Retirement: Planning for the future – but still not confident

Canadians want to live a full lifestyle in their retirement and see many things as being important to their enjoyment, according to a recent survey by Ipsos for RBC Insurance. For Canadians aged 55 to 75, keeping a sense of independence trumps all: eight in 10 (80 per cent) want to live at home for as long as they can and 72 per cent say it’s important to own a car. The majority also say it’s important for them to be able to travel at least once a year (68 per cent), shop for the things they want (62 per cent), and go out for lunch or dinner a few times a week (53 per cent).

Yet, while the retirement years can be a time to enjoy life to the fullest, having enough money to support their desired lifestyle is a real concern. In fact, a majority (62 per cent) are worried about outliving their retirement savings.

“Canadians are living longer than in years past, and they want active and productive lifestyles in retirement,” explains Jean Salvadore, Director, Wealth Insurance, RBC Insurance. “However, some are better prepared for retirement than others. Having sufficient retirement savings is critical, and Canadians should consider a combination of tools and a well-diversified retirement plan to ensure they have enough money to stretch over decades.”

Planning for the future – but still not confident
Despite using various financial tools for retirement savings such as RRSPs (45 per cent), cash savings (43 per cent), or TFSAs (39 per cent), 45 per cent of Canadians are still not confident that they will have enough money in retirement to afford the lifestyle they want.

Furthermore, only one in 10 Canadians (12 per cent) say they are using/planning to use an annuity to ensure they have enough money to lead their chosen lifestyle in retirement.

“An annuity provides a predictable income stream for as long as you live. They are particularly helpful if you have a certain amount of fixed expenses you want to cover throughout your retirement, and that way you can use your additional savings to fund those activities that are important to you,” adds Salvadore. “Yet, most Canadians are unaware of annuities and lack an understanding of the product, which can be the very reason why few are building them into their retirement plan.”

Annuities knowledge gets a “C” grade

Canadians aged 55 to 75 get an average grade of “C” when their knowledge of annuities is put to the test, scoring an average of 3 out of 5 questions right.

  • Nine in 10 (91%) know they don’t need to invest their entire retirement savings into an annuity
  • Seven in 10 (72%) know it’s possible to invest in an annuity using their RRSP and/or RRIF savings
  • Six in 10 (63%) know that an annuity provides a predictable income stream for as long as they live, regardless of whether financial markets rise or fall
  • Six in 10 (63%) know they can stagger their annuity purchases to help increase payouts
  • Just three in 10 (28%) know that an annuity does not have to be managed once it has been purchased

About the RBC Insurance Survey
These are some of the findings of an Ipsos poll conducted between November 13 and November 17, 2017, on behalf of RBC Insurance. For this survey, a sample of 1,000 Canadians aged 55 to 75 was interviewed including 500 Canadians aged 55-64 and 500 Canadians aged 65-75. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.5 percentage points, 19 times out of 20, had all Canadians aged 55-75 been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About RBC Insurance
RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, one of North America’s leading diversified financial services companies. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,500 employees who serve more than four million clients globally. For more information, please visit rbcinsurance.com.

SOURCE RBC Insurance

Some of the worst mistakes you can make after retirement

Some of the worst mistakes you can make after retirement

The Financial World

1) Not Changing Lifestyle After Retirement

Among the biggest mistakes retirees make is not adjusting their expenses to their new budget dependent life. Those who have worked for many years usually find it hard to reconcile with the fact that food, clothing and entertainment expenses should be adjusted because they are no longer earning the same amount of money as they were while in the work force. For example, you might need to do a little less dining out and learn to enjoy more home cooked meals.

Many retirees also tend to forget to take into account healthcare and long term care costs that usually come into play as a person ages. If you have never considered this before, it’s time to talk to a trusted financial planner to iron out your retirement planning. With some appropriate adjustments to your budgeting and proper planning, you’ll make sure you are set for any eventuality.

2) Failing to Move to More Conservative Investments

Once you have retired, you can’t afford large negative swings in your savings. You regularly hear financial advisors recommending a long term strategy and touting the strategy of leaving money in the market regardless of the ups and downs.  That’s because over time, the market, while very volatile at times, has historically ended up rising in the long term. When you retire however, you have to think more short term as you will need to access the cash.  It’s still probably smart to keep some money in more aggressive growth investments, but not nearly at the level you did when you were younger. A financial advisor can offer advice on how your investments should be diversified. You might not make as huge gains in net worth, but you will be protected.

3) Applying for Social Security Too Early

Just because you are already eligible to apply for Social Security at 62 does not mean you should. If you start taking benefits at age 62 will get you about 25% less than what you would get on your full retirement age of 66. You will also get 32% less than if you wait until age 70.

If you have the means to pay your bills, try to delay your application for retirement benefits for a few years more. The benefit increase is maxed out by 70 years old and will not increase any further, so that’s the target age you should shoot for.

4) Spending Too Much Money Too Soon

Before finalizing your retirement, you must take into consideration that you will only be living on a fixed amount of money.  Oftentimes the amount of retirement savings looks pretty large, but retirees must keep in mind that money will have to last a very long time – hopefully a very, very long time! Avoid the temptation to spend large chunks of that nest egg early in retirement.  The temptation to spend your money can be almost iresistable, but discipline is vital. Depleting your money beyond the interest that it earns will hurt the principal and would leave you with nothing after just a few years.

5) Failure To Be Aware Of Frauds and Scams

Retirees unfortunately are among the most targeted for scams. Be sure to consult an advisor prior to making any investment or laying out a large amount of cash on anything. Scammers will prey upon your desire to grow your savings.

Even if you are not retired or about to retire, always keep a certain level of skepticism when it comes to the investments being presented to you. Do your research first: ask about it and search for it online. You might just find out that this whole system is just an elaborate way for people to get money out of you.

Read more here: 

Infotrends Canada is an online continuing education company in its 28th year of serving and meeting the education needs of the Canadian financial services industry. 

For more information on Infotrends Canada read more here: 

 

What women want from financial advisors

What women want from financial advisors

By Paul Lucus | WP

Sometimes statistics speak for themselves – 73 per cent of women are ‘unhappy’ with the financial service industry, while 87 per cent of females looking for a financial advisor say they can’t find one they can connect with.

These are the damning results of a survey by StrategyMarketing.ca pointing to a significant disconnect between what women want and what they are actually being offered from the financial services industry. Even though the industry has earmarked women as a valuable demographic, its efforts to actually retain them seem to be falling short.

So what mistakes are they making and what can they do to put them right? Wealth Professional spoke to Paulette Filion and Judy Paradi, the authors of the report and partners at StrategyMarketing.ca, to find out.

One of the biggest issues, it seems, is that financial advisors see women as a niche market and don’t develop a strong female friendly brand. Even though they may design marketing campaigns to appeal to women they aren’t actually doing the things needed to make them happy. Indeed when part of a couple, men are almost two times as likely to be approached by a financial advisor and the male partner is 58 per cent more likely to be seen as the primary contact.

“Male advisors still seem to have the deep down gut feeling that women are a secondary market – not really interested in finances,” commented Paradi.

“Financial advisors consider couples as one client, not two and that’s not true – they are two distinct people,” continued Filion. “With single female clients, advisors think how they’ve approached other clients in the past is the same for these female clients. It may not be. Women face challenges that male clients don’t face and have different communication styles that may appear to indicate hesitation, risk aversion or lack of trust when, actually, nothing could be further from the truth.”

READ MORE HERE:

Ring in the new year with 10 tax tips

Canadians, and especially business owners, who take the time to plan ahead – rather than look back – will find that opportunities around personal taxes can be more than a holiday wish this season, according to EY Canada’s Asking better year-end tax planning questions.

“Tax rules are always changing and this year it’s more important than ever for Canadians to understand how the federal government’s private company tax reform proposals might impact their bottom line,” says David Steinberg, EY Canadian Tax Leader, Private Client Services. “The proposals are far-reaching and it’s critical for Canadians to pay close attention to what these changes mean for their tax planning now,  and well into the future. Early planning and action means taxpayers can prepare accordingly and save money on their 2017 returns.”

This December, EY suggests Canadians consider the following 10 questions as they plan their tax returns for 2017 and beyond:

1. Do you income-split private corporation business earnings with adult family members?
On 18 July 2017, the federal government introduced proposals and draft legislation that may limit income splitting opportunities with adult family members through the use of private corporations beginning in 2018. Consult with your tax advisor and consider maximizing income splitting with adult family members by distributing private corporation business earnings to them before the end of the year.

2. Do you receive non-eligible dividend income?
The tax rate applicable to non-eligible dividend income will be increasing for dividends received on or after 1 January 2018. If you have discretion over the amount of dividends received, consider receiving more non-eligible dividends prior to the end of the year. But be sure to weigh the savings of the lower non-eligible dividend tax rate against the tax deferral available by retaining income within the corporation.

3. Do you hold passive income?
The federal government has proposed to increase tax on passive earnings above a $50,000 threshold that will apply on a go forward basis. Draft legislation is expected to be released along with the spring 2018 federal budget. Now is the time to speak with your tax advisor on how to optimize grandfathering.

4. Do you have capital gains?
Although the government has indicated that it won’t proceed with proposals to restrict access to the lifetime capital gains exemption, and other capital gains planning, it’s important to review your capital gains transactions. Taking the time now to plan ahead can help you save on future returns.

5. Have you paid your 2017 tax-deductible or tax-creditable expenses yet?
There are a variety of expenses, including interest and child-care costs, which can only be claimed as deductions in a tax return if the amounts are paid by the end of the calendar year. You’ll want to check on expenditures that give rise to tax credits and consider if the deduction or credit is worth more to you this year or next.

6. Have you maximized your tax-sheltered investments by contributing to a TFSA or an RRSP?
Make your tax-free savings account (TFSA) and registered retirement savings plan (RRSP) contributions for 2017 and catch up on prior non-contributory years. In order to maximize tax-free earnings, consider making your 2018 contributions in January. If you’re considering making an RRSP withdrawal under the Home Buyers’ Plan, you can withdraw up to $25,000 from your RRSP with no tax withheld, but must acquire a home by October of the following year. The funds must be repaid over 15 years starting the second calendar year after withdrawal. So if you can, wait until January 2018 before making the withdrawal.

7. Have you maximized your education savings by contributing to an RESP for your child or grandchild?
Make registered education savings plan (RESP) contributions for your child or grandchild before the end of the year. With a contribution of $2,500 per child under the age of 18, the federal government will contribute a grant (CESG) of $500 annually.

8. Is there a way for you to reduce or eliminate your non-deductible interest?
Interest on funds borrowed for personal purposes is not deductible. Where possible, consider using available cash to repay personal debt before repaying loans for investment or business purposes on which interest may be deductible.

9. Have you reviewed your investment portfolio?
Consider if you have any accrued losses to use against realized gains and determine if you have realized losses to carry forward.

10. Have you thought about estate planning?
Take time to update your will and consider if there are changes to your life insurance needs. It may be the right time to consider an estate freeze to minimize tax on death and/or probate fees. Developing a comprehensive succession plan can help you pass the benefit of your assets.

Steinberg explains: “These questions may seem familiar, but as tax rules change and become more complex, it becomes increasingly important to think of the bigger tax picture continuously throughout the year, as well as from year to year as your personal circumstances change. Start a conversation with your tax advisor to find better answers.”

To read EY tax insights and tips, visit ey.com/ca/taxmatters. To learn more about how EY works with private companies, visit ey.com/ca/private.

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

SOURCE EY (Ernst & Young)

Older Canadians forgoing retirement, working through golden years: census

The three months of Bill VanGorder’s retirement were among the longest of his career.

Lured by the promise of relaxation and spare time, the Halifax resident thought he’d relish the opportunity to walk away from an executive position and enjoy the fruits of his labour. But restlessness and a desire to keep contributing drove him back to the job market within weeks, and he was ensconced in a different corporate office three months after relinquishing his old one.

In the four years that followed, a global economic crisis ate into VanGorder’s retirement savings, making the prospect of ongoing work both attractive and inevitable.

Eventually, he decided to go into business for himself, allowing the flexibility of both a stable work life and the perks of retirement _ making VanGorder, 74, a prototype of the new brand of retiree.

The latest census data from Statistics Canada show more and more Canadians are choosing to eschew the traditional retirement age, whether for their health, their finances or just for the fun of it.

More than 53 per cent of Canadian men aged 65 were working in some form in 2015, including 22.9 per cent who worked full-time throughout the year, compared with 37.8 and 15.5 per cent, respectively, in 1995, the census numbers show.

At the age of 70, nearly three in 10 men did some sort of work in 2015, twice the proportion of 20 years earlier. Full-time work was at 8.8 per cent, up from 5.4 per cent in 1995.

The shift is even more dramatic for women, a reflection of their escalating role in the workforce. Some 38.8 per cent of senior women worked in 2015, twice the proportion of 1995, while the percentage of women working at 70 more than doubled over the same 20-year period.

The numbers show it’s high time for governments and businesses to re-evaluate the way they view Canada’s senior citizens, VanGorder said.

“One of the great problems we have … is the myth that because our population is older than the rest of the country, that’s a terrible thing and we’re a terrible draw on resources,” he said in an interview.

“What we have is a large group of seniors who are very productive, who want to contribute to the economy, who are able to offer mentorship and leadership to younger people.”

Experts agree that the large pool of baby boomers deferring retirement beyond the traditional age of 65 represent a formidable cohort for governments and employers to contend with.

Demographer David Foot said their impact is not as noticeable as it was when they first began to enter the workforce decades ago, since their ranks have slowly been thinned by health problems and even death. But mounting financial pressures and increasing life expectancy are forcing those that remain to work longer than previous generations.

The average person’s lifespan has increased two years per decade for the past 50 years, said Foot, author of the best-selling “Boom, Bust and Echo,” which anticipated the impact of the aging baby boom.

“It’s stretching out our work life so we’re no longer thinking of retiring in our early 60s any more, and it’s stretching out retirement,” he said. “Many people now have the opportunity to look forward to 20, possibly even longer, years of reasonably healthy retirement.”

That prospect, Foot said, puts a strain on people’s financial resources, particularly in an age when guaranteed pensions are no longer reliable sources of income.

Foot said the current crop of retirees are more likely to have a stable, defined-benefit pension plan, unlike future generations forced to make do with a defined-contribution plan _ if any.

As a result, Foot suggested most working seniors will only defer their retirements by up to five years, and are likely to prefer part-time work _ a trend already borne out by Wednesday’s numbers.

Despite its advantages, however, the aging workforce has yet to be embraced by private enterprise, said Canadian Labour Congress senior economist Angella MacEwen.

While retail operations may have part-time work to offer its aging employees, she said companies with seniors in white-collar jobs need to rethink their approach.

“We haven’t had a discussion about retaining, maybe transitioning people into roles of mentorship, having them work part-time, flexible hours,” MacEwen said.

“They have a lot of valuable skills to contribute, so it would be useful to maintain them in some capacity. But in a lot of cases it’s still a choice between full-time or nothing.”

MacEwen said efforts to accommodate older employees would have benefits for younger staff too, dismissing the notion that the prolonged presence of seniors would pose professional barriers for those hoping to rise through the ranks.

Employing older people allows them to keep participating in the economy, she said, creating more jobs that can ultimately be filled by people of all ages.

VanGorder, meanwhile, wants to see governments focus on providing training opportunities for the types of seniors who are rapidly becoming the norm.

“Some of us older business people have been brought kicking and screaming into the digital age because our businesses depend on (it),” he said.

“Older workers need that kind of retraining, they want it, and they can’t get it.”

 

Most Canadians say they ‘need to save more,’ but aren’t making it a priority

The vast majority (85 per cent) of Canadians agree that they ‘need to save more money’, but nearly two-thirds (64 per cent) are not making savings a priority, finds a new CIBC (CM:TSX) (CM:NYSE) poll. And, while most admit they could get by with less, few do, and many say ‘extra money’ is for ‘pleasure or enjoyment’.

“With consumer spending still strong and fueled by a long period of record low interest rates, the study shows that very few Canadians are making savings a priority, which is concerning as we head into the holiday spending season,” says David Nicholson, Vice-President, Imperial Service, CIBC. This is the time of year when many of us make room in our budget for spending on gifts, Black Friday and Cyber Monday sales and holiday parties, but don’t think twice about how little we’ve saved until regret kicks in with our New Year’s resolutions.”

Key poll findings:

  • 85 per cent of Canadians agree that they ‘need to save more money’
  • 64 per cent say they lack a detailed or regular savings plan, including 26 per cent who ‘don’t really save’ or ‘never save’ at all
  • 82 per cent admit they could ‘cut back’ each month by on average $360 ‘before feeling the pinch’
  • In addition to their regular income, nearly two-thirds (62 per cent) say they receive on average $2,280 in ‘extra money’ each year
  • 79 per cent of those aged 35-54 worry about not having enough money to retire when they want to
  • 53 per cent of Canadians say they’d use credit or borrow from friends and family if faced with unexpected $1,000expense
  • Top hurdles to saving are: not earning enough income (46 per cent), getting derailed by unexpected expenses (29 per cent), and struggling to pay everyday expenses (24 per cent)

“People think it’s too hard to save, but the truth is that we’ve just become rusty at saving. It’s about shifting your mindset, and getting into the habit of saving regularly,” says Mr. Nicholson. “The hard part is exercising self-control over your spending so that you can increase the amount you save over time.”

No more excuses

A majority of Canadians (82 per cent) admit they could spend, or get by with, less each month — on average $360 less — before feeling the pinch.

Further, almost two-thirds (62 per cent) receive ‘extra money’ each year — roughly $2,300 on average and as much as $13,100 in the form of cash gifts, employer bonuses, and tax refunds. But, less than half (44 per cent) will save the surplus funds, and two in five say the ‘extra money is for pleasure or enjoyment.’

Among those who receive extra cash throughout the year, most (66 per cent) use it to buy themselves gifts, pay everyday expenses, or to chip away at consumer debt. Only two in five (41 per cent) will put those extra funds aside for an emergency, or to boost retirement savings.

With interest rates expected to edge higher and people living longer in retirement, Canadians need to do more than simply spend less, says Mr. Nicholson.

“The real question is, how can you afford not to save? Every day that you delay starting a savings plan, the harder and more expensive it gets to meet your goals later on in life,” he says. “The sooner you start a savings plan the sooner your money can be put to work for you.”

‘Give to’ yourself first

The poll findings show that simple saving habits work best, with more than half (55 per cent) of Canadians agreeing they’d be more likely to save if a set sum went automatically off their pay and directly into a dedicated savings account.

“Paying yourself first is an easy and effective savings strategy,” says Mr. Nicholson. “For most people, it’s actually easier to start with a savings goal first, set an automatic savings plan to meet that goal, and then, simply spend what’s leftover.”

Having a budget and financial plan helps determine the right savings amount based on each of your short- and long-term goals and monthly cash flow. By setting up the withdrawal on payday, we remove the temptation to spend those dollars, rather than trying to overcome it, he adds.

Directing money into a Tax-Free Savings Account (TFSA) can give an added boost to your savings since the interest or investment income that’s earned will be tax-free, helping your money grow faster. Money in a TFSA can also be withdrawn without penalty and used for multiple short- or long-term savings goals, such as to buy a car, renovate your home, take a vacation, tap it for an emergency, or save it for retirement.

“Before you get ready for the first big shopping weekend of the season, think twice and put yourself at the top of the gift-giving list,” says Mr. Nicholson. “We automate our bill payments, why not automate our savings? It can help you get through the upcoming season confidently, and get your savings on track.”

5 hacks for fail-proof savings:

  1. Get into a savings mindset
  2. Set a goal
  3. Decide how much you can cut back
  4. Make it automatic and frequent
  5. Keep spending and credit in check

SOURCE CIBC

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from ILSTV

You have Successfully Subscribed!

Pin It on Pinterest