Older couple engaged in retirement planning.

Canada Pension Plan – Will It Be There When You Retire?

In this post, Benefit Strategies Inc. in Edmonton Alberta takes a look at how Canadians feel about retirement and some troubling statistics about the state of the public pension plan in Canada.

  • The belief that Canadian pension plans will cease to exist at the point of retirement is shared by as much as 21% of today’s working age Canadians, according to an HSBC report entitled The Future of Retirement: Shifting Sands.
  • Concern over the decline of public pensions is also worrying at least 62% of the respondents. That same percentage of Canadians (62%) was mindful of economic uncertainty as it applied to their ability to save for retirement.
  • On the heels of the 2007/08 financial crisis, 52% of Canadians polled stated that it is now more difficult than ever to save for retirement.
  • Employee pension plans were troubling 48% who question whether they will receive a full pension payout on retirement.
  • Rising health-care costs concerned 74% of Canadians, who feel they will have to spend more in the future.
  • The report also indicates changes in the landscape of retirement are compelling Canadians to adjust their retirement outlook. Many are using online technology to research saving options, with 22% having deposited money in an online savings account.

How Canadians feel about retirement is certainly a cause for concern. Are you feeling bewildered by these Canada Pension Plan statistics and the potential ramifications for your future retirement?

Contact Benefit Strategies today at 1-780-437-5070 or send us an email and let us show you how to develop a positive course of action in today’s volatile retirement climate.

You might also like our Benefit Strategies article entitled New Trends in Retirement Planning in Canada.

Older man with laptop at a table.

When Employees Delay Retirement It Affects Benefits Plans

The changing demographics of the workforce have seen an increased number of employees delay retirement and work beyond the retirement age we had grown accustomed to.

Some seniors choose not to retire because they still find work interesting. Others cannot afford to retire and feel they must continue working. As an employer, both groups will force you to re-examine your employee benefits package to determine how this emerging workplace trend will affect your business.

Defined Contributions Delay Retirement

Defined contribution benefit plans, where a portion of the employee’s salary is used to pay for their benefits, has made it difficult for many to save for retirement however, employers can also suffer when employees delay retirement.

Employees in higher positions that wait longer to retire leave no room for mid-level employees who want to move up. Mid-level employees are squeezed out of their linear career trajectory.

Companies identifying this trend are feeling pressured to move towards developing more lateral career paths for all employees. Business owners must identify responsibility overlaps and allocate portions of high-level employee work to their mid-level employees.

Aging Employees In the Workplace Increase Health Claims

Managing aging employees in the workplace has also become more of a challenge for employers. With aging employees, health claims rise and increased pressure is applied to employee benefit packages. In addition, these higher costs of treatment are often passed on to the employer.

Be sure to check out our article on Employee Benefit Plans for Employees Over 65 Years.

Changing Employee Benefits for the Changing Workplace

Before you consider changing your employee benefits plan, speak with one of our Benefit Strategies brokers first. We can help you determine where your current benefits package might be insufficient to accommodate aging employees in the workforce.

We’ll guide you through the steps necessary to optimize your employee benefits package and help prepare your business for adjusting to the changing demographics of the workforce.

Call Benefit Strategies Inc. today at 1-780-437-5070 and ask for Daryl Smith.

As an experienced employee benefits broker, Daryl will explain in detail why employees delay retirement, and what your business needs to address in light of this emerging workplace trend. You can also reach Daryl by email.

Street signs displaying Work & Retirement

New Trends in Retirement Plans in Canada

New trends in retirement plans are a challenge according to Human Resource consulting agency Morneau Shepell’s recent study called Trends in Human Resources. Not only do employers want to offer competitive retirement plans to their employees, but 21% also want to reduce both the costs and the risks associated with the retirement plans they offer.

DB and DC Employee Pensions Plans

Here are three trends in retirement plans that Canadian employers should understand.

DB Plan Sponsors – De-Risking Retirement Plans

A Defined Benefit Pension Plan (DBPP) is where the income received in retirement is pre-set and typically calculated using a formula that includes employee’s years of employment and earnings. The employer manages the assets and the employee will receive statements each year showing the total retirement benefits in the plan.

The study shows that there’s a new retirement planning trend for employers offering DBPPs:

  • 38% are reviewing their investment strategy
  • 38% are reviewing their plan design
  • 18% are considering converting their DB plan to a DC plan

DC Plan Sponsors – How to Make Retirement Income Adequate

A Defined Contribution Pension Plan (DCPP) is where the income received in retirement is based on the assets in the retirement account upon retirement. The employee determines where to invest contributions from a variety of investment options based on their risk tolerance and goals. Upon retirement the amount within your DCPP is based on contributions and the performance of earnings over the years.

According to the study, DC plan sponsors are looking at different ways to provide payment options for retirees who typically are left to search out investment products on their own.

Rather than letting retirees make poor or expensive decisions, 27% of DC plan sponsors are already providing payment options or seriously considering doing so.

By providing payment options, DCPP Sponsors can enjoy several benefits:

  • Reduced post-retirement investment fees, which will increase retirees’ income
  • Nurture an ongoing relationship with retired employees
  • Maintain assets and balances in the retirement plan in order to keep fees stable

Employers Also Considering Other Aspects of Retiree Benefits

In addition to improving the financial side of retirement for employees, some employers are also considering employee health:

  • 31% provided health benefits to retirees
  • 57% do not provide health benefits to retirees and have no intention to do so

These new trends in retirement plans reveal emerging options to provide for employees’ health needs well into retirement, with one option being a retiree exchange, which gives retirees access to benefits while keeping employers’ costs fixed.

For more information on emerging trends in retirement planning and on how to effectively implement or manage retirement planning within your employee benefits program, please contact our professional advisers at Benefit Strategies Inc. by calling 1-780-437-5070, or by filling out our online Contact Form.

See also, our blog article on the Realities of Retirement Planning in Canada.

Street signs displaying Work & Retirement

The Realities of Retirement Planning in Canada

According to the recent RBC poll on Retirement Myths & Realities, Canadian’s expectations of retirement planning in Canada and the reality of their actual retirement objectives and goals have many major conflicts.

Here are some highlights from the poll that compare retirement planning “Expectations” with “Reality.”

Social Time Missed More Than Regular Paycheques

Expectation: Nearly half of the Canadians polled say they will miss their paycheques after retirement, when in reality, only about 26%1 say they do.

Reality: What Canadians actually miss most after retirement is the social interaction with co-workers – in fact, over half of retired Canadians say they miss the social outlet more than they miss their paycheque.

Time For Self Tops Travel Expectations

Expectation: The top expectation of how Canadians think they will spend their time after retirement is doing more travel.

Reality: In reality, as many as 7 out of every 10 Canadians say they travel less and actually spend more time “taking time for myself.”

Most Canadians Don’t Choose Their Retirement Date

Expectation: Approximately 80%2 of Canadians think they will choose their own retirement date.

Reality: The facts reveal however, that as many as 43% of Canadians won’t get to choose their retirement date.

  • 48% of Canadians retire earlier than expected
  • 46% of Canadians retire when expected
  • 6% of Canadians retire later than expected

There are several reasons for this including health, costs of living, the need to take care of a loved one, or depending on the employer’s request.

Canadians Worry About Financial Costs After Retirement

If you are worrying about how you will pay all your bills while supporting your lifestyle after retiring you are not alone.

Expectation: Just less than half of the Canadians polled (48%) say they worry about their money lasting their lifetime.

Reality: In reality, Canadians vary on how they feel about their financial position:

  • 38% feel they have enough to do everything they want
  • 44% feel they can live comfortably but without room for the “extras”
  • 18% feel they are just making ends meet

Retired Canadians Will Spend Around $2400 Per Month

Retired Canadians need approximately $28,8003 per year after retiring. This total retirement income includes:

  • Living expenses
  • Food
  • Travel
  • Entertainment
  • Medical expenses

Many retired Canadians also take on extraordinary purchases during retirement including buying a new vehicle, renovating their home, or giving large amounts of money to family members.

Why Is Retirement Planning in Canada Important?

Retirement represents an important life event that you need to seriously think about and prepare for.

Whether your retirement comes exactly when you expect it to or if you should retire earlier or later than expected, the fact of the matter is, you should work with a chartered retirement planning counsellor that can provide you with good solid advice.

Are you a baby boomer nearing retirement and needing some more concrete answers about financial retirement planning in Canada? Let us help you understand why retirement planning is important.

Call Edmonton’s Benefit Strategies at 1-780-437-5070 to speak with one of our retirement planning counsellors and advisors about early retirement planning for small business owners or for individuals.

Employees in a board meeting.

When Should Your Key Employees Start Saving for Retirement?

If your key employees are like most other Canadians they are saving for retirement and dreaming of the day they retire.

Pursuing leisurely activities such as travel, hobbies, volunteering, and spending more time with friends and family are likely at the top of their list when they are no longer tied up by the responsibilities of work. But without a steady paycheque will they be able to support their leisurely lifestyle – and what about unexpected expenses such as health bills?

This is why employee benefits and retirement planning is a must in order to make saving for retirement a possibility. Retirement planning is also a key Executive Benefit that your company can offer to help attract and maintain key employees within your workforce. Most employees find Retirement Plans important as many are not in the habit of regularly putting aside money for retirement.

Your employees also deal with the many costs of living expenses such as mortgages, education, raising children, food, and other unexpected expenses that often get in the way, preventing employees from properly saving for retirement, especially during their earlier years in the workforce.

The important questions then become paramount:

  • When should your key employees start saving for retirement
  • And how can you, as their employer, help with their retirement planning?

Here are three critical pieces of advice we’ve put together to help you explore the topic of employee benefits and retirement planning.

1. Help Employees Develop Good Retirement Saving Habits

Starting to save for retirement at a young age (even in very small increments) can help establish good lifelong saving habits.

Even though many employees find it much harder to actually do it, most do understand that every penny set aside for retirement early on definitely helps, allowing for the benefits of tax-savings and compounding interest.

As an employer, you can empower your key employees to start saving (even if it’s only small) for their future.

2. Keep Your Employees Informed with Retirement Planning Information

Your employees can also benefit from proper information and education in regards to saving for retirement. The big question for many Canadians is how much money will they actually need to retire? Helping them start to understand this number (and how they can achieve it) can help ease their worries and set them on the correct path of retirement planning.

The following outlines several factors that go into the financial influences that affect retirement savings. A good employee benefits and retirement planning specialist can help explain and incorporate these into an effective Retirement Plan:

  • Lifestyle choices
  • Monthly and annual expenses
  • Any additional accumulated savings
  • Any monthly pension income (through private or government sources)
  • Expected investment rate of return
  • Rate of inflation

Your company’s Employee Benefits Planner can provide useful retirement planning tools and can even advise you on the best ways to inform your workforce on retirement best practises.

3. Help Employees Plan for Retirement within 10 Years of Retiring

There are so many unknowns in your twenties and thirties that it can be hard to establish a formal retirement plan. Some of these unknowns include health, value of assets, rate of inflation, rate of return, and so on. This is why many retirement strategists will recommend that a formal retirement savings plan can come later in life when you are closer to retiring.

A general rule of thumb many people follow is to start seriously thinking about their retirement plan approximately 10 years before retiring and to formalize an official retirement plan 5 years before retiring.

This is when your company’s Employee Benefits Planner can step in and work with employees nearing the end of their career. Professional advice, accurate number crunching, and support through the retirement transition are very valuable to those gearing up to retire. For more information, call us at 1-780-437-5070.

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Calculator with itemized tax numbers

Poll Reveals Employee Preferences on Saving for Retirement

When it comes to retirement saving, Canadian workers prefer private investments, TFSA and RRSP over CPP.

A recent opinion poll by Ipsos-Reid for the Canadian Federation of Independent Businesses (CFIB) published some very interesting findings of Canadian’s retirement planning, ability to save for retirement, and preferred retirement planning and employee benefits.

The CFIB study discovered that before increasing CPP, more Canadians want to save extra money for retirement through TFSA and RRSP (Tax Free Savings Accounts and Registered Retirement Saving Plan), or through other private investments.

Here are some other interesting findings for you, as an employer, to consider.

1. 60% of Canadians can’t afford to save more than they already do.

This confirms that most likely, your employees are just barely supporting their current lifestyle due to living expenses and saving for retirement. Without government or workplace assistance, employees will struggle to save what they would like to save (or actually need to save) in order to maintain their lifestyle after they exit the workforce.

2. Less than 1 in 5 support putting more money into CCP.

Only 19% of working Canadians surveyed say they would put more savings into CCP. Furthermore, the results find that over one-third of Canadians would struggle to afford any increase in mandatory CCP, and would be forced to reduce spending on essential expenses such as rent and food.

3. Canadians want government to reduce taxes and/or create new saving incentives.

Rather than mandatory CCP increases, employees feel that the best way government can help them save for retirement is for government to reduce spending and taxes, and create new additional saving incentives.

Need Help with Employee Benefit Planning?

Do these survey results match the feelings of your employees?

Is your Employee Benefits plan reflective of how your employees want to save for the future? Are your employees more interested in TFSA and RRSP saving than CCP?

Call Benefit Strategies at 1-780-437-5070 to speak with one of our employee benefit advisors about employee benefit planning and how you can help your employees save for their future.

Read more about the study here.