Save with SPP recently reached out to Andrea Andersen, Principal, Western Canada Leader and Financial Advisor at Edward Jones for the company’s thoughts on a recent survey on retirement carried out by the firm Age Wave. Here are her answers to our questions.

We were interested that “purpose” is seen as one of the four pillars along with health, family and finances. This suggests that maybe the research shows people are looking for more meaning in their retirement than perhaps in the past. Is that your impression too and can you expand on why purpose has become (apparently) more important?

Absolutely – one of the biggest insights from our study was that the majority of retirees say that all four pillars—health, family, purpose and finances—are interdependent and essential to optimal well-being in retirement. We were also surprised to see just how crucial purpose is to retirees, as 92 per cent surveyed said that having purpose is key to a successful retirement. 

One reason for the prioritization of purpose is that scientific research has shown that having a sense of purpose can actually reduce the risk of cognitive decline, cardiovascular disease and depression, and is essential to a long, healthy and potentially cost-saving retirement. Another reason we found was that having purpose helps retirees feel both useful and youthful. Nearly all (93 per cent) retirees say it’s important to feel useful in retirement, and 87 per cent also say that being useful helps them to feel youthful.

Retirement is a time of enormous freedom, but that same freedom from work and family responsibilities can also create a missing link when it comes to how to live a life filled with purpose. During the pandemic, we’ve seen many retirees have taken on new roles and responsibilities, such as providing childcare to grandchildren, shopping for higher risk neighbours, and providing emotional comfort to family and friends. These stepped-up roles have given retirees a greater sense of purpose and connection.

The idea that COVID is causing some people to postpone retirement is interesting, but we were also interested to learn that 20 million Americans and two million Canadians stopped making retirement contributions during the pandemic. What caused this – lack of employment and tight finances? Pessimism about the timing of their retirement? We’d be interested in your views on why people paused retirement savings.

Our study showed that the pandemic’s effect on finances has not been equally distributed by age, wealth, gender, or retirement status. The greatest negative impact has been felt by Gen Z and Millennials and the least by Silent Gen, who have the safety nets of pensions, Social Security, and other means to provide financial security.

One of the biggest financial challenges we saw impacting Americans and Canadians alike during the pandemic is what’s been dubbed the “she-cession,” or the deepening of the economic gender gap. Women were more likely to lose their job or exit the workforce due to the challenges of COVID-19. They have also been far more likely to take on the lion’s share of time spent caring for family members, including home-schooling children and providing eldercare to parents. One of the outcomes of this is that only 41 per cent of women planning to retire said they were saving each month for retirement, compared to 58 per sent of men.

Pressing short-term financial needs have also taken precedence over longer-term goals. Combined with the existing gender pay gap, the headwinds facing women saving for retirement present a serious challenge. It’s crucial for women – and anyone facing retirement savings shortfalls – to work with a trusted financial advisor to determine a holistic financial plan to prepare for short and long-term financial goals.

The healthspan vs lifespan findings were equally fascinating, we had not heard it expressed that way before. The idea that a significant chunk of retirement may be in poor health doesn’t seem to get discussed often. Do you have any additional thoughts on that topic – should people, for instance, think about planning for a period of poor health where their care costs will be higher?

We know that money is an essential ingredient in retirement planning, but it’s not the only one. On average, the World Health Organization reports that the gap between life expectancy and healthy life expectancy, defined by the years lived in full health and free from disability, is 10.9 years for Canadians. That discrepancy tends to fly under the radar when pre-retirees are counting down the days until they can pursue their retirement dreams.

Saving for long-term care is a priority for many of my clients, who have seen older relatives suffer from medical issues – from suffering from a broken hip to cognitive decline caused by Alzheimer’s disease. These situations can leave retirees needing assistance from short-term hospital stays to full time care through hospice. For those concerned about the rising costs of long-term care and the potential financial impact it may have on them and their families, it might be worth considering long-term care insurance.

An advisor can help you identify which long-term care costs might be covered by your existing insurance and where additional coverage is needed. It’s important to weigh the benefits of insurance with its costs versus the risk of not having it and needing it. There’s always the possibility that you’ll pay for coverage you’ll never use, but I recommend it for clients who may not have the coverage to pay for these potential needs.

Finally, what surprised you most about the findings of this research?

I think the most surprising finding from the study was that 77 per cent of those planning to retire wish there were more resources available to help them plan for an ideal retirement beyond just their finances. This is hugely important as the vast majority of retirees surveyed say that in addition to saving for retirement and managing finances in retirement, it is important to think about all the other factors that contribute to a healthy retirement.

This research reminds me to challenge clients to think about the other aspects of their retirement planning outside of the finances. I now make sure to respectfully ask clients about their non-financial retirement goals, from where they will live to which activities will give them a sense of purpose, to get the conversation flowing.

We thank Andrea Andersen for taking the time to answer our questions. If you’re interested in saving for retirement – but aren’t all that sure how to go about it – the Saskatchewan Pension Plan may be the answer you’ve been looking for. Send SPP your pension contributions, and they will be professionally invested, grown, and at retirement, paid out to you as retirement income, with the option of receiving a lifetime annuity.

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