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“Respondents were very happy to no longer have to punch a clock, wake up to an alarm and commute. They appreciated having time to themselves to travel, enjoy their grandchildren, and pursue hobbies. Nevertheless, few respondents were completely prepared for retirement, especially on a social and psychological level, and wished they’d given more forethought to some aspects of this new phase of life.” – Bill Harford

 

Bill Harford

When it comes to taking advice, who better to get it from than someone who has walked the path you are about to embark upon? The first step in a new journey, from parenthood to retirement, is made easier if you gain a better understanding of what to expect and how to prepare.
For workers contemplating retirement, the Municipal Retirees Organization Ontario (MROO), which represents the interests of OMERS retirees, asked its members to talk about their retirement choices, and to offer suggestions to those about to step over the retirement threshold.
Its Retirement Readiness Survey produced reflective comments as well as proactive suggestions.
“Respondents were very happy to no longer have to punch a clock, wake up to an alarm and commute,” says Bill Harford, MROO president. “They appreciated having time to themselves to travel, enjoy their grandchildren, and pursue hobbies.
“Nevertheless, few respondents were completely prepared for retirement, especially on a social and psychological level, and wished they’d given more forethought to some aspects of this new phase of life.”
While 86 per cent of the survey’s 3,227 respondents said they retired at the right time, the transition wasn’t without its ups and downs. About two-thirds suggested future retirees spend time thinking about how to deal with age-related health problems, while more than half encouraged newly retired people to pursue new interests and opportunities.
Of the top opportunities afforded by retirement, having “free time” was “by far the largest,” Bill Winegard, MROO’s executive director, told ARIA, followed by “time to travel, having an opportunity to look after yourself and recharge your batteries, pursuing new hobbies and learning new skills.”
However, it’s not all leisure and hobbies. A survey conducted two years ago found that many retirees, mostly younger ones, developed encore acts working for pay; among early retirees aged 55 to 65, “40 per cent were doing some form of work for pay, even if it was just helping out during election time or starting a new business,” said Winegard.
That dropped to 25 per cent between the ages of 65 and 75, after which “paid employment essentially disappeared.”
Budgeting for a lifestyle supported by a monthly pension rather than a weekly paycheque is another component of being prepared for retirement, says Harford.
“Even those with a defined benefit pension have financial concerns in retirement. OMERS pensions for members retiring in 2016 average $29,600 annually and that income only stretches so far. Nevertheless, most MROO members are thoroughly enjoying their golden years.”
The availability of post-retirement benefits is another concern that takes many new retirees by surprise, adds Harford. Not all employers offer such benefits as part of a retirement package, and while Ontario has a drug benefit program, it doesn’t kick in until age 65, leaving many younger retirees uncovered.
To deal with that, MROO offers its own benefits program through a provider.
Other concerns identified by retirees in the survey include electricity costs, property taxes and retirement-home fees, but the topic of health benefits comes up frequently at MROO information seminars.
“We are very sheepish about pitching the MROO health plan although we are very proud of it … be aware that health benefits don’t (always) continue for life,” says Winegard. “I have always been surprised by the amount of interest that topic generates. There are more questions, on balance, on that than anything else.”
Over the course of its 40-year history, it was founded in 1977, MROO has advocated for OMERS retirees by seeking representation at the board level, for spousal benefits, and indexed cost-of-living increases. It also advocated for the creation of a plan that would allow additional voluntary contributions to be made and managed by OMERS after retirement.
In many ways, that program addresses decumulation problems experienced by people in defined contribution schemes. In such plans retirees receive a lump-sum payment that they then have to convert to retirement income, paying higher fees and getting lower rates of return than that provided by a plan like OMERS.
The voluntary plan allows retirees to leave their additional funds with OMERS, subject to legislated mandatory withdrawals, thereby continuing investment, management and cost benefits.
“OMERS returns are reliable and better than what you would find on the market. People did not want to take their money out and put it into a private investment … they wanted to leave it with OMERS and get the rate of return the plan was achieving,” says Winegard.
Similar decumulatiion solutions are being sought for private sector DC schemes.
The provision of adequate retirement income from a DB pension makes it easier to deal with age-related realities like health and retirement-home costs, says Harford. “DB pensions allow people to think through some of those issues without fearing that they are going to suddenly run out of money.”
And in addition to good social policy, the provision of DB income makes economic sense, Harford and Winegard say, pointing out that recipients are less likely to access tax-supported programs like the Guaranteed Income Supplement (GIS), and generally remain consumers contributing to local economies.
While focused on its own members, MROO is also engaged in the wider conversation over the provision of adequate retirement income. It advocates for legislated changes that would protect the pension promise made to retirees, including those in the private sector.
Federally, explains Winegard, a member of the Canadian Federation of Pensioners’ board of directors, a push is on for changes to the Companies’ Creditors Arrangement Act to give a greater priority to paying pension deficits in a company plan, so that the pension promise made to employees and retirees is kept.
“What’s not protected by the courts is the pension deficit … which means that pensioners lose promised income,” he says.
Provincially they want to see a topping up of the Ontario Pension Benefits Guarantee Fund which covers pension benefits for some plans that close. Funded by employers who sponsor DB plans, the fund is great idea say Harford and Winegard, but it needs more resources to do a complete job.
“Ontario is the only province that has such a fund. It is just inadequate … what’s available to be paid out is not enough and the fund does not collect enough money,” says Winegard.
As Ontario and other provinces move to ease solvency funding requirements from 100 per cent to 85 per cent, protecting the pension rights of retirees through legislated changes becomes all the more important, says Winegard. One of the objectives of the policy is to encourage private sector employers to retain their DB plans “but a solution has to be found other than saying that pensioners have to suffer,” he adds.
An existing solution, continues Harford, exists in the Canada Pension Plan (CPP), which he says should be beefed up to provide all Canadians the level of retirement income public sector retirees receive. That would entail higher private sector contributions, but the approach makes sense for today’s economy where workers are expected to work for a variety of employers, across numerous provinces, he says.
“It’s the only (national) system that really provides retirement security to the working person. It’s totally universal. It doesn’t matter whether you work in Yukon or Ontario. The CPP provides continuity and retirement security for everybody.”
In the end, it comes down to advocating for a system pension and retirement experts maintain is the most efficient and effective model for the provision of adequate retirement income.
“There is a very secure comfort level with a DB pension, says Harford. “I have friends who are in a DC-type plan and just about every other day they are checking the stock market to see how their money is doing, whereas I can take the dog for a walk and not have to worry. I know my pension is well looked after.”

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