How employee longevity is changing group retirement plans

Canadians are living longer than ever, and that reality is changing retirement planning. Here’s how longevity is affecting members and how you can adjust your offering and stand out from the competition.

It’s no secret that Canadians are living longer lives. The number of centenarians —those over 100—has more than tripled since 2001, and members who stop working today could enjoy 40 years of retirement . This is a huge cultural shift, as previous generations only had to plan for a few years post-career. Many are unprepared, and helping your employees plan for and navigate this new normal can help your organization stand out as you compete to attract and retain talent. 

Unfortunately, many plan members aren’t ready for the next chapter, regardless of the length. Nearly half are behind schedule on saving for retirement. Part of the reason is competing financial priorities. Your employees are juggling basic expenses, loans, housing, and more costs. It’s easy for retirement savings to fall behind, especially when money is needed for immediate concerns. In fact, 40% of workers have less than $50,000 in their retirement savings, and 14% aren’t sure how much they have. 

Longevity is more than what happens to your members when they retire. The stress of planning and saving for retirement, along with daily financial needs, can cause your staff to become distracted on the job, miss work, and reduce their efficiency. Over 40% of workers say they’d be more productive at work if they didn’t spend so much time worrying about their personal finances. Moreover, employees say they spend about six hours per month on their personal finances  while on the job. Whether or not you support members with their financial health can directly affect your bottom line and operational efficiency. Partner with your recordkeeper and advisor to promote educational resources and online tools. Give members multiple paths towards increasing their financial health so they can choose the method that feels most comfortable. For some, this may be interactive sessions and webinars, but for others this may be solo reading and calculators. 

In a few years, Gen Z-aged workers will outnumber Baby Boomers in the workplace. With the oldest of this generation still in their 20s, don’t assume they’re not aware of the need to plan for the future and the role an employer can play. In fact, over 40% of Gen Zers say saving for retirement is a financial priority—over saving for a car, managing debt, or saving for a big purchase.

Plus, more than half say they’re not willing to work for an employer who didn’t offer a retirement plan. Not only do Gen Z staff care about retirement, but they prioritize it. Because each generation can be so different, you should consider incorporating age-specific strategies and communications. Not only will it resonate more strongly with each group, but it will also help demonstrate your commitment to personalized support.

More than 40% of workers rate their current financial situation as fair, or even poor, and nearly 60% are already worrying about running out of money in retirement. Sponsors can make a big impact in this area. The majority of workers say their employer influences their financial decisions. Increasing awareness of longevity risk, supporting financial education, and providing tools can make a difference in helping members improve their financial health, both today and for their future retirement. Get support from your recordkeeper and advisor to help with these tasks. Both parties should have significant resources already available so you can get started right away.

The retirement you help your members plan for today is vastly different from those of past generations. Preparing for an extended retirement requires a different approach and greater support. This shift needs to be incorporated into your program, both to help your members prepare for their next chapter, and to help your organization truly meet the needs of today’s workforce. 

Q: How long will my retirement last in Canada?

A: According to a recent Manulife survey, Canadian workers may plan for a 40-year retirement. Statistics Canada shows that the number of Canadians aged 100 or older has more than tripled since 2001. Each member’s journey to retirement is unique, but workers today are living longer than ever before. 

Q: What is longevity risk and why should sponsors care?

A: Longevity risk is the possibility of a retiree running out of money during their retirement. Sponsors should care about this concern because it could affect their members and addressing it may help with retention, employee satisfaction, and recruitment, as many Gen Zers are already worried about running out of cash in their later years.

Q: How do Gen Z feel about retirement planning?

A: According to a recent Manulife survey, Gen Z workers are very concerned about retirement planning and consider saving for retirement a priority. They value the input of their employer in making financial decisions and are more likely to stay with an organization that offers financial wellness programs.

Q: What retirement plan design strategies support longevity?

A: Sponsors and advisors should incorporate longevity into their retirement plan designs, and there are numerous strategies that can help with this challenge. Leaders should consider target-date funds to address shortfall risk, promoting financial wellness programs, and consider phased retirement options.