Although february traditionally has been considered “RRSP crunch month” for the financial services sector, it increasingly has taken on another role: a period marked by warnings from the big financial services institutions about traditional retirement.
The latest warnings include the results of a survey from Toronto-based Sun Life Financial Inc., which detected rising ranks of would-be “unretirees” – people who expect they will be working away past age 65. In fact, for the first time in the history of the survey, which has been conducted for the past seven years, participants expecting to be working past age 65 outnumber those counting on a “normal” retirement.
A grim finding is that 60% of Canadian workers expect to work either full-time (32%) or part-time (27%) after they retire, compared with just 27% who expect to be fully retired. Why the “unretirement”? Those surveyed said they need to earn enough money to pay basic living expenses (21%); do not expect government pensions to be sufficient (18%); or will not have enough to live well otherwise (16%).
The Sun Life report on the survey describes the findings as a “tale of two retirements,” noting that the survey also found that one-third of working participants felt there is “a serious risk” that they will outlive their savings vs only one in seven current retirees.
“More and more Canadians are signalling a different kind of retirement,” says Rocco Taglioni, senior vice president of distribution and marketing, individual insurance and wealth, with Sun Life.
This shift can be attributed to the fact that Canadians, in general, have higher expectations for retirement and are coming to recognize the longevity risk from longer lives plus the higher costs of health care in later years. (In fact, Sun Life research found that a couple with both partners at age 65 will suffer at least one major health crisis during a 30-year retirement.)
For financial advisors, the lessons of the Sun Life survey are that advisors should provide a comprehensive “road map” retirement plan.
“At the end of the day, there’s no one single product that’s going to enable an individual to create and maintain the financial well-being they want in retirement,” Taglioni says.
With 97% of survey participants saying they want some form of guaranteed income for life, he adds, “It’s very clear that more individuals should have a payout annuity for part of their income stream in retirement. When you look at the health risk, you can self-insure it – and you need to know what that means from an investment standpoint.”
Royal Bank of Canada’s (RBC) 25th annual RRSP poll had its own worrisome findings on the state of retirement in Canada, the focus being that Canadians are woefully unprepared for life after work.
A majority (61%) of those surveyed said running out of money is a top concern if they live to 100; however, just 39% had saved for retirement in 2014, and 30% said they have yet to start saving for retirement altogether.
And although women often are portrayed as being more conservative and pragmatic than men regarding finances, the RBC poll found that women are falling behind in retirement planning. In fact, 75% of women surveyed don’t have a retirement savings goal (compared with 62% of men); 67% of women said they have not done any retirement planning (compared with 55% of men); 60% of women don’t have a financial plan (compared with 54% of men); 39% of women don’t own RRSPs (compared with 31% of men); and 44% of women have no company pension plan (compared with 38% of men).
But it’s not that Canadians are a nation of retirement planning slackers; rather, there’s simply not enough money coming into many households.
“It’s obvious that – and our clients are telling us the same thing – how many financial demands they have on their money right now,” says Richa Hingorani, senior manager of financial planning support with RBC’s financial planning division.
“The choices are immense [when] there’s a little bit left at the end of the month,” she says. “Should it be going toward paying off debt; should it be going toward paying off their kids’ education? Or, the one thing that is coming up for the ‘sandwich generation,’ they also have to take care of their aging parents. Retirement just happens to be one of those things for which [clients] are saving.”
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