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Investors planning retirement on the near horizon have unique financial needs.
More than five million people will turn 65 this decade. But not everyone even waits until that traditional retirement age to stop work: according to Statistics Canada, the average retirement age is currently 64.4 years old, while public sector employees wrap up their jobs at 62.4 years on average.
As a result, you likely work with many clients who see retirement as a soon-to-happen affair. In those years before decumulation, they may start asking new questions and expecting a different approach to managing their finances.
Since the Frontenac MIC (Mortgage Investment Corporation) is one of Canada’s leading alternative fixed-income investments, here at W.A. Robinson we invest a lot of time working to understand and meet the needs of retirees. Here are some useful facts, figures and trends about this large and diverse group of clients that may help you serve them better.
1. Plans keep changing
The pandemic has triggered a range of larger economic and social changes that are impacting the timing of retirement for many people. According to a survey conducted in 2020 by the Canadian Institute of Actuaries, 23 per cent of Canadians say COVID-19 is affecting their plans about retirement, and those of their spouse. Of these people, 69 per cent say they’ll be working longer because they need the money.
A retirement-focused study from Manulife published in 2022, meanwhile, reveals that 55 per cent of those surveyed were on track to retire when they planned while 26 per cent expect it to happen later.
2. Hardly anyone fully retires anymore
For financial and other reasons — it’s better for their mental health, or they have ambitions — many people don’t fully retire when they leave their main jobs. Semi-retirement is common: Statistics Canada reported in 2018 that one-third of people over 60 work or want to work, with 80 per cent saying work is their main activity and 10 per cent working at some point in the previous year.
Those who work in professions facing skills shortages, such as health care, teaching and the trades, may be offered (sometimes quite persistently) regular, part-time work from their old companies. Meanwhile, many people start businesses in their later years, often taking on self-employed freelance jobs, for the income and the independence of working for themselves.
Working in retirement can help people pad their retirement income, but it’s hard to predict how much they’ll bring in — that’s the nature of a new business, freelance income and getting occasional shifts. In addition, older adults are at higher risk of needing to suddenly stop work because of a health condition.
3. Real estate matters
According to a Royal LePage survey, 40 per cent of Boomers have at least half their net worth in real estate. As well, 17 per cent own more than one property.
Those planning their retirement will be putting their homes and real estate investments first. They’ll be curious about where the market will go, as it will affect their plans to downsize, relocate to a different region, purchase a holiday property or cash out.
4. The sandwich generation has challenges
Adults who have caregiving duties related to their children and their aging parents see considerable demands on their time and their finances. An RBC study estimates the cost of an average nursing home stay of five years for a parent with Alzheimer’s is $450,000. Many other age-related health conditions lead to similar expenses and regular care from family members.
Meanwhile, caring for children comes with considerable time and money commitments.
The cost of post-secondary education keeps going up: average tuition was $6,693 a year in Canada for the 2021 – 22 year. As well, a 2022 survey from the Ontario Real Estate Association shows 40 per cent of parents have provided financial assistance so their young adult children could purchase a home.
5. Inflation is a factor
The rising cost of living is proving a double-edged sword for those with retirement plans: it’s making everyday life more costly, affecting their ability to save, plus it’s triggering worries about how far a nest egg will go in the future. A 2022 survey by Bromwich+Smith and Advisorsavvy found that 54 per cent of Canadians over 55 are delaying retirement because of inflation. The survey also found that 71 per cent worried about running out of money after they retire and 24 per cent thought they might need to return to work because of the rising cost of living.
What does it all mean?
Retirement plans, for many, are a moving target. Those who see stopping work as something in their direct future bring a lot of uncertainty, worries and shifting perspectives to conversations with their advisors. It’s a big step, and one that needs the kind of support only a professional can offer.
Clearly, retiring for boomers in 2022 looks different than it did for their parents. People considering retirement now have their own unique circumstances and aspirations. This means evaluating a range of investments to find the ones that fit them best to help achieve their goals.
Contact a W.A. Robinson representative today to learn more about how the Frontenac MIC might fit into your clients’ portfolios.