Most Canadians expecting to fund own retirement: survey

Nearly a third (32 per cent) of Canadians don’t believe government benefits will still be available when they retire, according to new research by Natixis Global Asset Management.

Its survey of 300 Canadians found 78 per cent expect to fund their own retirement income and that a majority are taking personal responsibility for their own retirement. Only 23 per cent expect public pensions to be an important income source.

“We see this [sentiment] in a lot of countries,” says David Goodsell, executive director of the Durable Portfolio Construction Research Center at Natixis Global Asset Management in Boston. “Funding levels are a challenge. Will they be sustainable? People have heard about these arguments and are starting to pay attention to it. They want to make sure they’re able to live comfortably in retirement and they’re planning accordingly.”

Read: 21% of Canadians believe public pensions will be defunct when they retire: report

Many people are also now aware of the issues affecting the pension industry, such as employers switching from defined benefit to defined contribution plans and longer life expectancy, notes Goodsell.

He says many people are wondering what they’re going to do about their own retirement. “The questions a lot of people are grappling with is, ‘Where is the money going to come from?’, ‘How am I going to do this?’ and what I’d say is the interesting answer is that people recognize that retirement income is multidimensional.”

According to the survey, almost all (97 per cent) respondents said the most important retirement funding source is their personal savings and investments, followed by government programs (74 per cent) and sale of a primary residence or business (54 per cent).

Read: Despite optimism, U.S. employees keen for workplace financial help: study

Canadians with families will also be looking to their spouse or partner’s retirement savings (60 per cent), personal inheritance (50 per cent) and contributions from children (39 per cent) as a source of income, the survey reported.

But finding income from these sources may be more challenging than people anticipate, says Goodsell. “. . . The inheritance we see in other numbers may not match up for folks. It’s kind of a little bit of wishful thinking. And this idea of contribution from kids that can range anywhere from they’re going to allow them to move in with them at some point or they may help with certain payments or they may provide vacation . . . . There are some things that come to bear in that thinking.”

Nevertheless, the survey found Canadians are taking a proactive approach to retirement. More than three-quarters (77 per cent) have a general idea of how much they will need to save and 62 per cent have a rough idea of how much they’ll have during retirement. As well, 60 per cent know how much income they need to sustain to fund their desired lifestyle post-retirement.

Read: 90% of Canadians would pay more for predictable retirement income: survey

Yet, on average, survey respondents only plan to save nine per cent of their annual income, which is lower than the 12.1 per cent average among global respondents. As well, only 64 per cent are contributing to an employer-sponsored retirement plan.

There are many reasons that people may not be using their employer benefits, says Goodsell. He suggests some people may not even have access to a plan or may have other pressing financial obligations they have to meet.

Canadians are also aware of the barriers they need to overcome before retirement, according to the survey. Thirty per cent of those surveyed cited insufficient savings as an impediment followed by health-care costs (18 per cent), inflation (14 per cent), inadequate government pension benefits (13 per cent), outliving their assets (12 per cent), not getting enough returns from investments (seven per cent), and divorce or a spouse dying (five per cent).