How important is a formal written retirement plan?
Over six in 10 (63%) of Canadians with household investable assets of at least $100,000 are somewhat (49%) or strongly (14%) confident in their retirement prospects, according to a recent report.
And while the confidence is high among those with such assets of between $100,000 and $249,000, the level of confidence only grows as the amount of assets increases, reports research, consulting and professional development firm LIMRA:
|
Household investable assets |
Somewhat confident in their retirement prospects |
Strongly confident in their retirement prospects |
|---|---|---|
|
$100,000 - $249,000 |
47% |
7% |
|
$250-000 - $499,000 |
45% |
16% |
|
$500,000 - $999,00 |
60% |
17% |
|
$1,000,000 or more |
46% |
35% |
A previous report from BMO found that working Canadians now believe they’ll need $1.7 million to retire.
Nearly seven in 10 (69%) workers say they are confident they are saving enough for retirement, according to LIMRA’s survey of over 1,500 Canadian investors.
That’s because – on top of savings options available through their employer – more than half of workers across income brackets are saving money not just with their employer:
|
Household income |
Percentage of workers with savings at the workplace |
Percentage of workers with savings |
|---|---|---|
|
Under $50,000 |
28% |
56% |
|
$50,00 - $74,999 |
43% |
61% |
|
$75,000 - $99,999 |
56% |
54% |
|
$100,000 - $149,999 |
63% |
48% |
|
$150,000 or more |
67% |
50% |
“The vast majority (91%) of Canadian workers are saving for retirement, either at their workplaces or elsewhere (or both),” says LIMRA. “As expected, saving at the workplace increases as household income increases. Higher-income workers are more likely to work at employers offering defined contribution (DC) plans, and they are in a better position to put aside money each paycheck, compared with lower-income workers.”
What are the factors to consider when planning for retirement?
But retirement confidence should not be solely determined by wealth, notes the firm.
“Even investors with substantial savings need to do in-depth planning and skillfully deploy their assets to meet their lifestyle goals. A strong predictor of confidence is the presence of a plan to manage income, expenses, and assets throughout retirement.”
Having a formal written plan is also strongly linked to retirement confidence: While 86% of those with a formal written plan are “very” or “somewhat” confident that they are saving enough, less than 6 in 10 (58%) of those with no retirement plan express the same level of confidence, according to LIMRA.
“Plans for retirement must address longevity risk and consider both the likelihood and impact a very long retirement could have. While the majority of non-retired Canadian workers feel confident they will be able to live the lifestyle that they want in retirement, carriers and advisors should stress the importance of lifetime-guaranteed options and how a formal written plan can help them ensure they are able to live the retirement they hope for.”
Here’s how you can encourage retirement savings and make it a rewarding experience for your employees, according to ADP:
- Improve communications about your retirement plan.
- Make plan enrollment and annual increases in deferral rates automatic.
- Provide financial wellness programs that teach spending management.
Many workers have previously planned to delay their retirement because they expect they will outlast their savings by 10 years, according to a previous RBC survey.
