According to a new global report by HSBC, almost half (48 percent) of working-age Canadians aren’t actively saving for retirement. That’s a lot of people without a nest egg. Out of more than 18,000 individuals and retirees surveyed for the report across 17 countries, which included 1,037 Canadians, our working-age population fared pretty badly in terms of retirement savings. Only workers in Argentina, Taiwan, France, and Mexico were saving less than we are.
It isn’t really surprising that we Canadians aren’t saving for retirement as much as we should. After all, household debt is staggeringly high, making it more difficult for us to pay our bills now, let alone put money away for our retirement 20 or 30 years from now.
However, this lack of saving for retirement will be bad news for the majority of us when we retire. Though 53 percent of current retirees in Canada say that they have a government pension to help them fund their retirement, only 35 percent of current workers say they factor in this type of financial help once they retire.
How They’ll Fund Retirement
So if current working-age Canadians aren’t saving for retirement and aren’t expecting to get financial help from a government pension, how are these people expecting to be able to live comfortably once they stop working?
Well, it turns out, they’re planning to cash in on their real estate investments. In fact, working-age Canadians who aren’t saving are twice as likely to consider selling their homes as those who consistently save for their retirement. Twenty percent hope that downsizing or selling their homes will give them enough cash to fund their retirement. This is quite high compared to the mere five percent of current retirees who said the same.
Above and beyond selling their properties, they also expect to use cash savings and deposits, personal pension plans, and inheritances to fund their retirement years. But it may not be enough…
Working Part Time
Pre-retirees, particularly the ones not saving for retirement, are also more likely to keep working well into retirement, at least part time, in order to keep generating much-needed income. Twenty-nine percent of working-age Canadians expect to do so, anyway.
Part-time work in retirement isn’t all bad, though. It can help retirees stay active and mentally engaged, reducing boredom and making the transition to a full retirement a little bit smoother.
There’s no doubt that retirement as we know it is changing. With higher debt levels and the near extinction of employer-sponsored pension plans, many Canadians will be forced to keep working well into their retirement years just to pay the bills. We expect this to become the new norm for retirement in the future.
The Benefit of Retirement Advice
Out of the Canadian respondents to the global report survey, 45 percent who received retirement information and advice stated that this gave them a better idea of the financial consequences of their current choices—like not saving for retirement. As well, 32 percent of them said receiving this type of advice helped them avoid costly retirement saving mistakes, like not saving early on, or at all.
These statistics show that it’s more important than ever for plan sponsors to educate their employees about retirement savings, help them save as much as possible, and help them understand their retirement plan. By offering one-on-one or group information sessions, employers can help their workers more effectively prepare for their retirement years, allowing for a smoother transition.