Basic Living Expenses for the Canadian Elderly

Our research undertakes to determine the basic living expenses required by Canadian seniors living in different circumstances in terms of age, gender, city of residence, household size, homeowner or renter, means of transportation and health status. The paper develops required expenses for food, shelter, health care, transportation and miscellaneous. The research identifies the typical expenses of seniors in each of these categories. Using 2001 as our base year, we follow the US Elder Standard to build an elderly threshold for Halifax, Montreal, Toronto, Calgary and Vancouver. The research is unique because it is the first Canadian study of absolute basic living expenses tailored to seniors, rather than simply to adults in general. This information is important to seniors, prospective retirees, financial planners, policy makers and actuaries in assessing the minimum level of income required in retirement and the adequacy of savings and income security programs. Our conclusions suggest that individual circumstances, rather than age, are the primary drivers in determining the cost of these basic expenses. Seniors are a diverse group, particularly with respect to health, so it is important that seniors and financial planners do not blindly rely on a fixed replacement ratio or universal level of income when projecting the level of finances needed to retire. This research enables the reader to determine the threshold that is suited to a senior’s general circumstances.Retirement Income Adequacy; Absolute Measure; Elder Standard; Canadian Data

The Canadian Elder Standard - Pricing the Cost of Basic Needs for the Canadian Elderly

We determined the after-tax income required to fi nance basic needs for Canadian elders living with different circumstances in terms of age, gender, city of residence, household size, homeowner or renter status, means of transportation, and health status. Using 2001 as our base year, we priced the typical expenses for food, shelter, medical, transportation, miscellaneous basic living items and home-based long-term care for elders living in fi ve Canadian cities. This is the fi rst Canadian study of basic living expenses tailored to elders instead of adults in general, prepared on an absolute rather than a relative basis. We also accounted for an individual’s unique life circumstances and established the varying effect that they have on the cost of basic expenses, particularly for home care. We found that the maximum Guaranteed Income Supple ment and Old Age Security benefi t did not meet the cost of basic needs for an elder living in poor circumstances.Canadian seniors, poverty measure, economic security, aging-in-place, cost-of-living, absolute measure, home care

The impact of defined contribution pension plans on population retirement dynamics

Abstract unavailable please refer to PD

Three retirement decision models for defined contribution pension plan members: A simulation study

This paper examines the hypothetical retirement behavior of defined contribution (DC) pension plan participants. Using a Monte Carlo simulation approach, we compare and discuss three retirement decision models: the two-thirds replacement ratio benchmark model, the option-value of continued work model and a newly-developed "one-year" retirement decision model. Unlike defined benefit (DB) pension plans where economic incentives create spikes in retirement at particular ages, all three retirement decision models suggest that the retirement ages of DC participants are much more smoothly distributed over a wide range of ages. We find that the one-year model possesses several advantages over the other two models when representing the theoretical retirement choice of a DC pension plan participant. First, its underlying theory for retirement decision-making is more feasible given the distinct features and pension drivers of a DC plan. Second, its specifications produce a more logical relationship between an individual's decision to retire and his/her age and accumulated retirement wealth. Lastly, although the one-year model is less complex than the option-value model as the DC participants' scope is only one year, the retirement decision is optimal over all future projected years if projections are made using reasonable financial assumptions.Defined contribution pension plan Dynamic and stochastic simulation One-year retirement decision model Two-thirds model Option-value of continued work model

2006a. The Impact of DC Pension Systems on Population Dynamics

This study investigates the risk inherent in defined contribution (DC) pension plans on an individual and aggregate basis, based on U.S. data. Our aim is to gain insight into the consequences of a DC pension scheme becoming the predominant pillar of retirement income for an entire society. Using the stochastic simulated output of a DC flexible age-of-retirement model, we first determine the optimal investment strategies. We then examine the demographic retirement dynamics of an entire population of DC pension plan participants. We observe that even for the most risk-averse plan members there is a high level of uncertainty in an individual’s age at retirement. At the aggregate population level, we find that this uncertainty does not get dampened to any great extent by a diversification effect. Instead, the central role played by the market in determining retirement dates results in significant variation in the dependency ratio (the ratio of retirees to workers) over time. In addition, an attempt to ameliorate the outcome by introducing additional realistic features in the DC population modeling did little to dampen this volatility, which suggests that countries dominated by DC schemes of this type may, over time, be exposed to significant risk in the size of its labor force. 1

Getting Feedback on Defined Contribution Pension Plans

The financial market’s performance plays an important role in the retirement date of a DC pension plan holder. Consequentially, it could potentially also influence the labour force structure of countries that adopt DC features in their public and private pension systems. Numerous studies are motivated, however, by the theory that financial markets are affected by a country’s demographics, making the reverse also possible. In this paper, we model the potential feedback among the aggregate retirement patterns and macroeconomic variables with the goal of further understanding the implications of a traditional DC pension becoming the predominant source of retirement income for an entire society. Keywords: Defined-contribution pension plan; Financial market feedback; Stochastic simulation