How is the industry helping Canadians get retirement-ready?

The idea of retirement has long been regarded as the finish line for those seeking financial freedom. But with a variety of challenges and realities confronting modern Canadians, achieving that has become much more complicated than before.

“A lot of Canadians have debt in their retirement, and some of them have mortgages that will become more expensive,” says Eric Monteiro, senior vice president, Group Retirement Services at Sun Life. “Canadians are living longer, so they are going to have more expenses later in life.”

Healthcare expenses are a natural price to pay for Canadians in their old age, Monteiro notes. While some may decide to live in a long-term care home, the disruptive impact of the COVID-19 pandemic has led more people to consider aging at home, which could require renovations to improve accessibility and ease of movement.

That was also reflected in a recent report by Fidelity, which found health issues, long-term illness, or disability among the top reasons why some retirees were unable to reach their ideal retirement lifestyle. Respondents to that survey also indicated they didn’t have enough money saved for that post-work phase, and were having difficulty navigating inflation and the rising cost of living.

“For many Canadians, retirement may also involve traveling, sports and fitness, or making a big dream purchase, leading to even more expenses in their early golden years,” Monteiro says.

The current economic backdrop of inflation and increasing costs of living has also tested Canadian workers’ resolve to invest and save for the long term. Those who decide to tap out of the stock market now might be doing it at the worst possible time, Monteiro says, pointing to the common pitfall of selling low out of panic.

“The good news is we actually have not seen that in general,” he says. “We saw a slight 3% decrease in voluntary contributions, and an 8% decline in one-time contributions. But that’s on a growth trend relative to what we saw in 2020.”

Within Sun Life’s group plans, Monteiro says withdrawals registered a slight uptick of 4%. Five per cent of plan members changed their fund selections, typically going into lower-risk funds, suggesting that any fears of a major flight to safety have yet to materialize.

As inflation slowly but surely eats into their nest eggs, some Canadians might also consider moving the goalposts on their retirement. In Fidelity’s survey, 62% of pre-retirees said concerns over the rising costs of living were holding them back from retiring when they’d like to. On a related note, 55% were concerned they had not saved enough.

Since 2009, the percentage of pre-retirees in Fidelity’s annual survey who were planning to retire past the age of 65 has risen from just over 10% to roughly 25%. From the limited data available on Sun Life plan members, Monteiro says the average age when workers declare retirement has increased by an average of five months, though whether that’s part of a larger developing trend remains to be seen.

Companies are doing their part to help improve retirement-readiness among workers. One piece of the puzzle, according to Monteiro, is developing digital tools that can help promote better financial outcomes at scale.

“It's just not feasible to provide personal advice to everybody. And digital plays a big role in helping bridge that gap,” he says. “Ella, our digital coach at Sun Life, provides members with personalized tips pre-retirement and during retirement as well.”

Sun Life group plan members also have access to webinars, video tools, and educational sessions to bolster their financial awareness. Individuals who need it may also consult with financial services consultants to help plan for their retirement; those with broader estate-planning needs that involve their loved ones will need to go to a full-fledged financial advisor.

More broadly, Monteiro sees a growing need for financial advice supported by planning tools. Last year, Sun Life tapped Conquest Planning, a major provider of financial planning software, to introduce its digital tool across all of Sun Life’s wealth and insurance service platforms.

“We’re rolling out a new planning tool for our group plan members in a few months, which will help them better visualize what their future could look like and make more educated financial decisions,” Monteiro says.

He also stressed the importance of group plans for everyday Canadians. With the right plan, he says Canadians can have access to well-curated investment funds with competitive fees.

“Members can put money in their group plans straight from payroll, which helps drive consistency of behaviour,” Monteiro says. “As an industry, we’re doing everything we can to make sure employees understand what’s available to them.”