I landed my first really good job at the beginning of 1999, as editor of a trade magazine called Benefits Canada. I’d had a couple of enjoyable roles in financial journalism previously, but that was the first opportunity I’d been given to lead an editorial team in the production of a respected and widely read magazine.
Benefits Canada is published by Rogers Media for human resource and finance professionals who manage employer-sponsored benefit and pension plans. Its readership also includes people whose job it is to serve those plan sponsors: institutional money managers, insurance company executives, benefit and pension consultants and others. As you can imagine, these are highly educated folks with strong, well-informed opinions about what the magazine covers. In many ways, they are the perfect audience.
I still read Benefits Canada and follow the industry. This caught my eye last month.
The consulting firm Aon Hewitt found in a study of Canadian employers that 44% do not offer retiree benefits to their plan members. An additional 10% have plans in place for retirees, but they’ve closed them to current workers. Not surprisingly, these decisions often have to do with the “high costs compared to perceived benefit to employees.” Three quarters (76%) of employers cited that reason for their decision.
They’re not wrong. Few Canadians fully appreciate the investment their employers make in these benefit and pension plans. You could have included me in that group prior to my time at Benefits Canada. But if there’s anything a four-year assignment at their editor’s desk will teach you, it’s to appreciate – and to take full advantage of – what used to be called fringe benefits.
Three other things my friends in the benefit and pension industry taught me:
1. Match your assets to your liabilities
The secret to successful pension fund management is to ensure your assets align with the pension income you expect to pay out to current and future retirees. If you can’t meet those obligations, you’re in trouble. We can all learn a lesson from that. To fully understand what we need to save for retirement, we need to do some thinking about what our living expenses will be in retirement. How long do we think we’re going to live after we stop working? What kind of lifestyle do we want/need to have? What kind of medical expenses do we anticipate? How will we plan for the unexpected?
2. Poor health is expensive
Employers are increasingly dedicated to health promotion efforts in the workplace, in part because they recognize an economic benefit from doing so. This always struck me as a fine example of aligned interests. Employers want us to be healthy so that we can be productive for them. Employees want to remain healthy for a host of reasons, not least of which is our ability to earn. Our personal health and financial well-being are tightly linked.
3. Think big picture
In my four years at Benefits Canada, I watched the tech bubble inflate and then pop. I reported on the continuing shift from defined benefit pensions to defined contribution retirement plans across the country. And along with my readers, I tried to make sense of that horrible day in September 2001. (Today marks the 13th anniversary of the reopening of the New York Stock Exchange following the terror attacks.) When I asked the experts to help me make sense of it all, what struck me most was their firm focus on the long term. Is there any more important lesson for investors?