Building a bridge to span decades of retirement

The relationship between financial resilience and longevity

Even accounting for the pandemic, Canadians are living longer, healthier lives. Between 1950 and 2021, the portion of the population older than 60 more than doubled.¹ Life expectancy is over 80² and the number of Canadians living 100 years or more tripled since 2000.

When the retirement age and life expectancy were almost the same, retirement planning accounted for a few years. Longevity can bring with it lots of positives: more time to spend with friends and family and enjoying life. It can also bring more decades to pay for living and healthcare expenses.

Building financial resilience in our working years may be more critical than ever as we prepare to live three or more decades. This means being able to navigate financial realities such as debt, college costs, healthcare expenses, and emergencies, without derailing retirement savings. Plan sponsors, financial intermediaries, and recordkeepers often play a key role, offering workplace retirement plans supported with financial wellness resources and education.

Delaying retirement can help both sides of the equation

As we see every year, the closer people get to retirement, the better they are at managing their financial stressors—and that holds true, even in retirement. Some people end up retiring later than they’d planned, however, and others earlier than they’d planned. Retirees who retired as planned or later experience the lowest level of financial stress among all generations, and they’re the most optimistic about their retirement savings.

The picture for people who retired earlier than they’d planned, however, is very different:

• 30% are more stressed now than when they were working
• Less than half are unhappy with their financial situation
• 59% wish they’d saved more for retirement
• 10% rely solely on CPP/QPP as their source of income

Individuals’ retirement age affects both how much time they have to save and how long their money may need to last. While workers often have an age in mind, many end up retiring earlier. We discovered that 47% of retirees left the workforce sooner than they’d expected—on average at age 60. This simultaneously shortens their savings period and extends their retirement years.

Although early retirees need some extra care, Canadians are enjoying retirement

Retirement—like life—has its ups and downs. But the good news is that more than three-quarters of retirees are enjoying themselves. They’re generally doing what they’d expected, though far fewer are traveling than anticipated. More than half say it’s given them a chance to pursue a passion they hadn’t had time to do before.

But there is a flip side: Half have had to adjust their lifestyle to their cost of living. And although 26% say their social circle has grown, 33% are concerned that their social circle is smaller—a reminder that retirement planning should account for more than just finances.

Smart investing can help savings stretch

With extended time in retirement to plan for, workers should consider maximizing their saving years and investing wisely. But even though older workers and retirees are more knowledgeable about investments than younger workers, there’s still room for improvement. Less than 7 in 10 retirees are knowledgeable about investments.

Retirees are mostly receiving retirement income from annuities and pension plans, but a few are relying only on government assistance. Reflecting the shift toward defined contribution (DC) plans, most workers we surveyed expect to rely on their pension and registered savings plans.

This illustrates the importance of getting people into a DC plan and educating them about investing for the long term. Generally, workers and retirees appear to be following a glide path from more risk to less risk over time. But if a typical glide path provides for 70%–80% equity exposure when retirement is decades away, it appears that the younger generations could benefit from learning more about diversification strategies.

In general, almost half of workers consider themselves uninformed on selecting and managing investments. That’s why more direct, personalized advice on investments and beyond can be so valuable. Workers are interested in speaking to a financial advisor, but worry about the potential cost. This is an area where employers could provide assistance since this service is already part of some retirement programs.

How we can help Canadians enjoy their longer retirement

Having more years to enjoy after working can be a wonderful adventure. But this also means Canadians not only need to consider retirement savings plans, but they also need help saving and investing so they can reach their goals. Although there’s no magic wand, providing support and guidance can help workers build financial resilience and work toward a strong retirement. 

Next steps to consider:

• Evaluate the level of support you currently provide your employees: Make sure you have the right services to help them save and that you’re aware of every available resource.
• Assess your worker education and communication strategy: Consider providing regular communications to your members with relevant and timely information.
• Check your plan’s investment lineup and supporting resources: Because many workers across generations reported a lack of investment understanding, make sure they can access educational material and financial assistance.
• Consider the impact of one-on-one support: Workers benefit from individualized financial support, but don’t want to pay for it. If your plan offers this option, it’ll likely be well received.
• Review your plan design: Take an opportunity to review your plan rules like eligibility, vesting, and matching to make sure you’re accommodating the long-term savings needs of your unique employee population.
• Benchmark your offering: Use the survey to measure your own members and set goals for your plan.

For more insight from our fourth annual survey, download our financial resilience and longevity report.