Canadian retirees report a higher degree of financial satisfaction, are more confident in their financial decisions and have less anxiety about retirement compared to those who have yet to retire, according to new research by the Vanguard Centre for Investor Research.
Its study, which focused on the transition from work to retirement in Canada, the United States, Australia and Britain, surveyed those who intend to retire within 10 years and those who have retired in the past 10 years, exploring the sentiments and challenges faced by both groups.
In Canada, 65 per cent of retired respondents feel financially satisfied compared to 46 per cent of pre-retirees. Four-fifths (80 per cent) of retirees are confident in the financial decisions they’re making in retirement compared to 64 per cent of pre-retirees. And just 20 per cent of retirees expressed anxiety about their financial situation in retirement compared to 36 per cent of pre-retirees.
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“When you look generally at households of all ages, the people most satisfied with their financial situation are older and retired,” says Stephen Utkus, director of the Vanguard Center for Investor Research. “In this study . . . you see this big pickup in satisfaction.
“We believe it really has to do with the psychological resolution of uncertainty, that people have all these questions about retirement — it seems complicated, they don’t have answers when they’re working. And once they make those decisions, whether it’s something to do with their defined benefit or defined contribution account at work or their personal financial situation or even their lifestyle, life gets easier and more satisfying.”
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Canadian retirees cited government pensions as the most common source of retirement income (95 per cent for pre-retirees and 86 per cent for post-retirees), followed by income from personal savings and tax-advantaged accounts (88 per cent for pre-retirees and 85 per cent for post-retirees), defined benefit pension plans (41 per cent for pre-retirees and 58 per cent for post-retirees) and defined contribution pension plans (32 per cent for both groups).
The survey also found nearly half (47 per cent) of those who have yet to retire in Canada said they expect to work part time in retirement, but the reality changes for recent retirees, with only 14 per cent indicating they plan to or currently work part time.
“Across all of these countries, the fraction of older people who are working is rising over time,” says Utkus. “It’s not like that phenomenon has changed. But the point is a lot more people are worried about it before retirement.”
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A majority (78 per cent) of Canadian retirees received some form of formal financial advice to help with financial planning. Among recent retirees, 43 per cent said they should have saved more and 34 per cent said they should have started planning for retirement earlier.
Across the four countries surveyed for the study, Canada is the leader in formal advice, says Utkus, noting the study defines formal advice as a financial advisor, a financial institution or an employer plan.
“The interesting thing, I thought, about Canada, is there’s a very high degree of formal help. It’s a little bit higher than the U.S. but it’s pretty significantly higher than in the U.K and in Australia.”
In addition, more than half of Canadian retirees (56 per cent) and pre-retirees (54 per cent) are using multiple sources of formal advice. “The fraction of those who had no help was one in 10,” says Utkus. “Canada is the advice leader.”
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When it comes to advice, or education, provided through employer retirement savings plans, there’s a definite move towards technology in Canada, says Anna Madamba, a research analyst with the Vanguard Center for Investor Research. Among recent retirees, 59 per cent attended a seminar and 36 per cent visited a website, while those numbers are inverted among pre-retirees with just 31 per cent saying they’ve attended a seminar and 51 per cent visiting a website.
“In the employer plan space, there’s a potential for increasing the range if you use technology,” says Madamba. “It’s there because pre-retirees are starting to move towards the website.”
“People will always say . . . there’s a tendency to believe that the best way to help people is to have a seminar,” adds Utkus. “And that could be true, but maybe the future will be an electronic seminar, augmented by more digital assistance to help with your retirement planning, not a booklet that gets mailed to your house . . . and do your planning that way. There is a technological transformation underway.”
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