Are Canadians retirement-ready? Many aren’t sure

Poll finds two thirds of Canadians either don't know or are unsure about how much they'd need to save to live their desired lifestyle

Are Canadians retirement-ready? Many aren’t sure

In Winter 2022, Canadians' financial security deteriorated though it is still more than two points lower than before the outbreak.

This is according to LifeWorks’ recently released quarterly Financial Wellbeing Index.

According to the study by the leading provider of digital and in-person complete wellbeing solutions, many Canadians are unprepared for retirement and expect to rely on employer-provided benefits. Twenty-three percent of Canadians have no idea and 44% are doubtful how much of their retirement funds they'll need to maintain their preferred quality of living.

The respondents who do not know how much they must save to maintain their desired standard of living had a financial wellbeing score of -13.0, which is more than 10 points below the national average.

“Almost half of Canadians are looking to either their employer or government as their primary income support during retirement. Additionally, the majority do not know how much they need,“ Idan Shlesinger, president, retirement and financial solutions and executive vice president at Lifeworks, commented.  “Looking at this together, Canadians are trusting that their retirement income needs will be met. It is clear that specific planning is required. Both governments and employers are in a good position to support such planning.”

Furthermore, almost a third of Canadians (29%) expect their employer's pension plan to be their principal source of retirement income. A guaranteed monthly pension on retirement is most important to 53% of Canadians, followed by a retirement savings program with a contribution from their employer for 34%.

Personal retirement funds are the expected primary retirement income source for 29%. Meanwhile, 15% expect their principal source of retirement income to be a pension from a government plan.

In comparison to the pre-pandemic benchmark of 0.0, Canadians continue to have a negative financial wellbeing score this quarter, standing at 02.4 for Winter 2022. Savings, mortgages, and debt are all areas where financial understanding is low.

“It is interesting to note that more than half of the survey respondents answered incorrectly on basic knowledge questions. Not surprisingly, answering incorrectly or being unsure of one’s responses was correlated with lower overall financial wellbeing,” said Paula Allen, global leader and senior vice president on research and total wellbeing. “There are likely many assumptions that people are making about tax-free savings accounts and mortgage terms, and this foundational knowledge needs to be addressed.”

The Index report also shows that 52% of Canadians have no idea what a mortgage term is. Other than credit card debt, Canadians are unsure what constitutes bad debt.