The opposite ends of Canada’s workforce—those who have just begun their career in recent years, and those who are nearing retirement—have financial needs that more than likely look a little different. But their goal after decades of hard work should remain the same: invest enough during your working years to secure a comfortable and solid retirement.

Yet, many people in both groups are unprepared to cross this finish line based on their current investing behaviour, whether it’s still 50 years away or next week.

For those in their 20s, retirement seems like an unreachable future, and it’s too far off to even think about. In some cases, free money is being left on the table for those who view RRSP contributions as a deduction off their paycheque instead of a long-term investment, and decide to opt out of their employer plans or aren’t maximizing their payments.

For those 60+ on the other hand, retirement is hurdling towards present day faster and faster, and it’s too overwhelming to even think about. In some cases, retirees feel like they can’t afford to actually retire, and rising inflation certainly isn’t helping.

According to a 2022 Canadian Group Retirement Study conducted by NMG Consulting¹, member education and retirement readiness are the biggest challenges facing the industry right now.

So how can this be mitigated?

Both advisors and plan sponsors are in a position to provide the support that’s needed to sustain smart investing behaviour and practices, and both are key players in the game where the winning prize is not only a secure retirement plan, but also a content state of financial wellness in general. Advisors have a responsibility to their clients, and plan sponsors have a responsibility to their plan members.

Any good advisor will make it known to their clients that they are always available to provide assistance, guidance, and education to themselves and their plan members. One of the biggest challenges for plan sponsors that we see is a lack of access to expertise and knowledge of financial planning and tools. But as advisors, that’s exactly what we’re here to help with: to bridge the gap between uncertainty and confidence, and unlock the financial opportunities that will follow.

As present and engaged employers, plan sponsors should also ensure their plan members are maximizing the value of their work-sponsored programs for many reasons, but to name a few:

1. Financial stress among workers will add up to real, tangible costs for their employers due to the absenteeism and lost productivity it causes—$1,786 per year, per employee, in fact, according to Manulife’s 2022 stress, finances and well-being report².
2. The higher employee participation and opt-ins to your RRSPs are, the greater the tax breaks will be for your business to recoup from.
3. Your talent retainment and attraction strategies will be enhanced by giving the Canadian workforce what they’re looking for: financial wellness resources and tools. 82% of Canadian workers believe it’s important for employers to offer these².

All this to say, there is an undeniable connection between the state of financial and mental wellness, and productivity at work. With proper education behind how to navigate these spaces smartly and regularly based on the ever-evolving economic landscape, your organization will achieve the best balance and everyone can enjoy the pay-off.

Learning sessions aren’t a one-time stop

“The markets are down.”
“A recession is coming.”
“Inflation is never-ending.”

We know that these circumstances make people nervous, and understandably so, because without understanding the ebbs and flows of the marketplace, it certainly seems daunting.

MacDonald advises that when markets are down, it actually serves as an opportunity to look at investments as if they’re on sale. She calls it The Lifespan Approach. That’s because the journey in preparing for retirement isn’t a quick trade; it’s a long-term journey that spans over decades if you start early enough.

This is why regular educational sessions are so critical; because not only is our economic environment continuously changing, but financial needs are also going to look different for all of your employees.

For example, employees 25 and under who aren’t taking advantage of maximizing their RRSP contributions and matching likely aren’t aware of a few benefits—such as that the funds can go toward a down payment for their first home, or what the impacts of compound interest are and the amount of money they’ll lose from starting at 35 instead of 25.

“After conducting educational sessions with our clients and their employees, and showing them how it doesn’t matter when markets are down in the moment—it’s about the long haul—many times we’ll see the light bulbs turn on. Suddenly, many of the plan members will start to transfer more and more of their personal funds into their RRSPs than ever before. It’s because they finally realize what they’re missing out on.”

– Christine MacDonald, Partner & Advisor, Selectpath Benefits & Financial

Retirement shouldn’t be a switch, it should be a dial

Those who are approaching their target retirement age but feel they can’t yet afford it—and are frustrated because they’ve never lost sight of their goals for all these decades—may not have had their risk assessment profile or their investment levels adjusted in many years. Beyond the simple budget planning of retirement, there’s also a mental wellness aspect involved when going from 100 to 0 all of a sudden. Combine this with sky-high inflation, and it’s no surprise that many retirees don’t feel ready.

And the proof is in the pudding: 1 in 3 Canadians expect to retire later than they originally planned, which is up from 1 in 4 last year². Due to ever-changing economic conditions, more Canadians feel like their retirement planning and savings are behind—across all generations, and not just Boomers².

“I can’t tell you how many times I’ve heard our clients say, ‘I can’t afford to retire.’ This is why it’s so critical to think about your risk assessment profile and what needs to be adjusted several years in advance of your projected retirement date, and not just one or two years before. You want to avoid a rude awakening.”

– Christine MacDonald, Partner & Advisor, Selectpath Benefits & Financial

According to Manulife’s 2022 Debt Survey3, 44% of Canadian retirees report having no financial retirement plan at all. But it doesn’t need to stay this way with the support of an expert consultant.

Canadians who have a financial advisor are²:

• In a better financial situation
• More likely to feel good about their mental health
• Having an easier time saving money
• More likely to be on track to retire
• Less likely to worry about affording basic expenses in retirement
• More likely to identify their financial situation as very good or excellent, in comparison to those that don’t

Financial education is priceless

As advisors, it’s our job to make sure you’re aware of how to expedite your financial growth and retirement security. We come into this field of work for a reason: because we want to help others achieve their financial goals and all the dreams that can come true as a result.

We’re always here to educate, empower, and enlighten. We know the path that leads to the greatest ROI possible is one of education. Knowledge is wealth, and we want to help you see how priceless it can be.

Sources

1. NMG Consulting Canadian Group Retirement Study, 2022.
2. Manulife stress, finances and well-being report, 2022.
3. Manulife Debt Survey, 2022.