OUTCOMES Hosted by the Prairie Regional Council May 22, 2018 Delta - PowerPoint PPT Presentation

RETIREMENT OUTCOMES Hosted by the Prairie Regional Council May 22, 2018 Delta Hotel Regina Regina, SK

RETIREMENT OUTCOMES Louis Martel Managing Director & Chief Strategist Greystone Managed Investments & John Hallett Retirement Strategist Sun Life Financial Prairie Regional Council

AGENDA • How Much do you need to Retire? • Plan Member Challenges • Plan Sponsor Challenges • All Plans Overview • What’s Next

REPLACEMENT RATIOS It’s Personal • What to use? 50% o 60% o 70% o 80% o ? o • None are accurate • Each individual is unique And will have their own personal needs in retirement o

REPLACEMENT RATIOS How Much Do You Need • Starting Point Determine Needs at Retirement o Start with what you spend now o • What do you have now? Existing Retirement Plans o Prior Retirement Plans o Personal Savings o Spousal Situation o • On Track? Savings Rate o Existing Savings o Savings Required o Conversion Factors o

REPLACEMENT RATIOS Needs at Retirement • Two Basic Types Basic Requirements o Discretionary Requirements o • Basic Required Every Month o Need to start with these o Look at Current Spending o • Discretionary Some flexibility on some o Lots of flexibility on others o Individual has the choice to spend or not o

REPLACEMENT RATIOS Basic Needs • What to include Food o Rent/Mortgage o Home Maintenance o Clothing o Child Expenses o Income Taxes – still have to pay o Clothing o Transportation o Healthcare o

REPLACEMENT RATIOS Discretionary Needs • What to include Travel o Recreation/Entertainment o Tobacco, Alcohol o Gifts/Charity o Family Assistance o Savings o Education - personal o

NEEDS AT RETIREMENT LOW INCOME UPPER/MIDDLE INCOME 120 120 100 100 Non-Personal Consumption 80 80 Non-Personal 30% Consumption 55% 60 60 Personal 40 40 Consumption Personal 70% Consumption 20 20 45% 0 0 Category 1 Category 1 Source: “The Essential Retirement Guide” by F. Vettese

NEEDS AT RETIREMENT RENTER HOMEOWNER 120 120 100 100 Non-Personal Consumption Non-Personal 80 80 30% Consumption 50% 60 60 Personal 40 40 Consumption Personal 70% Consumption 20 20 50% 0 0 Category 1 Category 1 Source: “The Essential Retirement Guide” by F. Vettese

NEEDS AT RETIREMENT NO CHILDREN WITH CHILDREN 120 120 100 100 Non-Personal Consumption 80 80 Non-Personal 35% Consumption 55% 60 60 40 40 Personal Personal Consumption Consumption 20 20 45% 65% 0 0 Category 1 Category 1 Source: “The Essential Retirement Guide” by F. Vettese

CHALLENGES • Plan Member Challenges • Plan Sponsor Challenges • Defined Benefits Challenges • Defined Contribution Pension Challenges • Other Capital Accumulation Plan Challenges

PLAN MEMBER CHALLENGES • Determining Personal Needs • Discipline • Awareness • Monitor and Adjust

PLAN SPONSOR CHALLENGES • Develop target replacement ratio Integrate with social programs (CPP/QPP and OAS) o • Monitor and benchmark your target • Communicate to plan members • Engagement and Education of plan members Take a holistic point of view o • Planning Tools • Plan Flexibility Permit voluntary contributions o Permit Transfers in o Spill over account o

DEFINED BENEFIT CHALLENGES Considerations • Pensionable Earnings Include all compensation (i.e. overtime, bonuses etc.) o • Full or Part Time Employment Part time may not be prepared o • Holistic Point of View • Commuted Values Now just like a Capital Accumulation Plan o • Options at Retirement What assistance is provided o Again Holistic point of view o • Additional Savings Group RRSP/TFSA considerations o

DEFINED CONTRIBUTION PENSION CHALLENGES Considerations • Any focus on income Is wealth accumulation still the focus? o • Full or Part Time Employment Part time may not be prepared o • Education on Investments Especially as they approach retirement o • Options at Retirement What assistance is provided o Conversion is not an easy task o Again Holistic point of view o • Additional Savings Group RRSP/TFSA considerations o

OTHER CAPITAL ACCUMULATION PLANS CHALLENGES Considerations • Same as DC Pension Plans, plus • Focus on Retirement Is it a Retirement Program or not? o • Withdrawals In plan while employed o Savings Account or a Retirement Plan o

WHAT’S NEXT • Focus on Income • Education • Retirement Readiness • Communication

WHAT’S NEXT Focus on Income • These are retirement programs • People understand income and retirement ages What does a pot of money mean at retirement? o • More Engagement Easier to discuss day to day expenses o Investments not as easy to understand o • Options at Retirement So many choices o Unengaged definitely need assistance o

WHAT’S NEXT Education • Plan Members need help • Holistic Point of View Need to look at their total needs o • Financial Wellness Addresses one concern o One less stressor for employees o Focus on income may help now – look at budgets o • Planning Tools Easy to understand o Focused on income o Encourage people to utilize o

WHAT’S NEXT Retirement Readiness • Should be a focus for any plan Compare to your target replacement ratio o Shock employees now – not at retirement o Statements – remind employees how they are doing o • Many suppliers can provide this Determine how much detail you require o • Workforce Management Employees retire on time o May not feel they NEED to continue working o • Benchmarking More to retirement plans than investments or funded status o Develop your own and monitor o Stay focused on retirement readiness o

WHAT’S NEXT Communication • Retirement Income Money is personal to individuals o Easier to understand than investments o • Engagement Easier to engage plan members o It’s their goal to retire, so have an interest o • Start Early Younger workers are already focusing on this o Most common complaint at retirement – why didn’t you tell me sooner o • Trust Plan members trust their employers o More than financial institutions o More than financial advisors o Build on this trust and help them o

WHAT’S NEXT • As a program sponsor, what is my position on the: Vision o Main objective o Plan design o Education o Communication o Program assessment o

THANK YOU Louis Martel Managing Director & Chief Strategist Greystone Managed Investments & John Hallett Retirement Strategist Sun Life Financial Prairie Regional Council