2016 Retirement NOW REPORT Life s brighter under the sun
Contents About the Sun Life Financial Retirement Now Report... 3 Life in retirement... 4 Finances in retirement... 7 Leaving a legacy... 9 2
About the Sun Life Financial Retirement Now Report By surveying retirees about their present circumstances and working people about their plans for the future, the Sun Life Financial Retirement Now Report aims to provide a balanced, insightful view of the evolving state of retirement in Canada. Inside this report After seven years of successful study, Sun Life Financial wound up its Canadian Unretirement Index in 2015. Our original hypothesis that baby boomers were going to transform retirement and that many would work past the traditional retirement age of 65 for both lifestyle and economic reasons was proven true. Eight years later, unretirement is a widely accepted idea many have already put into practice. The next research opportunity is to better understand what it s like to live in retirement. We ll continue to track the views of today s workers. Additionally though, we will focus on Canadian retirees in an effort to understand their retirement, in financial and other respects. Our new hypothesis is that retirement is less challenging than many Canadians fear. It s more affordable than a lot of us believe (particularly given the state of the public pension system) and there are non-financial benefits that can be realized after one s career has ended. In this first Retirement Now Report executive summary, we ll focus on the results gained from our retiree surveys. There s a lot to share. For information regarding any of our other findings, please contact us at retirementnow@sunlife.com. These findings are part of an Ipsos Reid poll conducted between Dec. 15 and 23, 2015 on behalf of Sun Life Financial. For this survey, Ipsos Reid conducted online interviews with a sample of 4,010 Canadians drawn from the Ipsos I-Say online panel. That total includes 2,006 retired Canadians (all at least 30 and no older than 80) and 2,004 working Canadians (age 30 to 65). The data for retired Canadians were weighted by region. The data for working Canadians were weighted to ensure the sample s regional, age and gender composition reflects that of the actual Canadian population according to the 2011 Census data. The precision of Ipsos online surveys is measured using a credibility interval. In this case, the survey is accurate to within +/- 2.19 percentage points at 95% confidence level had all Canadian adults been polled for both the retired and working Canadian samples. All sample surveys and polls may be subject to other sources of error, including, but not limited to methodological change, coverage error and measurement error. 3
Life in retirement In a word, life is good for Canada s retirees. At a time when roughly 1,000 baby boomers enter into retirement each and every day, this will come as a relief, perhaps even a surprise. Today s retirees are positive about post-work life, many are doing well financially and a strong majority is in good health. First, our headline: Nine in 10 retirees (88%) 1 feel positive about my life in retirement. Just 12% report feeling negative. 1 All results have been rounded to the nearest full percentage figure. QGenerally speaking do you feel positive or negative about your life in retirement? Positive 88% Nearly 9 in 10 retirees feel positive about their life in retirement. Negative 12% Regionally, respondents in Ontario are least likely to report this view: 84% of retirees are positive. The other regions all fall within the margin of error. There are no differences between men and women. There are, however, differences between those who are married (90% positive) versus those who are single (84% positive) or divorced, separated or widowed (85% positive). And there is a difference between those who have a financial advisor (94% positive) and those who don t (83% positive). About seven in 10 retirees say they are in good physical health. More than half (54%) say their physical health is good, another 13% say very good. Just 9% say they are in poor health. In terms of mental health, 45% say good, 43% say very good. Only 4% say poor. Four in 10 (42%) agree with the statement: my physical health has improved in retirement. Forty-five per cent disagree; the rest answered don t know. When you flip the question however, just 27% say their physical health has deteriorated in retirement. Sixty-three per cent disagree and the rest don t know. 4
QDo you agree or disagree with the following statements? Agree Disagree Don t Know My emotional health has improved in retirement. 62% 25% 13% My life in retirement is more fun than my work life was. 59% 29% 12% My retirement is like a vacation. 54% 38% 7% I spend less than I expected to in retirement. 48% 43% 9% I exercise more often in retirement. 48% 47% 5% I worry more about money now than when I worked full time. My physical health has improved in retirement. 47% 48% 4% 42% 45% 13% I m more intellectually stimulated in 41% retirement than I was during my work life. 47% 13% So while about one quarter have experienced a deterioration in their physical health since retiring, the rest have either seen no significant change or in fact have seen their physical health improve. Clearly the aging process plays a role in all of this. We ll dig deeper in future study. The mental health picture is more dramatic. Six in 10 (62%) agree that my emotional health has improved in retirement. One quarter (25%) disagree and the rest don t know. Seventy-eight per cent disagree that my emotional health has deteriorated in retirement. Eleven per cent agree and 11% don t know. We presented respondents with 20 agree/disagree statements in total. Ten were positive and 10 were negative. There are no instances in which more respondents agreed than disagreed with a negative statement. Retirees are more likely to agree than disagree that: My emotional health has improved in retirement. My life in retirement is more fun than my work life was. My retirement is like a vacation. I spend less than I expected to in retirement. 5
Almost half of retirees (48%) say the single best thing about retirement is the freedom to do what you want, when you want. Fifteen per cent say it s not having to follow a schedule. Three in 10 (31%) say the single worst thing is living with financial constraints. Eight per cent say not getting out of the house enough. Another 8% say my health. And 7% say boredom. But a higher number (35%) say nothing when asked to name the single worst thing about retirement. QWhat was the biggest financial surprise of retirement? How easy it is to live on a reduced budget 32% How difficult it is to live on a reduced budget 22% I m spending more than I expected 10% How quickly my money is running out 10% I m spending less than I expected 10% The cost of health care 8% Other 9% 6
Finances in retirement Half of retired Canadians (49%) say they saved enough for retirement. One third (33%) say they did not and 19% are not sure. Retirees with a financial advisor are far more likely to answer positively: 62% versus 38% of those without an advisor. That being said, we asked retirees to name the biggest single financial surprise of retirement. These results add colour to our understanding of the different experiences retired Canadians are having. One third (32%) say how easy it is to live on a reduced budget. Close to that number 22% say how difficult it is to live on a reduced budget. One in 10 says I m spending more than I expected. The same number says I m spending less than I expected. On average, Canadian retirees are living on 62% of the income they earned immediately before leaving the workforce. This falls within the range of income replacement ratios recommended by financial advisors and other personal finance experts, and reflects the high instance of workplace plan membership among today s retirees. (Seventy-seven per cent had access either themselves or through a spouse to a workplace plan.) Q What percentage of your retirement income comes from each of the following sources? Workplace Pension or Retirement Savings Plans 38% Other Source 6% Inheritance 2% Home Equity 2% Personal Savings and Investments 15% Sources of retirement income Government Plans 38% 7
Five per cent live on 20% or less of what they earned; 12% have between 21% and 40%; 29% are between 41% and 60%; 41% are between 61% and 80%; and 14% are between 81% and 100%. This income comes from multiple sources. Retirees report that, on average, 38% of their income comes from government plans, another 38% from workplace plans, 15% from personal savings and the rest from home equity, inheritances and other sources. Finally, we asked both working Canadians and retirees to estimate what they spend on a variety of monthly expenses. The average results illustrate clearly how much less expensive life after work can be. QHow much, on average, do you spend on the following on a monthly basis? Working Canadians Retired Canadians $971 $928 $3,431 $2,611 $731 Monthly total $464 $396 $498 $333 $431 $86 $110 $213 $118 $124 $220 $170 $249 Food Housing Health care Income tax Leisure/travel Entertainment Transportation Savings 8
Leaving a legacy Almost half of retired Canadians have either received an inheritance (28% have) or expect to (19% say it is either very likely or somewhat likely ). Much larger numbers expect to leave money when they pass. Almost half (46%) say it is very likely they will leave an inheritance. Another 31% say it is somewhat likely. Seven per cent say it is somewhat unlikely, 10% say very unlikely and 6% don t know. Four in five (81%) say they have a will, a key document in a financial plan. But interestingly, 22% say that they have not discussed the terms with any of their heirs. Half (51%) say they ve discussed the terms with all of their heirs. One quarter (27%) have talked with some but not all of them. We also asked retired Canadians what level of pre-retirement income they recommend today s workers seek to replace in retirement. Given their average replacement rate of 62%, it s interesting to see that they recommend an average replacement rate of 71%. Their top three pieces of advice for working Canadians? Take care of your health, start saving/investing early and live within your means. They re nothing if not practical. Q Do you have a will? Q Have you discussed the terms of your will with your heir(s)? Yes 81% No 18% Don t know 1% Yes, with some, but not all of them. 27% Yes, with all of them. 51% No, I have not discussed the terms with any of them. 22% Retirees with a will (n=1658) 9
For more information on the Sun Life Financial Retirement Now Report, or any of the information presented in this paper, please contact retirementnow@sunlife.com, or visit www.sunlife.ca/retirementnow. Sun Life Assurance Company of Canada Sun Life Financial Retirement Now Report 2016 GRP1788-E-04-15