limit financing terms to four years or less

Leverage Employer Matching Programs
The Association of Canadian Pension Management (ACPM) reports that about 40 percent of Canadian employees do not take full advantage of employer matching contributions in defined contribution pension plans, group RRSPs, TFSAs, and deferred profit-sharing plans. This leaves nearly $3 billion in employer contributions unclaimed each year. Matching contributions are essentially free money and one of the most effective ways to boost long-term savings.

Select the Right Insurance and Ensure Proper Coverage
Most people do not need permanent whole life insurance, which is far more expensive than term coverage. Insurance should primarily serve as risk protection, not as an investment vehicle combined with a permanent policy especially if tax-advantaged accounts are not fully utilized. Maintain term life and disability coverage at levels that protect against catastrophic risks you cannot self-insure. An insurance needs analysis can help determine the right amount of coverage for you and your family.

Build Your Personal Pension  
With most people retiring without a defined benefit pension, building a personal retirement plan is essential. Public equity investing remains the most effective way to outpace inflation and create long-term wealth, and a globally diversified, balanced portfolio is the optimal strategy for most. Historically, 60/40 portfolios have delivered average annual returns of about 7%, helping disciplined investors stay ahead of inflation and secure sustainable income for life.

Ensure Continuity with a Will and Both Primary & Alternate POAs
It is essential to have a will and review it annually. Equally important is naming a Power of Attorney (POA) and an alternate POA for financial and health decisions in your estate plan to ensure seamless activation if you become incapacitated. Most people appoint a primary POA but circumstances can change unexpectedly. Your chosen person may become ill, relocate, or predecease you, and without an alternate, a costly court process is required to appoint one. This applies to both property POA for financial matters and personal care POA for health decisions.

In summary, building financial resilience before retirement requires proactive planning and disciplined habits. With early retirement often triggered by health issues or job loss and traditional pensions in decline, Canadians must take control of their financial future. Key steps include prioritizing financial assets over home equity, managing housing and vehicle costs, maximizing tax-advantaged accounts, and investing in a balanced, globally diversified portfolio for the long term. The bottom line: start early and make intentional choices to secure long-term financial stability.

Sinan Terzioglu, CFA, CIM, is a financial advisor with Turner Investments, Private Client Group, Raymond James Ltd.  He served as vice-president of RBC Capital markets in New York City and VP with Credit Suisse in Toronto.

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Source: https://www.greaterfool.ca/2026/01/05/the-big-shock/