Canadians finding retirement is not all it’s cracked up to be: survey
Almost three in four retirees (72 per cent) say retirement is not what they were expecting — and not in a good way, according a new Sun Life Financial Inc. survey being released Tuesday.
The 2019 Sun Life Barometer, based on an Ipsos online poll, found that many Canadians don’t seem to be financially prepared for retirement, with 23 per cent of retirees describing their lifestyle as a frugal one that involves “following a strict budget and refraining from spending money on non-essential items.”
If that doesn’t sound like much fun, consider the gloomier alternative: almost half of working Canadians (44 per cent) expect they’ll still be employed full-time at age 66. Among the “frugal” retirees still working after the traditional retirement age, 65 per cent say it’s because they need to work for the money rather than because they enjoy it.
This all appears to be a rational response to the long-established fear that retirees will run out of money long before they run out of life. Forty-seven per cent still in the workforce believe there’s a “serious risk they could outlive their retirement savings,” with Sun Life finding that three in four working Canadians don’t have a financial plan.
This is the second year for the survey but this year’s edition has a greater focus on retirees, said Sun Life Canada president Jacques Goulet in an interview. Nor was he surprised by the findings, which were based on a poll of 2,151 employed Canadians aged 20 to 64 and 750 retirees aged 55 to 80.
The survey also seems to reflect the current state of pensions and retirement saving in this country. There’s long been a huge and growing divide between the retirement preparedness of the fortunate few with inflation-indexed defined benefit pensions (typically government workers, union members and politicians) and the many in the private sector who lack such plans.
The latter must save and invest in employer-sponsored defined contribution (DC) pensions, group RRSPs or individual RRSPs. As Goulet puts it, employers are “devolving responsibility onto the shoulders of individuals” by in effect making employees “undertake the underwriting of longevity risk.”
“But achieving financial security is not an easy task,” Goulet added.
Employers are in effect making employees ‘undertake the underwriting of longevity risk’
Jacques Goulet, Sun Life Canada president
With interest rates at minuscule levels and stuck at “lower for longer,” the latter group is forced to take on more stock-market risk and its attendant anxieties. Add in rising longevity and it’s little wonder a common response is to work longer and be frugal, since those factors are under one’s personal control.
Canadians are leaving on the table up to $4 billion in savings by not taking advantage of the “free money” available with employers matching DC contributions (often an extra 50 cents for every $1 employees put in), Goulet said.
Worse, there is a third group of totally unprepared Canadians who have neither employer pensions nor save in RRSPs or TFSAs. They’ll have little more than government programs, such as CPP and OAS, available as early as age 60 and 65 respectively, but in those cases they’d be better off deferring benefits till 70 and continuing to work and save (at least in TFSAs.)
That’s one group the survey was trying to get at, Goulet said — the “47 per cent (who) are at serious risk,” many of whom don’t understand the concept of life expectancy and underestimate the complexity of the task.
“For most Canadians, managing day-to-day finances is hard enough, let alone worrying about planning and saving for the future,” Goulet said.
As for the remedy, Sun Life is urging the unprepared to seek “holistic” personalized financial advice, take those free matching dollars if they can, and to budget and plan whenever possible in order to turn “small steps into big leaps.”
Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence Day and co-author of Victory Lap Retirement. He can be reached at [email protected]