Lack of savings, unexpected costs could make retirement tough sledding: Deloitte

A new report from Deloitte Canada finds that “nearly 55 per cent of near-retiree households will have to make lifestyle compromises to avoid outliving their financial savings.”

As well, reports the financial services firm in a recent media release, that number jumps to an alarming 73 per cent when “unexpected costs” are factored in.

The report, titled Running Out of Time: An Urgent Call to Fortify Canada’s Private Retirement Pillars urges the “financial services ecosystem” to “improve the quality and access of near-retirement advice and products, help retirees manage rising retirement costs, and help Canadians build healthy savings habits early on.”

In the release, Hwan Kim, Partner, Financial Services Information and Open Banking at Deloitte Canada, notes that “given roughly 40 per cent of retirement wealth inequality is due to a lack of financial knowledge, the financial services ecosystem must collaborate with the health care system and public sector to equip Canadians with accessible retirement advice, holistic near-retirement offerings, updated pension planning, quality health care, and new resources to retire confidently.”

The report had a number of somewhat alarming findings:

• “Only 14 per cent of three million soon-to-retire households can retire with confidence, while 31 per cent of near-retirees will require support in the form of the government’s public pension system.
• Only 24 per cent of private sector workers participate in employer-sponsored pension plans.
• 40 per cent of retirees have not purchased health insurance, of which 44 per cent cite expensive premiums as the primary reason for not doing so.
• 73 per cent of near-retiree households will be at risk of financial hardships
  in later stages of life if they require long-term care.
• 58 per cent of near-retiree and retiree households do not have a formal or detailed retirement plan in place.
• 44 per cent of working Canadians were dipping into their retirement savings to pay for non-retirement-related expenses.”

Getting the word out there about pensions and retirement programs is very important. Be sure you are aware of any retirement program that exists at your workplace, and even if you worry that taking part will be costly, your future you will be very glad you signed up. We know folks who decided against signing up for pensions and benefits, figuring they needed the money, who are now older and wiser, and missing that extra monthly income they might have had.

It’s also easy to ignore signing up for vision, dental, and drug plan benefits when you are young and still can see, chew, and get through a day without a bunch of pills. When you are older, however, these things won’t be as easy to achieve, and they are costly. Sometimes if you sign up for a group insurance plan at work you can remain in it after you retire, and again, your older self will be very glad you did.

Don’t have a pension program at work? Think about signing up for the Saskatchewan Pension Plan, a not-for-profit, open, voluntary defined contribution plan that’s been building retirement futures for over 35 years. SPP’s experts will invest your savings in a pooled, low-cost fund, growing them into future retirement income. You’ll have options when you retire, including the possibility of a lifetime annuity that pays you each month for as long as you live, or the Variable Benefit, which gives you flexibility on how much income you want to receive.

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