Many working Canadians aged 50 and older are overly confident about their level of retirement preparation, a new study from Morneau Shepell has found. Their employers, on the other hand, often have a more realistic view.
Nearly a quarter (24 per cent) of the employees surveyed don’t think they’ll be financially prepared at retirement. More than a third (35 per cent) save less than 10 per cent of their current salary for retirement and, on average, plan to withdraw 15 per cent of their total savings each year after they retire. That amount, the study pointed out, is more than four times the recommended rate.
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More than half of employers (51 per cent) say their employees won’t be financially ready when they retire. Yet 29 per cent of employers don’t provide retirement-related financial information.
“Employers clearly see risk in the retirement preparedness of employees, but often do not have the systems in place to offer the necessary support and education,” said Paula Allen, vice-president of research and integrative solutions at Morneau Shepell.
“Providing employees with more knowledge on the facts and options for personal financial management and health cost issues in retirement is crucial to adequately prepare employees for their transition to retirement.”
The survey also found a strong majority (86 per cent) of employees expect to retire in good health, even though 61 per cent of those aged 50 and over suffer from at least one chronic condition. The most common conditions are hypertension (25 per cent), arthritis (24 per cent), high cholesterol (18 per cent), diabetes (12 per cent) and mental-health problems (nine per cent).
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“The cost of chronic health issues, which often increase with age, can be a big shock during retirement, as employer health benefits may no longer be available for medication and other health-related support,” said Allen.
She also noted public drug plans cover far fewer medications than many employer-sponsored plans.