The age at which Canadians expect to retire is increasing, more out of need than desire. But there’s one thing group retirement plan members think can help – and that’s getting a little advice along the way.
If you thought that attitudes about something as far away as retirement wouldn’t change in a few short years, the results of a recent survey may surprise you.
The 2010 Sun Life Canadian UnretirementTM Index – an annual survey that tracks workers’ attitudes and expectations about retirement – reveals some surprising trends about Canadians’ thoughts about retirement.
The annual Unretirement Index survey is one of the key ways that Sun Life Financial – and our plan sponsor clients – are able to determine member needs in order to help them achieve lifetime financial security.
This year’s survey was conducted online between November 24th and December 7th, 2010. A total of 3,422 Canadians aged 30 to 65 participated from the Ipsos Reid Consumer Panel of Canada, which consists of more than 40,000 pre-recruited Canadian households (close to 100,000 individual).
Of survey participants, just over half (53%) were members of group plans or had a spouse who was a member of a group plan. Here’s a look at some of the key findings of the survey – as well as some specific insights as they relate to group retirement plan members.
Overall – Canadians not as confident about retirement
The overall Sun Life Canadian Unretirement Index score – measuring the confidents of working Canadians – is down significantly from prior years, to 39 in 2010, from 50 in 2008 and 51 in 2009.
The index runs on a scale of zero to 100 where 100 represents extreme optimism and the expectation of a perfect retirement at the perfect time. The lower the index number, the more negative or pessimistic the outlook is on issues that influence retirement.
And the pessimism has increased. Canadians believe they’ll work much longer than the traditional retirement age of 65, are less confident about their retirement-readiness and outlook, and are increasingly more concerned about their financial well being.
One possible reason for the drop in overall confidence is that at the end of 2009, many Canadians were hopeful the recession was over in this country – and that recovery would be swift. While the recession did end, Canada did not witness the extensive economic rebound it had hoped for, with unemployment still high, GDP increasing at low levels, and continued worries about the health of other countries that could impact our economy.
Meet the new Canadian retirement age
The most significant shift in the thinking of Canadians about retirement over the past year is the change in their expected retirement date. For all working Canadians, the average age they expect to retire has moved up three and a half years, to almost 68. Last year, that figure was just above age 64.
In fact, only 28% of working Canadians between 30 and 65 in the survey thought they would be fully retired to age 66 years.
The retirement age gap is even more pronounced when broken down by two other factors: income and age. Canadians who earn over $100,000 expect, on average, to retire at the traditional age of 65, while Canadians who earn less than $50,000 expect to wait until age 70 to retire.
In terms of age, as people approach retirement age their expectation of when they will retire increases from 67 years to those under 50, to 71.5 years for those in their early 60s.
In terms of regional differences, the expected retirement age generally increases as you move from east to west across the country.
• In the east, Quebecers and Maritimers expect to retire earlier than other Canadians – age 65.5 and 66.4 respectively.
• In Central and Western Canada, the expected retirement age is 68.6 in Ontario, 66.8 in Manitoba and Saskatchewan, and 68.7 in Alberta.
• In B.C., the expected retirement age is the highest in Canada, at age 69.2.
Marital status also has an impact on an individual’s expected retirement date. The economic toll of martial separation is apparent, as individuals who are divorced expect to work until age 70, while those in marriage or partnership expect to retire at age 67.
Working past age 65 – more need, less desire
While age 68 is the “new” 65 in terms of the expected retirement age in Canada, fewer Canadians say they would continue working because they enjoy it – and more expect to work because they must. Last year, when individuals were asked why they would be working at age 66, more than half (54%) said it is because they want to. In 2010, that number declined to 39%.
Conversely, 62% of respondents say they will be working at age 66 because they have to, versus just 46% in 2009. Clearly, the outlook for the future has grown a little cloudier for many Canadians.
That sentiment is confirmed as the survey digs deeper into the primary reasons that Canadians plan to work past the traditional retirement age. In 2008, the most popular reason to work past age 65 was because respondents enjoyed their job or career. In 2010, the number one reason to work past age 65 is to earn enough money to pay basic living expenses.
Not surprising, those with higher incomes are inclined to cite personal fulfillment for continuing to work. 71% say they’ll work past age 65 to stay mentally active, and 60% say they’ll keep working because they enjoy their job or career.
That’s in stark contrast to those making less than $50,000 per year, as 68% say that economic necessity is the reason for working past age 65.
Age also plays a significant factor in the “need to” / “have to” divide. The worry about having to work after age 65 is highest at younger ages. But as people get older, many realize that they have enough money – and the need to work declines while the desire to work increases as the unknown frontier of retirement looms.
What group plan members say about retirement
While Canadians are in general more pessimistic about retirement – and planning to work longer because they need to cover expenses – there are a couple of clear areas where group retirement plan members have a decidedly different attitude.
The first is concerning their expected retirement age. While only 28% of survey participants expect to be retired by age 66, 40% of those with a group retirement plan (either their own or a spouse’s) expect to be fully retired at age 66.
In addition, only 45% of group plan members say that they now expect to work longer than they originally anticipated, versus 58% for those without a GRS plan. And almost two-thirds (64%) of group retirement plan members say their retirement will be as nice as they hoped, versus just 50% for those without a GRS plan.
In terms of the needs of group retirement plan members, there were two in particular that stood out:
• Advice: 86% of those with group retirement plans would like some advice to help them make good decisions about their plan.
• Guaranteed income: 68% of survey participants with a group retirement plan say that they want some income guaranteed – and that they are more worried about the risk of losing money in their investments.
In terms of guaranteed income, group retirement plan members have seen the impact of the 2008 market crash on their savings and can more readily appreciate the value of a guaranteed source of retirement income.
The value of advice is also appreciated by a large majority of group retirement plan members – and this value is reflected in the broader survey as well. The survey results clearly show that Canadians who have an advisor are more confident about retirement than those who don’t (a score of 44 with, versus 36 without).
And if we take financial planning a step further – to the written financial plan stage, the survey results also show that Canadians with a financial plan are more:
• Confident about being able to take care of basic living expenses in retirement (84% with a plan versus 48% without a plan).
• Confident about being able to take care of medical expenses (66% with a plan versus 38% without a plan).
• Confident about having enough money to pursue their hobbies and interests in retirement (73% with a plan versus 32% without a plan).
• Confident about having enough money to enjoy their lifestyle they want in retirement (71% with versus 40% without a plan).
• Satisfied with what they’re saving for retirement (67% with versus 25% without a plan).
More Support = greater confidence
Based on the survey results, it’s clear that all Canadians – including group retirement plan members – can benefit from the greater support that comes from professional advice and the discipline of a written financial plan.
By developing some planning steps around items such as personal and workplace savings, pensions, portfolio diversification, asset protection, and income guarantees, individuals can develop much greater confidence – and peace of mind – in relation to their future.
For more information
For more information on the Sun Life Canadian Unretirement Index, or any of the information presented in this paper, please visit: www.sunlife.ca/unretirementindex
To learn more about group retirement programs and the value they can offer to your employees, please contact The Leslie Group Limited at (416) 510-8966. The Leslie Group is a full service employee benefits consulting firm that is committed to providing you with the best advice required to manage your group retirement plan and meet the capital accumulation plan guidelines.
This article was taken and edited for content from the March 2011 Sun Life InSight Newsletter