Past to Present
Retirement by definition is “the practice of leaving one’s job or ceasing to work after reaching a specific age,” derived from the French ‘retirer’ – to withdraw. As a concept, it’s been around since the 18th century. However, as a government policy, it was only adopted by countries during the late 19th and early 20th centuries.
In Canada, Old Age Security was started in 1952 (and prior to that, the Old Age Pensions Act in 1927), CPP in 1966, and the Guaranteed Income Supplement in 1967. In First Nation communities in Ontario, it wasn’t until the mid-1980’s that several Nations opted-in to private pension plans. Today, 44% of the population overall participates in workplace pensions (StatsCan).
For many years, this concept has existed as an absolute term with a commonly understood meaning, perpetuated by the pension industry and the media in general. For example, years of service + age = ‘retirement factor’ and in defined contribution platforms, ‘early’ and ‘normal’ retirement ages are defined (but may not have practical applications). Regardless of capacity and capabilities, people usually attach it to the age at which they’re told they can retire.
Retirement Readiness
According to this year’s Benefits Canada’s 2024 CAP Member Survey, significant negative impacts on Canadians’ ability to save and manage the cost of daily life are threatening their retirement preparedness. A quarter (26%) of unretired Canadians expect to continue working in retirement to support themselves. Half (49%) haven’t set aside any money for retirement in the last year; 43% say they have enough to set some savings aside. Cost of living is the top concern for Canadians (70%), followed by inflation (63%), and worries about government cuts to social services (61%).
For First Nation communities, there are some very important differences. First, not all First Nations' people contribute to CPP. This is especially true for elected officials, who often serve many council terms without any pensionable years. Second, not all First Nations have implemented private pension plans. And third, home equity – often done during retirement years, reverse mortgages or downsizing aren’t usually possible in First Nation communities.
As well, for the first time in history, there are five distinct generations in the workforce – Gen Z, Millennials, Gen X, Baby Boomers and the Silent Generation. As Baby Boomers pass and younger people enter the workforce, the concept of “retirement” has measurably changed.
The New Retirement
Today, three quarters (74%) of Canadians aged 24 to 44 view the conventional retirement approach as outdated. Millennials will not be retiring at the same time or in the same way as current retirees. To them, retirement is not a fixed age, and for some, suggests waning energy or ability. As such, the concept of the “new retirement” has evolved in recent years and includes the ideas of ‘starting older’ and possibly deferring retirement.
Younger cohorts are less attached to security, growing up in a time with more uncertainty, where they must figure things out as they unfold. People more commonly change jobs, are more mobile, and less attached to legacy. With the generational wealth transfer in progress, some are opting to buy in to an expensive housing market rather than save for their retirement years. And we’re living longer.
As humans, we’re hardwired to have purpose, which often means work. However, culturally and emotionally, we’re slowing letting go of generational shame around the ideas of ‘working hard’ or being ‘productive’ towards more to purpose-driven lives.
Financial Wellness
And yet, we know that one of the top sources of stress for employees is personal finances (43%, up from 35% in 2022). And emotional stress, financial or otherwise, is one of the leading causes of disability claims. Mental health-related absences represent about a third of LTD claims – the fastest growing claim type, with an increase of 53% for STD and 70% for LTD claims (SunLife). As such, emotional/mental health is now the top area of benefit plan investment (57%).
Fortunately, financial and psychological behaviours are significant determinants of our financial wellness. Understanding one’s behaviour is key. One way to do this is by exploring your financial archetype. Helping to explain what drives financial behaviours and habits, archetypes can help us understand how we think, feel, and behave with money. Once we’ve unpacked our natural financial habitats – patterns, attitudes, tendencies and beliefs surrounding money – we’re better able to address and deal with stressors.
At WP, we’re recalibrating how we engage younger generations and structuring our processes to relate to all generations, not just those who see retirement as an absolute event in time. We’re here to support you and your staff with employee engagement that reflects and honours the changing tide. Our desire to help will continue to manifest by honouring generational, emotional, and knowledge-based differences in psychologically safe environments.