While a new Sun Life study suggests a third of working Canadians fear that they’ll run out of money in retirement, another earlier report released the same week argues as many as 80 per cent think they're right on track. The discrepancy is a red flag, say advisors.
“The (earlier) report says, ‘A couple with two income earners and a constant combined income of $40,000 or less throughout their working life would be able to maintain their standard of living in retirement based solely on income from GIS, OAS and the CPP/OPP’," said Ken MacCoy, a financial planner and life insurance agent at Ritepartner Financial Services. “If one thinks they can enjoy retirement on CPP, OAS, GIS and no other savings, they are dreaming and need to pull their heads out of the sand.”
The survey tracked expectations from working Canadians over the last seven years and also found that just one in seven retirees fear the same risk.
"This really is a tale of two retirements," said Kevin Dougherty, President Sun Life Canada, in the report. "It is striking that in today's economic environment, they've developed a view of retirement that previous generations of workers would not recognize."
The survey comes just days after McKinsey and Company, a consultancy, released a study of their own, citing that four in five Canadians, or 83 per cent, believe that they’re financially on track for retirement.
With conflicting opinions on recent surveys about Canadians’ readiness for retirement, WP reached to an experienced advisor to set the record straight.
“Surveys results can vary greatly and most are based on demographics but not all are often taken into account,” said Ken MacCoy, a financial planner and life insurance agent at Ritepartner Financial Services.
MacCoy took umbrage with the McKinsey report, which analyzed 9,000 households with working Canadians and 3,000 households with retired individuals, saying it was misleading and left out a number of key factors to consider: household debt, retiring with debt, inflation, health issues and the “sandwich generation” to name a few.
Back in the day, you could stay at one job for years and have your house paid off in no time; these days, people don’t have the job-staying power they once did with many switching jobs more frequently.
What’s more, fewer employers are offering pension plans, which is one of the main reasons that Premier Kathleen Wynne is pushing for the Ontario Pension plan.
A recent study from CAPs research report from Benefits Canada, which was sponsored by the three largest pensions providers in Canada, cited as much as 54 per cent of Canadians believe that their employer should be responsible to ensure that the investment choices they make in the employee retirement plan are the best choice for them.
In addition, when asked who should assist them in making decisions, only 48 per cent of Canadians polled mentioned they’d use a financial advisor while 15 per cent said they’d handle their own finances.
With household debt, rising health care costs and real estate, especially, not a factor in the McKinsey report, his opinion falls more in life with the Sun Life survey.
“People often consolidate their debt to reduce their monthly payments, but ultimately pay more,” said MacCoy. “Most Canadians ...do NOT consider a mortgage or car loan debt, yet are retiring owing on both.”
“If you don't have a Health Plan, the cost of drugs is expensive. For example, I know of an individual to whom I recommended an individual Health Plan to replace his Group Plan on retirement. He procrastinated and missed the deadline. He now pays over $500 a month for drugs for himself & his wife.”
Just one of the realities for which Canadians will ultimately need an advisor to sort out, he added. Line up advisors, Canadians need you!