Trading places: Canadians and Americans diverge on retirement savings habits

Franklin Templeton survey finds more Canadians are saving,
yet high level of anxiety is at odds with their passive approach to planning

TORONTO, March 14, 2016 /CNW/ - In a striking reversal, more Canadians are now saving for retirement than Americans. According to Franklin Templeton Investments' 2016 Retirement Income Strategies and Expectations (RISE) survey, 70 per cent of Canadian pre-retirees have started saving for retirement, a steady increase from 2015 (63 per cent) and 2014 (60 per cent). In contrast, just 59 per cent of US pre-retirees are saving for retirement, continuing a slide from 61 per cent in 2015 and 65 per cent in 2014.

"One possible driver of the rising retirement savings rate among Canadians could be the increasing use of workplace savings opportunities. Our survey results show that 26 per cent of Canadians (up from 20 per cent in 2014) are saving for retirement through workplace salary deduction programs," said Duane Green, managing director, Canada at Franklin Templeton Investments Corp. "However, despite this positive savings trend in Canada, we tend to see some recurring anxieties about retirement, both from our annual survey and anecdotally in our ongoing retirement discussions with individual Canadians."

The annual survey revealed that 82 per cent of Canadians are worried about paying their expenses in retirement, with anxiety about retirement expenses peaking well before actual retirement.

"As retirement appears on the horizon, people increasingly start worrying about the financial aspects of it. Our survey reveals that an astonishing 92 per cent of Canadians who plan on retiring in the next 11 to 15 years have some concerns about paying expenses in retirement," said Matthew Williams, head of Defined Contribution and Retirement at Franklin Templeton Investments Corp.

According to the survey, pre-retirees' perceptions and the actual spending habits of those in retirement are also at odds. Williams highlights survey data indicating that "69 per cent of pre-retirees anticipate spending less in retirement, but only 32 per cent of retirees say their expenses have actually decreased. So, there is a disconnect between what pre-retirees foresee and the actual experience of retired Canadians."

Developing a retirement savings and income plan with professional advice can help bridge that gap and reduce the stress that comes with it. Williams emphasizes that "creating a retirement budget is the first step, and then a plan can be built around it. Having a financial advisor can help with the formulation and implementation of a plan."

Williams notes that "the older we get, the greater the probability of unforeseen health issues – whether mental or physical – as well as rising prescription drug expenses or needing long-term care. We continue to notice an awareness of health care-related concerns, which are likely to increase as people age." While those younger than 55 expect that running out of money (33 per cent) will be a bigger concern in retirement than health or medical issues (23 per cent), the trend reverses significantly as age increases. Over a third (36 per cent) of those aged 55 to 64 expect health and medical issues to be their top concern during retirement, whereas 19 per cent anticipate their primary concern will be running out of money.

Anxiety higher among DIY (do-it-yourself) investors

Regardless of their specific concerns, 72 per cent of Canadians experience varying levels of stress when thinking about their retirement savings and investments. Notably, among those who report significant stress and anxiety, 76 per cent do not currently work with an investment advisor.

"Engaging professional investment advice can help alleviate some of the stress and uncertainty surrounding the prospect of retirement," said Williams. "Creating a retirement plan can help Canadians gain confidence in their preparations for whatever type of retirement they envision – whether that is working part-time, volunteering or travelling."

The numbers also demonstrate the value of professional advice when it comes to making retirement planning a priority: 91 per cent of pre-retirees who work with a financial advisor have started saving for retirement versus 52 per cent of those who have never worked with an advisor.

Individual retirement planning is particularly critical given that 63 per cent of Canadians do not have a workplace pension plan, according to the survey. The lack of pensions, according to 2015 Statistics Canada data1, is particularly acute in the private sector, where just 22 per cent of employees have a workplace pension plan, a sharp contrast to the 60 per cent coverage rate for private sector employees in the US.

Among those who do have a workplace pension plan, complacency can be an issue: Almost half (48 per cent) of Canadians with a workplace pension plan do not know what their personal contribution rate is, and just 12 per cent (vs. 18 per cent in 2015) worked with their investment advisor when selecting investment choices in their workplace pension plan.

"We encourage Canadians to take a more active role in their retirement savings strategies and to engage the help of a financial advisor to create a comprehensive plan," said Williams.

Other key survey findings:

  • Regionally, on the high end, 81 per cent of those not yet retired in the Prairie Provinces have started saving for retirement, but only 58 per cent of Quebec pre-retirees have started. Nationally, 70 per cent of Canadian pre-retirees are saving for retirement.
  • Over half (53 per cent) of those in Atlantic Canada are very or somewhat concerned about outliving their assets or having to make major sacrifices to their retirement strategy vs. only 27 per cent in Quebec. Nationally, 44 per cent of Canadians are concerned about outliving their assets or having to make major sacrifices to their retirement strategy.
  • 43 per cent of Canadian retirees say their expenses have increased since they retired, up sharply since 2015 (33 per cent). In contrast, the same survey response data in the US indicated very little difference between 2016 (38 per cent) and 2015 (37 per cent).

About the survey
Franklin Templeton Investments' Retirement Income Strategies and Expectations (RISE) survey was conducted online among a sample of 2,006 Canadians, 2,019 Americans and 2,003 UK residents ages 18 and older. The survey was administered in Canada from January 4 to 18, 2016, by ORC International's Online CARAVAN®.

About Franklin Templeton Investments
Franklin Resources, Inc. [NYSE: BEN] is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management to retail, institutional and sovereign wealth clients in over 180 countries. Through specialized teams, the company has expertise across all asset classes—including equity, fixed income, alternative and custom solutions. The company's more than 600 investment professionals are supported by its integrated, worldwide team of risk management professionals and global trading desk network. With offices in 35 countries, the California–based company has more than 65 years of investment experience and approximately US$714 billion (C$966 billion) in assets under management as of February 29, 2016.

For more information, please visit or connect with Franklin Templeton on Twitter (@FTI_Global) and read the Beyond Bulls & Bears blog featuring perspectives from Franklin Templeton investment professionals around the world.

Copyright © 2016. Franklin Templeton Investments. All rights reserved.

Source: Statistics Canada, July 2015.

SOURCE Franklin Templeton Investments Corp.

For further information: Media Contact: Amie Lauder, Corporate Communications - Canada, Franklin Templeton Investments, (416) 957-6560,


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