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Canadians are not prepared to manage health and financial issues in retirement

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Corporate / Pension/Retirement / Canada

Canadians are not prepared to manage health and financial issues in retirement

Morneau Shepell survey finds that Canadians age 50 and over expect to withdraw 15 per cent of total savings each year in retirement – four times the recommended rate

TORONTO, June 15, 2016 /CNW/ - Morneau Shepell announced new research today from its study, "Forgotten Decisions: the disconnect between the plan and reality of Canadians regarding health and finances in retirement." The study polled working Canadians, 50 years of age and over, and found they are optimistic about their health. Their plans, however, may not be realistic.

Employees plan to use their retirement savings at an unrealistic rate

The survey discovered unrealistic plans when looking into the amount of income employees are contributing to a retirement fund versus their expected annual withdrawal. More than one third (35 per cent) of employee respondents reported saving 10 per cent or less of their current salary for retirement. Even more concerning is that, on average, employee respondents plan to withdraw 15 per cent of their total savings a year following retirement – four times the rate that is typically recommended.

"Employees have an unrealistic view of what their financial situation will be in retirement," said Paula Allen, Vice President, Research and Integrative Solutions, Morneau Shepell. "There is an evident disconnect between how long retirement income typically needs to last, the savings pattern of many, and the withdrawal plans of most. More than 70 per cent of respondents are planning to withdraw more than the recommended amount annually."

The survey also found that responsibilities in retirement may include the need to support dependants. Seventeen (17) per cent of respondents indicated that supporting dependants was among the most important financial issues. Thirteen (13) per cent indicated concern regarding their support of dependant children and 14 per cent indicated concern about the support of elderly parents.

Optimism about health may suggest under-planning for health costs

The survey found that nearly two thirds of employees age 50 and over (61 per cent) are currently suffering from one or more chronic health conditions. Despite this, 97 per cent of survey respondents described their current level of health as being good, very good, or excellent and a large number of employees (86 per cent) are expecting to retire in good health.

"Chronic health issues are so commonplace that sometimes they are accepted as the norm. Unfortunately, this can lead to complacency and lack of investment in one's own health and lack of preparation for health costs," said Allen. "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. As well, the public drug plan covers much fewer medications than most employer-sponsored plans."

The most common chronic conditions affecting survey respondents include hypertension (25 per cent), arthritis (24 per cent), high cholesterol (18 per cent), diabetes (12 per cent), and depression, anxiety or other mental health problems (9 per cent).

"Health is one of the most important factors to consider when preparing for retirement," noted Allen. The majority of respondents (59 per cent) indicated they will not have access to an employer-sponsored health benefits plan after they retire.  Two thirds indicated health costs as one of their top concerns in retirement.

The survey found that perceptions surrounding employees' preparedness for retirement differs between employers and employees

Of the employees surveyed, one in four (24 per cent) indicated that when they choose to retire, they will not be financially prepared. Twenty three per cent (23 per cent) of employee respondents plan to rely on government pension programs as a primary source of retirement income. On average, however, more than half (51 per cent) of employer respondents indicate that their employees will not be financially prepared when they retire. Furthermore, employers believe that one third of their employees will not be financially prepared to deal with a health crisis when they retire.

Almost all employer respondents (96 per cent) indicated that it is important for employees to know that health costs will impact retirement income. Despite this, a large proportion of employers (29 per cent) reported that they do not 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 Allen. "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."

About the survey

The purpose of the survey by Morneau Shepell, conducted in September 2015, was to understand what employees nearing retirement thought about the unforeseeable circumstances surrounding personal health and healthcare costs in retirement savings.

Two separate surveys were conducted. The first surveyed employed Canadians who were 50 years of age or older at the time they responded to the survey. The second surveyed employers who were senior decision makers within their organization. The margins of error for the survey are +/- 3.1 per cent for employee findings and +/- 9.8 per cent for employer findings; valid 19 times out of 20.

About Morneau Shepell Inc.

Morneau Shepell is the only human resources consulting and technology company that takes an integrative approach to employee assistance, health, benefits and retirement needs. The Company is the leading provider of employee and family assistance programs, as well as the largest administrator of retirement and benefits plans and the largest provider of integrated absence management solutions inCanada. Through health and productivity, administrative, and retirement solutions, Morneau Shepell helps clients reduce costs, increase employee productivity and improve their competitive position. Established in 1966, Morneau Shepell serves approximately 20,000 clients, ranging from small businesses to some of the largest corporations and associations in North America. With almost 4,000 employees in offices across North AmericaMorneau Shepell provides services to organizations across Canada, in the United States, and around the globe. Morneau Shepell is a publicly-traded company on the Toronto Stock Exchange (TSX: MSI). For more information, visit

SOURCE Morneau Shepell - Corporate  

For further information: Heather MacDonald, Kaiser Lachance Communications, 647.725.2520 ext. 207,