With one glaring exception, a decade of strong gains in real estate and stocks seems to have produced a sense of complacency about personal finance.
The 2022 edition of the annual Horizons Retirement Survey by Vancouver-based RGF Integrated Wealth Management shows little progress on financial literacy compared with 10 years ago. And, if you can believe it, fewer people are taking care of wills and powers of attorney. On retirement aspirations, there’s been a slight move toward thinking about lifestyle rather than finances.
The one change that jumps out comes from a seemingly innocuous question: “How confident are you that your marriage will adapt to the changes in life and finances that may come after retirement?”
In 2012, 73 per cent were very confident their marriage would adapt to retirement, 26 per cent were somewhat confident and 1 per cent were not confident at all. In the 2022 version, only 49 per cent were very confident, 45 per cent were somewhat confident and 6 per cent were not confident at all.
Some advice for people looking ahead to retirement: Work on your marriage. “All I know is the worst financial mistake you can ever make is get to divorced later in life,” said Clay Gillespie, managing director at RGF.
The term grey divorce is used to described marital breakups among people aged 50 and up. A recent Statistics Canada study of divorce from 1970 to 2020 found that grey divorce rates rose 26 per cent between 1991 and 2006, then levelled off. But it’s a topic that resonates with financial planners and advisers.
“I’ve seen this trend in my practice,” Mr. Gillespie said. “It’s not unusual for clients whose kids have left home to be more in tune with what they personally want to achieve in life rather than as a couple. They don’t know each other any more.”
Longer lifespans also contribute to grey divorce, Mr. Gillespie said. Decades ago, people retired around the age 65 and lived maybe another 10 or so years. Now, it’s possible for couples to spend two decades and more together after retirement.
The financial destructiveness of divorce is a result of the division of a couple’s assets. Splitting up is a harsh lesson in how much more cost-effective it is to live and retire as a couple.
“I try to explain to people who are divorcing, your life has got to change because you’re paying for two houses and two lifestyles,” Mr. Gillespie said. “There are two households and each has less money.”
The RGF survey involved more than 200 people with investable assets of $200,000 or more who planned to retire within one to 10 years and another 150 who were already retired. On general questions of personal finance and investing, the survey results suggest the relative prosperity of the past decade has lowered our sense of urgency about attending to financial matters. When your house is going up in value and your investments are soaring, why worry?
In the 2022 version of the RGF survey, 76 per cent of participants looking ahead to retirement had a will. In 2012, 82 per cent said they had a will. 40 per cent said they had designated powers of attorney in 2022, compared with 49 per cent in 2012. As well, more people said they used an adviser in 2012, and more said they had a written financial plan.
The survey also asked some basic investing questions to test financial literacy. Let’s just call the results unimpressive. For example, 45 per cent correctly said bond prices go down when interest rates go up, compared with 46 per cent in 2012.
This may seem too esoteric a question to judge people by, but we are living through a period where interest rates are chugging ever higher and bond prices have tanked in a way many investors have never seen before. If you knew how bonds work, you’d understand that today’s declines are temporary and will reverse course when interest rates head lower.
Mr. Gillespie said he was most surprised by the survey’s divorce findings, even if he is sometimes a financial sounding board for clients who are considering a split. “What’s sad is that when someone wants to get divorced, I typically know before their spouse.”
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