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Employees spend a lot of time thinking about saving money for retirement – but what about spending it when they get to that stage of their lives?

A recent Sun Life Financial Inc. survey shows 80 per cent of Canadians feel more confident in retirement if they have a financial plan. Sun Life also says 70 per cent of employers want support helping employees understand decumulation. The financial services company recently created a Decumulation Playbook to help employers help employees spend their pension and retirement savings.

Globe Advisor spoke with Eric Monteiro, senior vice president of group retirement savings at Sun Life, recently about how employers can play a bigger role in helping employees plan for life after work:

Why is education on spending money in retirement as important as saving it?

Once people have built a nest egg, whether they have only a defined-contribution pension plan or part of their income is from a defined-benefit pension plan, the question is, how do they make it last? It’s a multi-dimensional issue when you consider people don’t know how long they will live or what their lifestyle will be like in retirement. Then, you factor in inflation, which has been a big issue lately. From there, they need to figure out how to withdraw their money in the most tax-efficient way possible. There’s also the decision on how to invest, including the right risk and return profile for someone in their retirement years. It can be very complicated.

What are some of the issues people come across in the decumulation phase?

One is that people are living longer, but only some plan for it. The most uncertainty comes later in life when health can fail, and the cost of care can be higher than expected. Many people take their Canada Pension Plan or Quebec Pension Plan benefits too soon, which can be a mistake because of the guaranteed income you may need later. It can provide some longevity protection.

Another issue is people need to be more deliberate about spending and how they want to live in retirement. If you want to take a three-month trip to Asia, for example, or you want more choice when it comes to long-term care, should you need it, you’ll have to budget for that.

Another pitfall is people need to understand or take the time to optimize their tax bills. That includes knowing which account to withdraw money from first and ways to avoid an Old Age Security clawback later in life if that’s a concern. A final pitfall is people assuming that because they’re in retirement, they should take no investment risk. Your retirement can be 20-plus years, so you will probably need some growth in your portfolio. In minimizing investment risk, you may be increasing the risk that you outlive your money.

What can employers do to help employees spend more wisely in retirement?

Employers have an opportunity to help people prepare for the decumulation phase by providing communication and support. The average employee shouldn’t be left to figure it out for themselves. Communication often includes pointing people to where they can get expert advice – and making that information simple, easy to access, and, dare I say, fun. After all, we’re talking about how to enjoy the final years of your life.

– Brenda Bouw, Globe Advisor reporter

This interview has been edited and condensed.

Must-reads from Globe Advisor this week

How to prepare for intergenerational business transfers before key tax-related changes kick in

With pending changes to Bill C-208 and the alternative minimum tax in the new year, accountants and advisors are in a time crunch helping clients who are selling their business to a family member while it’s still advantageous to do so from a tax perspective. Bill C-208 provided families with more flexibility with intergenerational business transfers by giving the seller the ability to utilize the current $971,000 in lifetime capital gains exemption. But as of Jan. 1, 2024, more stringent conditions will be required to prove that a business transfer between family members is a genuine transaction. Deanne Gage reports.

Why this $3-billion money manager is buying a specialty beauty retailer and selling an IT hardware reseller

Money manager Jeff Mo says he isn’t in the market forecast business. So, instead of buying stocks based on short-term predictions, the portfolio manager at Mawer Investment Management Ltd. in Calgary looks for all-weather companies he believes will still be standing years from now. “Our motto at Mawer is, ‘Prepare, don’t predict,’” says Mr. Mo, who manages about $3.1-billion of the firm’s $86-billion in assets including Mawer U.S. Mid Cap Equity Fund and Mawer New Canada Fund. Brenda Bouw asks what he’s been buying and selling.

Why India remains an overwhelmingly favourable investment despite rising political tensions

Investing in emerging markets brings opportunities as well as risks – there’s massive growth potential but a sizeable degree of uncertainty. That’s especially true of Canadian investments in surging India, with political tensions stemming from Prime Minister Justin Trudeau’s recent public statement accusing India of responsibility for the murder of a Canadian citizen. Last week, U.S. authorities said their investigation into the alleged plot to kill a Canadian-American Sikh uncovered apparent links to the slaying of that Canadian citizen. Although Canadian portfolio managers say they have a watchful eye on Canada-India relations, they’re remaining invested in India because of its long-term outlook, which is overwhelmingly favourable. Mary Gooderham explains.

How advisors’ client appreciation events have evolved following the pandemic

Amid a challenging macroeconomic climate of decades-high interest rates, a higher cost of living and plenty of stock market volatility that has put pocketbook issues front and centre for many Canadians, some advisors say they’re doubling down on client appreciation events this year. “For me, as an advisor, it’s imperative to be in contact and keep clients informed. … Having a client event is the best way because it’s face-to-face, you can see them all together and deliver that peace of mind that everything is okay,” says Debbie Adams, senior wealth advisor and CFP with Adams Wealth Management at Wellington-Altus Private Wealth Inc. in Toronto. Kelsey Rolfe has more.

Also see:

Year-end tax planning strategies

How this retired national park worker found solace in city living

Why separating planning for retirement income and estate goals can lead to better outcomes

How the expanded qualified family member provisions for RDSPs help with financial planning

How the BoC’s last interest rate decision of 2023 will play out in this week’s Advisor Lookahead

What you and your clients need to know

Wellington-Altus raises financing to recruit new wealth advisors

Independent wealth manger Wellington-Altus Financial Inc. has raised $40-million in new financing, as it continues an aggressive recruitment strategy intended to attract high-end adviser teams from competitors. The Winnipeg-based investment firm – which manages about $28-billion in assets – announced on Thursday that Cynosure Group has injected $40-million into the company, in a second-round growth equity investment. This brings Cynosure’s minority stake in Wellington-Altus to 15 per cent. Clare O’Hara reports.

Bank of Canada holds key interest rate steady but warns ready to hike again

The Bank of Canada held interest rates steady for a third straight decision Wednesday but warned that it is still prepared to hike again, as it continues to talk tough about inflation in the face of market speculation that rates have peaked and cuts are coming next year. As widely expected, the central bank kept its policy rate at 5 per cent, where it has been since the last rate hike, in July. The bank has pushed interest rates up aggressively over the past year and a half to combat the biggest surge of inflation in decades. “Governing council is still concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed,” the bank said in its one-page announcement, reiterating earlier warnings. Mark Rendell reports.

Four high- and low-risk ways to exploit the $7,000 TFSA limit in 2024

One small benefit of high inflation is a second straight annual increase in the contribution limit for tax-free savings accounts (TFSAs). This limit is adjusted to account for year-over-year changes in the inflation rate, which has been as high as 8.1 per cent in the past 24 months. As a result, we had a $500 increase in the TFSA limit for 2023 and we’ll get an identical increase in 2024. The ceiling next year will be $7,000, which compares to $6,000 in 2022 and $5,000 when TFSAs became available in 2009. Rob Carrick explains.

– Globe Advisor Staff

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