Let me ask you something that I
ask my son and my daughter from time to time. If your employer offered you a
choice between a slightly bigger paycheck today or a pension that would pay you
a steady income for the rest of your life when you retire, which would you
choose?
If you're like most Canadians,
you'd probably take the pension. And here's the thing, you'd be willing to give
up a surprising amount of your paycheck to get it.
Back in the early 2000s,when I
retired things were different, the average private-sector worker was willing to
sacrifice about 3.3% of their earnings to land a job with a pension. Fast
forward to today, and that number has tripled to just over 10%. Let's put that
in perspective. My son and my daughters are willing to take a pay cut to work
for an employer who has a pension. This means that for someone earning $60,000
a year, that's like saying, "I'd willingly take home $6,000 less every
year if it meant I'd have a secure retirement."
That's not a small decision.
That's a loud, clear message from Canadian workers: we are worried
about retirement, and we're willing to pay real money to feel less worried.
The really fascinating part?
Over the same period, private-sector pension offerings have been heading in the
opposite direction. Fewer employers are offering pensions, and the ones that do
are increasingly moving away from the old-fashioned "defined benefit"
plans, the ones that guarantee you a set monthly income for life.
If you're in your 40s or 50s,
like my children, you're right in the middle of this shift. You're close enough
to retirement to be thinking seriously about it, but you still have time to do
something about it.
Here's what the research tells
us:
1. Pensions help you stay put. Workers with a traditional defined benefit
pension are roughly 40% less likely to change jobs each year than workers
without one. That's good for employers who want to keep experienced staff, but
it also means you need to think carefully about what you're trading when you
switch jobs.
2. Not all pensions are created
equal. A defined benefit plan,
the kind that promises you a specific monthly amount in retirement, is the gold
standard. I was lucky that was the pension plan I had. Defined contribution
plans, where you and your employer contribute to an account that you then manage
yourself, are more common now but put more responsibility on your shoulders.
3. Saving on your own is hard. Without an employer pension, you have to
figure it all out yourself. How much to save. Where to invest. How to make it
last. Some people can manage that, but it's not easy. It requires a level of
financial literacy that many of us simply don't have.
Here's the good news: you're not
powerless. There are practical steps you can take, starting today.
Talk to your employer. If your company offers a pension plan, find
out what kind it is and how it works. If they don't offer one, ask why. Many
employers are open to discussing benefits if they know their employees care
about them.
If you're self-employed or your
employer doesn't offer a plan, start your own. RRSPs and TFSAs are powerful tools. You don't
need to be a financial genius to use them, you just need to start.
Don't go it alone. A financial advisor can help you figure out
what you need and how to get there. The cost of advice is almost always worth
it.
Yes, there are government
programs like the Canada Pension Plan and Old Age Security. They're important,
and they'll help. But they're designed to provide a basic income floor, not to
replace your entire working income. For most people, they won't be enough on
their own.
If you're in a low-income job,
these programs become even more important. They're there to help ensure that no
one falls through the cracks. But for everyone else, the responsibility for a
comfortable retirement falls largely on you, and on what your employer is
willing to offer.
Here's the bottom line. Canadian
workers have been sending a clear message for two decades: we value
retirement security enough to sacrifice today's income for tomorrow's peace of
mind. That message matters. It should matter to employers, and it
should matter to policymakers.
But most of all, it should
matter to you.
If you're in your 40s or 50s,
you still have time. You still have options. You still have the power to shape
your retirement future. But you need to start now. Have the conversation. Do
the math. Make the plan.
Because the best time to start
planning for retirement was twenty years ago. The second-best time is today.
Key Takeaways
1. Workers are willing to give up 10% of
their pay for a pension, What You Can Do: Ask your employer what pension
options are available
2. Traditional pensions are becoming
rarer What You Can Do: If your employer doesn't offer a plan, start your own
RRSP or TFSA
3. Saving without a plan is hard What
You Can Do: Talk to a financial advisor
4. Government programs help but aren't
enough on their own What You Can Do: Don't rely solely on CPP and OAS,
supplement them with your own savings
The message to employers and
government is clear: workers want retirement security What You Can Do: Advocate
for better pension options in your workplace
