The New Retirement

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One of the programs I’m most proud of from my time at Sun Life Financial is the Unretirement Index. Dean Connor, who at the time led the Canadian organization, asked my team and me to develop a study that dug into people’s plans and expectations for retirement.

We went in with a simple hypothesis. Baby boomers would transform retirement, just as they had so many social conventions over the years. Given how many Canadians in that demographic identify so personally with their work, why wouldn’t white-collar professionals keep doing what they do after 65? Hence the term, unretirement.

My team prepared the first annual survey over the summer of 2008. Little did we know that the worst financial crisis since the Great Depression would coincide with its fielding. There we were, asking Canadians about what age they expected to retire at the same time televisions across the country screamed about a financial apocalypse.

What seemed a disaster at the time, turned out to be an extraordinary research opportunity. In the years that followed, we tracked the evolving views of Canadians about retirement in light of the crisis. By 2011, the average adult expected not to fully retire until 69.

While our hypothesis held up, it was clear that economic factors were also driving unretirement. Among Canadians who said they expected to be working at 66, 61% said they’d do so because they need to and 39% because they want to.

New research from Aon confirms that while the anxiety so prevalent in the years immediately following the crisis has largely subsided, there remains a kind of low-grade angst among a lot of Canadians about their financial future.

The firm’s Global DC and Financial Wellbeing Employee Survey delivers useful insights into the views of Canadians who are lucky enough to have employer-sponsored defined contribution (DC) retirement plans. While not a representative sample of the broader working population, it’s not a bad proxy.

A few highlights from this year’s edition:

  • 30% “expect to continue working forever in some capacity.”
  • 29% “do not feel they are saving enough for long term needs.”
  • Nearly half say “their outstanding debts prevent them from saving for retirement.”
  • Two-thirds contribute less than 10% of pay to their DC retirement plan.

“The reality is that for most people, retirement will be different than in previous generations – likely starting at older ages and incorporating phased or flexible arrangements,” according to the report. “Our research shows that retiring in your 70s – or not at all – will become increasingly common.”

Two takeaways.

First that debt stat is neither surprising nor necessarily bad news. While I’m not a fan of delaying retirement savings until your home mortgage is paid off, it’s hard to argue against clearing credit card and other high-interest debt before saving for long-term goals.

Second, if you do have a retirement plan at work, take full advantage of whatever employer-match it offers. Aon found that only 78% of respondents have signed up for the plan their employer sponsors. And 41% of those who have access to an employer-match don’t take full advantage. If your boss is prepared to match the first $100 you save for retirement each month, take it. Take all of it. Save more if you can. Just don’t miss out on free money.

Kevin Press

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Jobs Jobs Jobs

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Photo by Sam Bark on Unsplash.

A few years back, I was invited to deliver the commencement address to graduates in the faculties of Applied Science and Technology and Continuing and Professional Studies at Sheridan College in Mississauga, Ont. My goal was to deliver a practical message, hence the speech’s impossibly catchy title: “Success in an era of personal responsibility.”

“Canada’s beloved social safety net is wearing thin,” I said, trying my best not to sound like the voice of doom. “Our aging population — about 1,000 Canadians retire every day — will put unparalleled pressure on government-funded healthcare and other programs. This will transform Canada. You will be responsible for your financial well-being in ways previous generations of Canadians were not.”

That was conventional wisdom at the time. It was not uncommon to hear experts predict that baby boomer healthcare expenses, as they entered their high-use years, would so dominate government spending that our reliance on Ottawa and the provinces for virtually everything else would be significantly diminished.

Some still argue that (and they may be proven true). But increasingly, there is a recognition among policymakers that government will have to do more, not less, in the years ahead. Last month’s release of the latest Organisation for Economic Co-operation and Development (OECD) Jobs Strategy signals an emerging view that leaving citizens to fend for themselves is a bad idea.

The strategy laid out three needs:

  1. Promote high-quality jobs. Two keys here. Well-designed, quick-hit work programs can make a positive difference when economic growth slows or turns negative. The financial crisis made that clear. A high-functioning education/training system is also a must. From the report: “To better match skills with labour market needs, it is important to develop stronger links between the world of education and the world of work and have robust systems and tools for assessing and anticipating skills needs.”
  2. Put an end to labour-market exclusion. Where there are barriers to quality work, address them proactively. “To reduce the risk of workers becoming trapped in low-quality jobs or joblessness, they should have continuous opportunities to develop, maintain and upgrade skills through learning and training at all ages.”
  3. Adapt to the evolving labour market. Prepare for tomorrow. It’ll look less like today than you think. This is on both policymakers and individuals, as anyone close to the car industry knows too well. “Skills policies, social protection and labour market regulations will need to be adapted to the new world of work to achieve greater job quality and inclusiveness. … A first challenge is to equip workers with the right skills in a context where the demand for skills is likely to evolve rapidly and people continue working at a higher age, with an increased emphasis on science, technology, engineering and mathematics as well as soft skills.”

There’s a lot of detail in the report’s nearly 400 pages. More generally it represents a step back from the idea that developed world governments will download additional responsibilities to their citizens.

The assumption that Canadians would have to rely less on government has been a staple of financial advice in recent years, for good reason. But if this new OECD report is an indication of where policymakers are headed, it bears revisiting.

Kevin Press