While goal setting, budgeting, and accumulating savings often take centre stage in the retirement planning process, decumulation is equally important to achieving retirement goals.  Saving enough money so you can retire is important. How you drawdown your savings to ensure an adequate income stream for as long as you need it, is critical. 

The decline of defined benefit pension plans in the workplace has shifted the responsibility of creating retirement income to Canadian workers. Combine this with the additional burden of understanding the complexity of tax sheltered vs. non-taxed sheltered assets, investment strategy, and longevity risk, there can be little wonder about why Canadians are so confused (and worried) about retirement.    

What’s the average Canadian to do? Canada is awash with financial planning resources and recommended safeguards like the CAP guidelines aimed at providing minimum standards of education for members of workplace capital accumulation plans. Yet, more than half of Canadians¹ say they don’t know how much they need to save for retirement and nearly two thirds of working Canadians² worry about running out of money during retirement.  

For employers, employee financial stress translates to significant impact on the bottom line. Research tells us that employee financial stress can lead to reduced productivity, increased absenteeism and delayed retirement. In fact, according to a recent survey by the National Payroll Institute, employees worrying about finances while at work, cost employers $40B in 2022. Add to that the potential business costs of delayed retirements and the case for why financial and retirement literacy on decumulation matters, seems highly compelling.

Financial and retirement literacy during the working years can contribute significantly to the skills and behaviours that support an effective retirement plan and a successful transition from the workforce.   Employers can play an important role in supporting financial literacy efforts with financial education in the workplace. What that looks like will – and should  – be specific to each organization’s unique goals and workplace demographic, but there are several best practices to help ensure employees get the information and tools they need to plan and achieve their goals and help employers buffer the potential impact of employee financial stress on the bottom line. 

1. Get buy-in from senior executives: One of the most significant barriers to launching a financial literacy program in the workplace can be getting buy-in from senior executives. While all executives should want a financially healthy and engaged workforce, presenting a clearly articulated rationale and the cost benefits will be key to gaining their support.  
2. Work with a financial education expert: Every organization has spent time and money to ensure they have the people with the experience and expertise to achieve organizational goals. Most organizations don’t have the internal expertise or knowledge to deliver financial literacy programs. Experience and expertise in delivering effective financial education and coaching that engages, builds knowledge and   confidence and leads to action, is critical. 
3. Build a program that engages: To truly engage with employees, and see a return on investment, education must align with what your employees want to learn about and how they want to receive that learning. While new hires and mid-career employees will likely benefit most from education on topics like planning and budget setting, if you’re targeting financial stress and delayed retirement among those closest to retirement age, education should be focused on the topics that matter most for decumulation – sources of retirement income, products available in the marketplace, and tax implications, for example.  Research shows that those closest to retirement age also prefer smaller group discussions and one-to-one sessions. 
4. Communicate: Good communication should start with those who have the power to engage and inspire. Workplace leaders should explain why the company is offering the education and the benefits to the employee.  Communication should be concise, clear, and honest. Your employees aren’t financial planning experts. In fact,  many are struggling to understand their day-to-day finances let alone  planning for the complexities of retirement. If they cannot understand what you are communicating or, even worse, do not believe it, you are not communicating effectively.
5. Set goals and assess: Education, especially financial education, is a process that takes time and dedicated focus. For employees and employers, improvements in financial wellness and its benefits can be hard to explicitly quantify and measure. Setting goals for the education program is a critical first step. By knowing what’s working, and what isn’t, you can adjust your program to help support further improvements.

The average Canadian is responsible for making a host of financial decisions about their workplace and personal savings plans – and they must bear the consequences of those decisions. From new hire to  retire, workplace financial education programs can play a vital role in providing the information and tools needed to instill confidence and achieve financial goals – for life.  

¹2023 BMO Annual Retirement Survey 

²CIBC poll, January 2023