By: Kevin-Barry Henry, #1 Bestselling Author
It is no big secret that the markets have not been in a particularly good mood the last year or so.
The ever-changing market conditions have undoubtedly given Canadians much to consider in terms of retirement.
I can remember vividly back in 2008-09 when people were having to make the very difficult decision to delay retirement because their retirement accounts had gone down so much. Those were some sober discussions.
Retirement uncertainty may be a reality for many, as one in every five Canadians over the age of 50 does not know how much they need to save to retire comfortably, and only one-quarter of Canadians have a detailed plan for how they will spend their retirement.
Over the last six to eight months, the challenging economy, marked by inflation and market volatility, has had a significant impact on Canadians’ finances, much like 2008-09. As a result, as many as half of Canadians who aren’t retired are considering delaying retirement, and one in every six retirees is considering returning to work.
Canadians over the age of 50 are trying to understand how much money they will need to retire comfortably and how their finances will work in retirement.
This demographic is also a sizable market segment. Retirees or near-retirees control nearly two-thirds of Canadians’ financial wealth, or $3.7 trillion, a figure that is expected to grow to $6.4 trillion by 2030.
At the risk of looking like I am fishing for business, the truth is that financial advice has never been more valuable at a time when Canadians are concerned about inflation, high interest rates, and the impact these will have on their retirement plans. There seems to be more month than money in many cases.
According to a recent survey, half of near-retirees have had to reconsider their retirement goals as a result of recent economic conditions, including reconsidering when and where they can retire and saving more for retirement.
Similarly, nearly half of retirees made changes to their lifestyles, such as cutting spending, re-evaluating investments, and considering ways to generate more income.
The current economic climate is clearly prompting Canadians to reassess their finances in preparation for or during retirement. Perhaps they wouldn’t have to make many drastic changes if they had a comprehensive long-term plan. Rebuilding retirement portfolios can help provide income, stability, and growth.
Those who have not yet retired can begin to systemically de-risk their portfolios (also see Guaranteed Investment Funds) to align with their retirement timelines, allowing them to be prepared for various scenarios. Those who are already retired will benefit from a properly structured portfolio that takes several factors into account, such as sequence of returns risk, inflation, and downside protection.
A retiree, for example, who used a cash-wedge strategy could have avoided having to withdraw from investments during a downturn in 2022.
Finally, even in times of market volatility and challenging economic conditions, a well-crafted plan can assist retirees and near-retirees in avoiding downgrading their retirement dreams.
In the same study, what Canadians over the age of 50 considered a sufficient retirement amount varied greatly. It ranged from less than $250,000 to more than $1 million, depending on individual circumstances. Four out of every ten retired Canadians retired with less than $250,000, but only one-tenth of those who are still working believe they can retire comfortably with that amount.
According to the recent survey, not only are Canadians unsure of how much they need to save for retirement, but the majority also do not understand how to draw income from their investments during retirement. Only one-third of retirees and one-fifth of near-retirees said they completely understand the amount needed to sustain them for the duration of their retirement, including how they will be taxed.
Those are a lot of fractions, but basically retired or nearly retired Canadians are concerned and need answers.
A comprehensive, outcome-oriented plan tailored to your individual circumstances, which includes lifestyle planning, tax optimization, estate planning, and portfolio construction is what I would recommend.
If you would like to discuss your own retirement plans and ideas, you can reach out to me for a free call or zoom.
As always, I look forward to your feedback.
With Gratitude,
KB.
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.