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Between 1999 and 2016, the wealth of Canadians approaching retirement increased faster than incomes, due largely to appreciating real estate assets and growing retirement wealth, a working paper from the C.D. Howe institute says.

The paper, “The Evolving Wealth of Canadians Approaching Retirement,” said that this was true only of Canadians in the middle and upper end of the wealth distribution. It identified certain vulnerable populations, including people “not in economic families.” The subset of the population living alone is growing and is at greater financial risk, the paper said.

The growth in net worth and total assets that the report examined was “supported by growth in all the main types of assets that Canadians own,” including retirement assets, other financial assets, non-financial assets and principal residences. All grew in value for the age groups approaching retirement (45-54 and 55-64), but the value of principal residences grew the fastest.

Author Bob Baldwin said that assets grew more strongly in the 45- to 54-year-old age group than in the slightly older one, which could be because 55- to 64-year-olds were already moving into retirement, fully or partially, and beginning a drawdown of assets.

For both groups, retirement assets and principal residences accounted for the majority of total assets (65%).

The report said that there are significant geographic differences in the growth of principal residence values. Unsurprisingly, values have grown more rapidly (and home ownership is less common) in Toronto and Vancouver. The strong growth in home values has also been accompanied by a growth in mortgages on principal residences in these areas.

For this reason, “the wealth of Canadians approaching retirement age was more highly leveraged in 2016 than in 1999 and, as a result, is more vulnerable to movements in interest rates,” the report said.

Whether the increase in wealth will translate directly to increased retirement income “depends on the cost of a dollar of retirement income.” This, too, increased over the period, to the extent that it could offset much (but not all) of the increase in wealth, the paper said.

The “cost of a dollar of retirement income” essentially means the cost of providing retirement income from a certain age forward. According to the paper, the rising cost has two causes: firstly, longevity is improving, which means that pensions must be paid over longer periods of time, and secondly, lower interest rates mean that the cost of low-risk income is going up.

Read the full report here.