The idea of an early retirement conjures up daydreams of lazy beach-filled vacations and relaxing golf games, but the reality can be vastly different, according to a recent Manulife survey. The company’s 2024 Financial resilience and longevity report reveals that more than half of Canadian retirees wish they’d saved more and more than one-quarter are more financially stressed now than while working.
While the majority of workers expect to stay on the job well into their 60s, current retirees actually stopped working at age 59, on average. Coupled with longer-than-ever lifespans, Canadians must be prepared to fund a retirement that could last two or even three decades.
It’s a daunting task for even the most financially savvy individuals but understanding the lessons of those who have already made the transition can help you advise today’s workers on their journey toward retirement.
Lasting impact of a group retirement plan
Unsurprisingly, pension plans are the top source of income for retirees, but the importance of a workplace program extends beyond retirement. Employers and retirement plan providers have more influence on financial decisions than workers’ friends and family; in fact, one in five workers consider their provider the sole or major influence on financial matters.
Is retirement more stressful than working?
Employers’ and providers’ influence reflects a level of trust from workers, which is in turn an opportunity for employers to encourage workers to prioritize saving for their retirement years. Unfortunately, nearly one-quarter of early retirees worry they didn’t save enough, and very few are working part time to make up the gap. This reality is causing many to make difficult lifestyle and financial decisions, such as reducing spending, giving up travel, or taking out loans. In fact, about half are more financially stressed in retirement than during their career.
Knowledge gap: investment understanding
One major way to help workers avoid a financial shortfall can be to provide investment guidance. Nearly half of workers say they don’t have the knowledge to select or manage their retirement investments. Increased support and education from employers appear to be greatly needed to address this gap. It’s also troubling that more than one in four Gen Zers and millennials are choosing low-risk investments for their retirement accounts, minimizing the chance for higher returns during the time in their careers when they can most withstand greater loss and recover from market downturns.
Retirement length is steadily growing
Life expectancy in Canada has grown steadily over the past century with no sign of slowing, which means the years spent in retirement will also likely increase, making longevity planning even more critical. Employers should consider more direct and personalized forms of support to help their workers prepare for a potentially decades-long retirement.
Workers want—and need—financial advisors
Right now, most workers don’t have a financial advisor or formal plan for retirement. These tools can be paramount for a comfortable retirement. The Manulife survey confirms that the majority of stress-free retirees had a comprehensive financial plan in place before they stopped working, and they continue to meet with an advisor. Most workers are interested in receiving professional help, unless there’s a cost. Some group plans offer one-on-one financial guidance or other similar services as part of their programs, allowing workplaces to effortlessly provide this support.
Next steps for the industry
It’s clear that early retirement can cause tremendous financial pressure, and many workers will exit the workforce earlier than planned. Understanding the experiences of early retirees can help you provide guidance for workers who still have time to avoid many financial pitfalls. In particular, help with investments through education and one-on-one support can make a significant difference in the stress levels and preparedness of retirees. The duration of retirement shows no signs of slowing, but action by employers, financial intermediaries and retirement plan providers can help Canadian workers live longer, better lives.
This article is brought to you by Manulife, a platinum preferred solutions provider for members of Benefits Alliance and their clients.