Retirement saving trends and challenges

Saving for retirement is important for more than 80% of working Canadians, though nearly as many (71%) aren’t sure if they’re saving enough and more than half (60%) haven’t started building funds.

So says a Nest Wealth retirement report that examines how employees’ financial stress can affect their personal lives, work performance and morale. The report’s release coincides with the digital wealth manager’s release of Nest Wealth at Work, a group RRSP platform for small businesses.

“Stress is one of the contributing factors to poor health, and worrying about financial status is part of the problem,” the report says.

Gender can also be at play when it comes to financial anxiety. The report notes 65% of men were wary of not saving enough versus 75% of women, due in part to the lower earning power of female employees.

To alleviate such anxiety, most respondents (82%) said they would invest through an employer’s group RRSP, and almost 70% said they’d choose a job that came with a pension plan over one that didn’t.

Using such a plan means people are more aware of their retirement options, with 79% of those who contribute knowing how much they need to save and only 47% worrying about meeting their goals.

However, “small businesses have been daunted by the effort to offer the sort of retirement plans that large enterprises do,” the report says.

Additional retirement saving trends

In the third quarter, more than 60% of Canadian defined benefit pension plans were fully funded, and pensions had the highest solvency position in 18 years, according to Mercer’s most recent Pension Health Index.

Factors positively affecting pensions plans included rising interest rates and strength in U.S. and international equity markets, despite market weakness domestically, a release from Mercer said. Those factors are leading some plan sponsors to consider more investment risk.

Separate data suggest that, aside from saving through work and pensions, Canadians are looking to sell their homes in their post-work years, with a 2017 OSC poll saying nearly half (45%) of homeowners aged 45 and older in Ontario are considering that option.

A more recent 2018 Schroders study found that, overall, working Canadians are saving less than their global peers (11.9% of their incomes, compared to the global average of 12.2%). That survey included responses from 22,000 investors in more than 30 countries.

The Schroders study found Canadians underestimated their post-work costs, with non-retirees expecting to spend 42% of their retirement incomes on basic living expenses compared to retirees actually spending more than half (59%).

For more insights, read the following articles.

Why Canada is among top 10 countries for retirement security

The case for longevity insurance

Unforeseen consequences from downsizing a home

OSC offers ideas to remove retirement planning barriers

About the Nest Wealth survey: It was conducted online within Canada by Nest Wealth Asset Management Inc. from Aug. 17 to Aug. 18, 2018 among 513 Canadians adults ages 18 and older.