‘The majority of Canadians don’t have as much knowledge about the logistics around their retirement’
Many Canadian workers will retire later, need more money when they do so or will continue to work past the retirement age, according to a survey released by Mackenzie Investments.
The average age of retirement will rise to 62, up from 57 which is the average age when currently retired Canadians quit working.
“It’s mostly due to Canadians’ dreams of the ideal retirement and the fear of outliving their money. More people are starting to work longer and more people are in debt so they have to stay working longer,’” says Carol Bezaire, vice-president of tax estate strategic philanthropy at Mackenzie Investments in Toronto.
“Statistics Canada, in the census in 2015, found that the number of Canadians working past the age of 65 has doubled between 1995 and 2015 to about 20 per cent of Canadians.”
Those people still working anticipate they would need more than twice as much money to retire ($878,000) against current retirees who reported they needed $427,000 to retire comfortably, finds the survey of 1,511 Canadians (split between 759 retired persons and 752 working adults 30 to 50 years old).
There are a number of reasons for this dichotomy, according to Bezaire.
“You’ve got the decline of a defined benefit pension plan that maybe parents and grandparents had: there’s not as many of those. And then the higher cost of living, the higher cost of health care, the higher cost of traveling because many people want to travel — not that they can do that during the pandemic — but it just costs a lot more to retire.”
Full retirement will not happen right away, finds the survey, as 45 per cent of pre-retirees say they would continue to work in some capacity versus nine per cent of those already retired.
“Many of the people who are in retirement or approaching retirement are generally more highly educated so many people work past retirement because maybe they’re a lawyer or an accountant or a doctor; they love what they do and they just keep working,” she says.
“Some people just want to keep working because of the social aspect, they want to see people.”
Boosting employee knowledge
But the overall level of retirement knowledge is low, according to Bezaire.
“According to our survey, there is not enough education out there for the decumulation stage. What really jumped out was that the majority of Canadians don’t have as much knowledge about the logistics around their retirement; in particular, what kind of investments they’ll need, how they’ll be taxed, how they’re going to handle their expenses. Many Canadians don’t understand how the conversion from an RSP to a RIFF (registered retirement income fund) would work.”
Another survey found that many employees are keen to have financial advice, especially are retirement worries are rising during the pandemic, according to another survey.
More financial education and regular reminders about what is offered by an employer would be beneficial to current employees, says Bezaire.
“When you get onboarded with a company, they’ll tell you about all the benefits, but it would be really great if there was a refresher course for employees on exactly what they have because you may be told about a group RSP when you first walk in the door, but you don’t qualify for it for a year,” she says.
“When the year comes and they send you the forms, a lot of people don’t act on it, because they’ve forgotten what it is, so being a little more proactive and communicating about all the good things the company is offering you to help with your retirement would be great. A refresher course, every once in a while, by HR or even a memo, an email about ‘This what it is, and this is how it stands.’”
