Canadians over 45 years of age are most concerned about how the cost of living and caring for family members will affect their retirement, says Michelle Munro, director of tax and retirement research at Fidelity Investments Canada.ANTHONY MACCARI/iStockPhoto / Getty Images
This is Globe Advisor’s weekly newsletter for professional financial advisors, published every Friday. If someone has forwarded this newsletter to you via e-mail, or you’re reading this on the web, you can register for Globe Advisor, then sign up for this newsletter and others on our newsletter sign-up page. For more from Globe Advisor, visit our homepage.
More Canadians are ho-hum about their retirement prospects, according to the 2024 Fidelity Retirement Report, the annual retirement study from Fidelity Investments Canada ULC.
Michelle Munro, the asset manager’s director of tax and retirement research in Toronto, says the firm started measuring Canadians’ retirement outlook in 2018. At that time, 80 per cent of those surveyed had a positive outlook, but this year only 69 per cent do.
Globe Advisor spoke with Ms. Munro recently about retirement in the face of affordability issues.
Were there any surprises for you about Canadians’ gloomy retirement outlook?
We did a deeper dive into what’s driving the decline. And it’s the pre-retirees, those who are age 45 or older, as opposed to the Millennial generation. We also found it’s women who are feeling the pinch more and feeling more negatively. Women who are pre-retirees were more likely to say, ‘I’m never going to retire, I’m going to delay retirement.’ They’re concerned about the rising cost of living. They’re also concerned about caring for other family members – more specifically, helping the next generation.
Your survey found six in 10 retirees are helping their adult children with finances. What are they helping with?
It ranged from daily living expenses and smaller-ticket items to bigger-ticket items, including weddings and down payments for homes. Of interest, only four in 10 pre-retirees said they expect to help their non-student adult children. So, there’s a gap there between retirees and pre-retirees.
Advisors are already having these conversations with their clients about adult kids. They’re helping to build that eventuality into somebody’s retirement plan. Parents want to help their children but not to the detriment of their own retirement. It’s finding that sweet spot. How do they make adjustments for that? I think this discussion leads those people to decide to delay or work in retirement.
The survey found most pre-retirees anticipate working in retirement in some form. Are people just resigned to this because life is more expensive versus an actual desire to keep working?
First and foremost, people do it to stay engaged, to stay busy. They recognize that people are living longer and longer. But the second reason is for financial reasons. They want to make life easier to thrive, to have additional vacations, and dinners out. It’s more of a phased-in approach to retirement. But how we define ‘working in retirement’ is different. It means retiring from your primary career and working at a secondary option.
Deanne Gage, Globe Advisor reporter
This interview has been edited and condensed.
Must-reads from Globe Advisor this week
What happens when an advisor dies without a contingency plan?
Although many advisors urge clients to create comprehensive transition plans for their businesses in case of unexpected death, too few have plans of their own in place. And when an advisor dies without a contingency plan, there are negative repercussions for clients, staff, the dealer and the advisor’s family. “It happens more often than you think, and it’s heartbreaking to see it in real-time,” says Afsar Shah, business and regulatory coach with The Personal Coach in Waterloo, Ont. “The lack of advisor readiness and preparedness with respect to succession and broader transition is arguably the most important strategic challenge facing our industry today.” Alison MacAlpine reports.
Why DIY investors are turning to financial professionals as retirement approaches
Many do-it-yourself (DIY) investors who managed their own finances for decades suddenly hit a wall in their 50s and 60s. “They think accumulating a portfolio is something they can do, but feel overwhelmed about how to set up their retirement income,” says Ed Rempel, a fee-for-service financial planner in Toronto. From guidance on when to begin taking Canada Pension Plan benefits to rejigging investment portfolios for retirement, former DIY investors often seek professional advice later in life. Anna Sharratt reports.
Increase to capital gains inclusion rate has led some business owners to re-evaluate their plans
The Liberal government’s proposed change to the capital gains inclusion rate has sent financial advisors, tax professionals and their clients into a tailspin, with business owners approaching retirement especially concerned. Some now face a much higher tax bill if they sell an asset or their company to fund their retirement, says Matthew Ardrey at TriDelta Private Wealth. “You’re at the finish line and somebody moves it another three kilometres down the road. That’s where a lot of the angst and frustration” is coming from, he says. Gillian Livingston reports on how business owners are adjusting their plans.
Why this money manager believes markets will end the year higher
Money manager Allan Small believes investors can finally stop talking about a recession and focus on economic growth instead. “We’re in a slower-growth economy now, but that’s by design because central banks wanted it that way and used interest rate hikes to bring down inflation,” says Mr. Small, a senior investment advisor with Allan Small Financial Group at iA Private Wealth, based in Toronto, who oversees about $350-million in client assets. “The good news is that we seem to be at peak interest rates, meaning they’re unlikely to go higher.” Brenda Bouw asks what he’s been buying and selling.
Also see:
What advisors need to know about the change to T+1 trading
How the federal budget’s AMT changes affect tax planning
Developing a financial plan to help clients care for an aging family member
Risk tolerance is emotional and can’t be measured easily
Health and faith are the ‘most valuable assets’ for this widowed retiree
Back-office technology upgrades present challenges, rewards for wealth managers
What you and your clients need to know
The question people planning their retirement keep asking: How much of my savings can I afford to give my kids?
There is no end to the financial cost of parenting. It starts with gear for newborns and daycare bills and goes on. And on. In a recent report from Fidelity Investments Canada ULC, 59 per cent of retirees surveyed said they were helping adult children financially. Welcome to retirement in the 2020s, where one of the biggest planning questions is whether you can carve out some of your retirement savings for your kids. Rob Carrick reports.
Canadians pay the price of a baroque tax system
The Income Tax Act (ITA) has grown increasingly complex, complicating even the simplest transactions. Recent approaches to specific tax issues have created rules that escalate compliance costs and administrative burdens, often involving excessive and needless reporting, writes CPA Canada’s John Oakey, who calls for a thorough review of the ITA.
CI Financial CEO says he is comfortable with current debt levels
CI Financial Corp.’s chief executive officer, Kurt MacAlpine, says he’s comfortable with the company’s current debt levels, although the market reaction to its recent financial results suggests others are not. Canada’s largest independent asset manager is under pressure from credit rating agencies to pay down the debt that it took on as it purchased more than 30 wealth management companies, most of which were in the U.S., over roughly three years. Clare O’Hara and David Milstead report.
The new due diligence: why M&A scrutiny is digging deeper (and taking longer) than ever before
Due diligence has become much more than just double-checking contracts and balance sheets. High-profile corporate frauds such as Theranos Inc. and FTX Trading Ltd., stricter insurance requirements, rising investor caution and higher interest rates have all pushed the scrutiny applied to proposed mergers and acquisitions to levels industry experts have never seen before. An entire industry of third-party specialized investigators, analysts and consultants has risen in response to the unprecedented demand. Jameson Berkow reports.
– Globe Advisor Staff