Retirement at the tipping point

The report, based on a survey executed in March, treats the economic impact of the past year, outlining the reactions of survey respondents about retirement, family and finances.

Findings include what Dychtwald refers to as ‘resetting the retirement clock’ or delaying retirement due to the impact of the economic crisis. “We think of the economic crisis as something that’s happening right now and it’s affecting us right now, affecting companies in terms of their earnings, this week this month,” he said.

“It (retirement)’s our future dream and what became obvious to us is that today’s economic crisis has a dramatic and powerful alteration effect on everybody’s notion of retirement,” he explained, adding that changes include respondents’ decisions to delay retirement, a reversal of the trend towards earlier retirement.

The report also covered respondents’ concerns about making up for financial losses, the shift from defined benefit to defined contribution (DC) pension plans, the effect of the markets on DC plans, and increased savings rates and debt reduction.

Experts consider many of Dychtwald’s findings applicable in Canada, since some financial and demographic trends resemble each other in both countries and see the findings as pointing to opportunities for fund-licensed advisors, insurance-licensed advisors and benefits consultants.

In the insurance category, the decline in DB plans and therefore the certainty of a completely predictable source of retirement income could boost the case for guaranteed minimum withdrawal plans, says Robert Fleischacker, president of Markham-based Stonehaven Financial Group, suggesting that GMWP’s have many of the same characteristics as DB plans.

On the benefits side, the finding that some individuals will push back the retirement clock means increased attention to benefits, explains Paul Greene, principal of Toronto-based Paul J. Greene and Company Insurance and Financial Services Corp. “We’re looking at our plans right now to make sure that coverage is available for people that the employer wants to cover,” he says.

With group insurance, this means amending employer plans so that employees actively working after age 65 can receive full benefits including travel insurance while on vacation.

While some might object to the added costs, Greene sees them as workable. With group insurance, he explains, the incremental cost in covering an individual getting one-year-older is not substantial. “And in the defined contribution universe the payroll burden is always measured in terms of a percent of payroll so the cost to maintain that person on a DC pension plan doesn’t increase because they are older,” he says.

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