The Next Steps: Preparing to Retire
In today’s episode of Risky Business Paul Martin and Colin Rooke are joined by Ryan Warner to discuss working with employees close to retirement.
Listen to the full episode here, or read the full transcript below
Paul Martin: Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the business commentator on CKOM. And joining me in studio today, Colin Rooke, the commercial risk reduction specialist with Butler Byers. And we’ve got another special guest joining us. You’ll hear from him in a moment. But, first, Colin, and let’s just sort of set up today’s show. You’re always talking to business leaders, business owners, managers. What are the things that are weighing on their minds these days? What things are they sending back to you? You’re kind of the eyes and ears out there. What are you hearing from business owners? What’s keeping them up at night?
Colin Rooke: Well, I don’t know if it’s come up more lately, but certainly something that’s top of mind with us is, so on the group retirement side of things, we’ve run into a few situations on the ongoing account management where, okay, so we’ve got employees that are either ready for retirement, nearing retirement, five years out kind of thing. And we just thought we’d talk a little bit more about, okay, so someone that’s gearing for retirement, I mean, in a perfect world, it’s this glorious day where you hang up your coat for the last time and travel the world. And, of course, I’m not trying to suggest that that’s not the case, but there’s also a lot of anxieties about, okay, what next? Certainly if your employer’s been managing a lot of your investments, what do I do now? What should I be thinking about? What are the next steps? And it’s a conversation that we’re often having with our clients and their employees. But I thought we’d bring a Ryan Warner back, who’s been on this show several times, and just to talk about, okay, well, again, from the employer’s perspective, I mean, what conversations need to have? What should they be worried about?
But, also in the spirit of educating the employees on what to do next, what can I plan for? Have I put enough away? Especially when you’re nearing that date and just have a conversation around what he’s seeing and what, I guess, both sides need to know about.
Paul Martin: Well, it couldn’t have been a more timely topic really, because if you look at demographics in the workplace, and it’s something that I track as a business commentator. A couple of years ago, we saw the leading edge, the first years of the baby boomers start to hit that magical 65. And sometime in the next 12 months we’re going to see a major shift in the workplace where millennials become the largest cohort in the workplace, replacing the boomers, which had been the big one. But the boomers are now starting to retire and the millennials are coming on.
So this topic of, I guess we’re really talking about the boomers, but this whole notion, Ryan, about being prepared to retire. That comes with a lot of things. We tend to think of it only in monetary terms. Do you have enough money to retire? There’s way more to it than that, isn’t there? It’s not just the money.
Ryan Warner: You nailed it. There’s a lot going on in those people’s mind.
Paul Martin: There this notion of being financially prepared, but also psychologically prepared. And that comes not from the employer’s side, but the employee’s side. Can you talk a little about that? What are you seeing out there? What do you hear when you talk to people about being psychologically prepared to retire?
Ryan Warner: You’re talking about a dramatic shift in what’s going on in this individual’s life, and certainly the idea of being able to unwind and relax and not having the dayto- day pressure of their regular working life. But then there’s also that sense of purpose and wanting to have some value in what they’re doing day in and day out. And, as you can imagine, not doing anything for a number of days in a row, even those of us that take some vacation now and then, it can get old in a hurry. So finding something that keeps them busy is really important. But certainly from the employer side of things, too, I think it’s very, very important that they take the time to understand what their employees are going through at the back end of their career. Because that can bring a lot of stress in those years leading up to it that really can impact what they’re doing on a day-to-day basis for their own jobs.
Paul Martin: All right. This program is about trying to help business owners and managers deal with the issues of the day, and mostly related to issues of risk and insurance. And one of the things is a insurance for employees, benefit plans, and that’s where you specialize. Can you give me a one, two, three, a quick guide for an employer? And what you just said, okay, that kind of intuitively makes sense to me, but, man, how do I start that conversation? Can you help me? Like give me a little practical guide about how, as an employer, I go about doing this.
Ryan Warner: That’s really where we come into play. I mean, frankly, we understand, and obviously you do, too. Employers have got a lot on their plate. There’s 4,000 things on their mind. The idea of having to focus in on how to make sure that their employees aren’t stressed out or whatever they might be dealing with at different stages in life. That’s not generally speaking top of mind, but they want to take care of their people. So first and foremost, bringing someone in and giving those employees access to the advice, whether the employees take advantage of or not is ultimately their prerogative. But, frankly, it’s important to give them access to people that can properly educate them and make their employees feel more comfortable about what their options are as they lead into retirement. What are those next few phases and steps look like and really ask some questions that very well they might not know to be asking themselves. So that’s really what it boils down to.
Paul Martin: Just the way you phrased that it popped a whole bunch of questions into my head about, first of all, I say I’m a 45 year old business owner and I’m talking about somebody who’s 65 but ready to retire. That’s the same age as my dad or my mom. So there’s a certain psychological barrier about sitting them down to have that conversation. But also you always hear in financial planning circles time is your friend. So we don’t just start this at age 63, I assume. But walk me through that. What do you advise business owners on this thing?
Ryan Warner: Well, certainly we’re hoping they’re not starting the planning process at 63. I know, unfortunately a lot of employees at the back end of their careers haven’t spent enough time dealing with it. So it can almost be like triage. You’re going in and trying to really understand how can we quickly put a plan together and make what they’ve put away for savings work for them.
Now, as a younger business owner, I can’t stress enough how important it is to give employees access to a savings program, even if it’s purely on a voluntary basis. I mean, the employers don’t always necessarily have the money to be able to contribute to it. If they do, fantastic. That’ll motivate more. But putting these plans in place and starting early is vital to ensuring that people have enough at the backend.
As a younger business owner, I can’t stress enough how important it is to give employees access to a savings program, even if it’s purely on a voluntary basis…putting these plans in place and starting early is vital to ensuring that people have enough at the backend.
Paul Martin: Isn’t that what Canada Pension’s there for?
Ryan Warner: That’s a great question. Yeah. I mean that’s the intent of CPP and QPP. The whole idea is to give you that first building blocks, so you’ve got Canada Pension Plan then you’ve got your old age security. And, really, I mean those two combined are not … we’re not talking about a lot of money that’s coming into your jeans each and every month. So it’s that much more important that you’re saving on your own to put that next building block and in place.
Paul Martin: And then putting together, as you say, a savings plan that can be done through anybody who’s a benefits provider, I assume?
Ryan Warner: That’s right. Yeah. There’s the big players in Canada, your Sun Lifes, Manulifes, Great Wests, Industrial Alliances, et cetera. There’s lots of options of who you can put these programs with, but there’s also a number of things you need to factor in and keep in mind when selecting a provider. Who’s got the most competitive fund lineup? What are their management fees look like? What services are being offered? There’s a lot of factors at play that are important to consider, so really important that you do bring in a resource that’s going to be able to assist you with that kind of decision.
Paul Martin: And that really is where your insurance broker comes in, right? I mean, that’s kind of what they’re paid to do is sort you through the options and say, “This is the recommendation we would make.”
Ryan Warner: That’s right. This doesn’t have to be as complicated as it sounds. The whole idea is if you bring in the expert, they should bring the tools and resources to the table to help you put what you need in place to fit within the budget you’re working.
Paul Martin: All right. We’re going to take a little break here, but when I come back I want to just explore a little bit more. We’ve talked for the last couple of minutes about what an employer can do. I want to get into the head of the employee who’s facing this prospect of a major life change that’s coming up. And you get to deal with this on a lot more frequent basis than someone like me, so you probably have some insights that I’d like to get your views on that. So if you don’t mind, just sit tight. We’ll come back in just a moment. You’re listening to Risky Business Commercial Insurance with Butler Byers back after this.
Paul Martin: Welcome to Risky Business Commercial Insurance with Butler Byers. Paul Martin here. And joining me in studio, Colin Rooke, the commercial risk reduction specialist, and Ryan Warner who has a whole pile of initials behind his name that are all related to being an advisor on the group benefits side of things. And so, Ryan, just before the break I had asked you to reflect on what thought processes or sort of fears, maybe is the best word, are going through a long term employee of the organization is not looking at the prospect of 65 is there and somehow we’ve all been conditioned that 65 is a magical day. You get a watch and you’re out of here. What goes through their minds? What do you hear from employers and employees about that big day?
Ryan Warner: I think you really hit an interesting point there with that 65 is the magic number that we’ve been trained to think that this is the magic time. This is the date that we’re moving on to settle down and enjoy the golden years. And, frankly, it’s not glued to that specific age.
It’s interesting how many people we talked to at that age that are wanting to retire but maybe can’t because they haven’t put enough away and don’t necessarily understand that that’s the reality. So the 60 to 65 range can be an interesting time frame for employees to really get some true understanding and a picture of what the next 20, 25 years could look like. We’re talking to these people on a regular basis about their options and, realistically, can they retire outright? Do they need to maybe consider a part time job? What are the next few years look like? And there is a lot of questions that come up in that age range simply because they haven’t given it a whole lot of thought until that point.
Paul Martin: Do you encounter people who are, A, I just want to retire, B, I want to kind of retire and maybe do some part time stuff, and, C, I don’t want to retire at all?
Ryan Warner: All of the above. Certainly. It’s amazing to me how many people love the idea, the concept of retirement, but even a couple of years in just decide that they want something more. They want to keep busy. They want to do something that they love or simply find something, like I said, just to keep them busy. There are those that are ready to call it and hang them up, and are going to enjoy the rest of their years and that’s fantastic, too. Frankly, it takes a lot of planning and thought to make sure it’s going to work because, at the end of the day, we want them not to stress in those years over their financial situation.
Paul Martin: There also is that notion of what do I do to fill my day? We hear often about people needing a purpose. Famous books have been written about, Victor Frankl’s book that probably is the Bible for this kind of a topic. This is the man, for those who don’t know, survived the concentration camps in World War II and drew the conclusion that those who actually survived were the ones who had hope that there was a reason to be alive at the other end. It wasn’t necessarily the strongest. It was those who had the best psychological look. When you talk to employees, do that nature of conversation came up about what are you going to do? Are you going to have the value of purpose for the community, for your life?
Ryan Warner: Yeah, we’ll definitely dig in on that because we want to help them understand what are those next year’s going to look like. Not just the parking it on the couch or traveling or whatever it might be. We want them to give some true thought and understanding to what those years look like. Retirement, frankly, is a pretty new term. The whole concept of retirement is relatively new, and that’s only in the last hundred years simply because life expectancies are longer now. Right? I mean, if you think about our parents and our grandparents, I mean that’s really when retirement became a reality. It was our grandparents were the first ones and now our parents is that they’re going through it at that baby boomer stage. I mean, that’s round two of retirement. As life expectancies continue to expand, the concern of outliving assets becomes greater all the time. So all that much more important that we’re having these discussions earlier or as early as possible.
Paul Martin: I want to come back to that point about starting early, but I’m taken by the fact that when we set the age of 65 to get Canada Pension, life expectancy for a man was 59 at the time that that was set. So it was really anticipated that hardly anybody would tap into that pot, but, on average, more people would die before they got to the pension plan. And now the other way around where life expectancy is what? 78, 80, somewhere in there. So the game has changed. And, as you pointed out, that you’ve got to start the conversation at least early. Do you have a program for people, employers to say a recommendation that this is part one, part two, part three of that? I mean, how do you approach that?
Ryan Warner: Yeah. Our education perspective when we come in with a new client or an existing account is we’ll offer different types of conversations so that the younger staff that are just getting started can come into one session. And we might have someone in that accumulation phase that we’re going to speak very differently to and maybe get a little more detailed on what investment options they have and what they should be considering. And then, of course, the backend of getting ready almost there. We’re going to be very aware of the audience, and try to work with people to help them understand their particular position in life at this point.
Paul Martin: What are you seeing from employers, and I know I’m going to ask you to generalize here, so this is not a one size fits all thing. But are employers tilting more towards getting more actively involved in say pension plans, group RSPs or less inclined that way and saying, no, it’s more on the employee?
The pension environment, the old golden handshake that was a defined benefit pension plan, those are fading off into the sunset and are almost nonexistent anymore. Most of them frankly are winding up.
Ryan Warner: I would say it’s a combination of what you just said. Frankly, the pension environment, the old golden handshake that was a defined benefit pension plan, those are fading off into the sunset and are almost nonexistent anymore. Most of them frankly are winding up. So a lot of them are converting into what’s called the defined contribution, where the employer is simply saying, “Here’s what I can afford to put towards your retirement. You match and we’ll help you get as close to it as we can.” And then the employee is obligated to pick up that gap, or if a gap exists.
Paul Martin: But there is still some active involvement by employers. They’re saying, “Yeah, we have a role in this.” And if nothing else, it’s … and as an employer, even if you can’t afford to put some money in, you can afford to do education. You can help your employees understand.
Ryan Warner: Absolutely. Like I said, so a voluntary program is a program that is only contributed to by employees. An employer’s not incurring any kind of an expense to offer that program. They have the ability to offer it without digging into their pockets if they’re not in a position to do so yet, and maybe they can do something in small amounts later on. But I would say a large number of employers are still very much trying to offer these programs because of how important it is that their employees get used to savings, and there is no easier way to get used to that savings than having the regular deduction off the paycheck that goes right into these accounts and starts accumulating.
Paul Martin: We’ve only got about a minute left today, but I wanted to focus on the things you can do rather than what happens if you don’t get this right. Can you give me a thumbnail and a half a minute. What does it look like? I’m sure you’ve seen people who didn’t get this right and end up at the wrong end of the wrong destination at the end of the trail.
Ryan Warner: Yeah. I’ve had some unfortunate conversations with individuals that just certainly didn’t plan or weren’t in a position to do so. And as a result at the backend, they end up with the decision that they can’t retire. Right? They have to continue to work. And I think it’s important for an employer, not necessarily to step into the planning phase, but to understand when they have an older employee that’s saying they want to retire at 65, it’s important that that individual is engaged with at that time so that they know that they can. It’s a real shame when someone says, “I’m retiring on such and such date,” and then literally can’t. At that point in time, this person’s now possibly going to be forced to look for other employment when maybe in their own employer’s position they could back off and works less hours. There are options out there and we do run into those cases, but we’ll gladly walk them through it.
Paul Martin: Ryan, thank you. As always, very insightful stuff. And, Colin, just before we wind up, you might want to just add a word here about you bring Ryan in to talk to employers all the time and you probably can’t encourage them enough to start the conversation early.
Colin Rooke: Yeah, exactly. I mean, you took the words right out my mouth. I mean, part of our step-by-step risk reduction approach is, okay, so what conversations need to be had and then who should we bring in to have those conversations? We put Ryan on the show because we are rarely putting Ryan in front of our clients and just making sure, again, both in this case, both employer and employee understand what needs to happen either at retirement or on their way. And just make sure, again, there’s at least as little stress as possible leading up to the big day. And, again, we want to make sure that it is a big day. It’s not something that, again, it’s causing a lot of anxiety due to improper planning. So thanks, Ryan, for joining us.
Paul Martin: All right. Colin, thank you. You’ve been listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers. I’m Paul Martin. Thanks for joining us, and we’ll talk to you next time.