Many workers unprepared for retirement

Important for HR to engage staff on financial literacy, say experts
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 04/24/2019
Many employees struggle with conflicting financial priorities, such as immediate bills, major debt and lifestyle choices. Vergani Fotografia/Shutterstock

When it comes to retirement, more than three-quarters of Canadians wish they had made financial contributions at an earlier age, according to a TD Bank survey of 1,101 workers.

“Many employers no longer offer a pension plan and the onus now falls on employees to not only self-fund their retirement, but to also determine how much money they’ll need and how to save for it,” according to Jennifer Diplock, associate vice-president of personal savings and investing at TD Canada Trust in Toronto.

“There’s a growing population of Canadians who not only have this uncertainty but are also looking for some help and support.”

With more than two million gig workers now in the Canadian workforce, it is more common than ever for workers to change roles or careers, she said.

“As the face of Canada’s workforce changes, so does the way that Canadians need to manage their finances and plan for retirement,” said Diplock. “The days of working for one employer for your entire career and potentially having an employee-sponsored pension plan are probably something less and less frequent today.”

Many employees struggle with conflicting financial priorities, such as immediate bills, major debt and lifestyle choices, she said.

Tuning out, taking responsibility

As a result, younger workers often tune out HR’s efforts to promote pensions and retirement planning, said Frank Wiginton, financial wellness expert at Eckler in Toronto.

“Companies are focusing on what they want to focus on, which is the big programs that they put a lot of dollars into… and there's nothing wrong with that,” he said.

“The problem is that that's not what a lot of the employees want to learn or know about. They want to figure out ‘OK, well, how can I get to the end of the month? And how can I get rid of my debts? And how am I ever going to buy a house?’”

The desire to retire before 65 remains the dream for most professionals, said Wiginton.

“The majority of people have a utopian vision of what retirement will be,” he said. “People have this belief that retirement is all rainbows and unicorns.”

As for those planning to work past 65, many believe they don’t have the necessary funds to retire — often due to a lack of understanding, said Wiginton.

“It’s the thing that’s keeping them chained to their desk.”

While many Canadians plan to retire by 58, most keep working in some capacity until age 62, said Jamie Golombek, managing director of financial planning and advice at CIBC in Toronto.

“The employee ultimately has to take responsibility for their own retirement, based on the compensation package that they choose, the benefits that they’re getting,” he said.

“But the problem is — do they have the time? Do they have the knowledge? And what can the employer do to help the employee be able to properly prepare financially for retirement?”

One in four Canadians will regret leaving the workforce, due to lack of intellectual stimulation and financial concerns, according to a CIBC survey of 3,029 retirees.

Regret often depends on how an employee exits the workforce, said Wiginton.

“It’s definitely a real issue where a lot of near-retirees are encouraged out the door before they’re really ready,” he said. “That creates a lot of regret for people, even if they’re being handed a large sum of money. My experience has been that nine times out of 10, it’s not about the money. It’s about being psychologically ready to retire.”

Advice for HR

Employers should help workers by ensuring appropriate financial literacy resources are in place, said Diplock.

“There’s lots of tools and resources available to Canadians to help identify how much you’ll need to live in retirement — depending on the lifestyle you’re looking to live.”

Group savings plans, lunch-and-learn seminars and online tools such as retirement calculators could also be considered, alongside followup from a financial adviser, she said.

Too many Canadians approach retirement without a plan, which can lead to unnecessary stress, said Golombek.

“Make sure that they really understand how much money they’re going to need to save,” he said. “That will benefit the employee — it’s a happier workforce — and it will benefit the company, ultimately, in terms of having a productive workforce.”

Support of business continuity should also be top-of-mind for HR as more senior employees transition into retirement, said Wiginton.

“You want to find a way to retain the knowledge of these experts.”

To help transition companies from one generation to the next, legacy mentorship programming could be implemented to retain critical knowledge while simultaneously allowing younger talent to rise the ranks, he said.

“For many people, it’s not about the money. It’s about feeling like they’re worth something, that they’re contributing, that the company believes in them. That’s a big piece of it.

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