New poll suggests more than half of Canadians worried about retirement savings
More than half of Canadians over the age of 45 are concerned that the sagging economy and volatile stock markets are squeezing their retirement savings, suggests a poll.
The survey by Sun Life Financial and the CARP seniors group said 54 per cent of its 5,500 members surveyed were worried about the impact of economic turmoil on their financial security.
“I think people are more worried than if you go back three or four years,” said Kevin Dougherty, president of the Canadian division of Sun Life Financial.
“The financial crisis and the impact of that and what people have lived through these last few years have really changed people’s views about how turbulent markets really are and how much risk there is out there.”
A third of respondents said they fear losing money in their retirement accounts from recent stock market losses.
Since the summer, global markets have dropped over fears the Greek debt crisis could lead to a global recession. Some big pension funds have lost about five per cent of their value in the third quarter alone.
However, European stocks gained sharply overnight after leaders agreed on a plan to provide Greece with more rescue loans.
Dougherty said that since 2008, he’s seen an influx of Canadians coming to the insurer for financial planning advice.
He believes some were more apt to take on risk prior to the crisis, but now the psychology has changed and people are very aware of risks and are trying to get ahead of them.
Another problem lies in recent statistics that point to seniors being lured by low interest rates to pile on debt. A recent TD Bank report noted that those 65 years old and older racked up debt at three times the average pace over the past decade.
With a squeeze on the value of their investments in recent years and rising food and energy costs, many seniors have resorted to so-called reverse mortgages to help finance their lifestyles.
Another factor that points toward a greater need for Canadians to plan better for their own retirement include pension plan movements away from defined benefit plans to defined contribution plans, Dougherty said.
A Sun Life survey earlier this year found that people are delaying the age of retirement to as old as 71.
“These are incredibly huge changes in people’s attitudes and the demographics,” Dougherty said.
Research from Statistics Canada found that a 50-year-old worker in 2008 could expect to stay in the labour force another 16 years – 3.5 years longer than would have been the case in the mid-1990s.
Some economists have suggested a growing proportion of older Canadians can’t afford to retire after seeing their savings hammered by financial market turmoil.
That could put pressure on Canada’s 7.1 per cent unemployment rate and mean fewer job openings for the some 1.4 million unemployed Canadians.
More than 69 per cent of the CARP members said they were confident that they have a plan to maintain their lifestyle in retirement. But 30 per cent admitted their plan needs some work.
However, Dougherty noted that members of that organization are particularly involved in their retirement planning and the data for the broader Canadian population could show potential retirees are even more vulnerable.
The Sun Life poll with its new partner CARP, a 350,000-member seniors lobby group, aims to increase awareness of wealth management and financial planning for Canadians close to retiring or who are already retired.
For banks and insurance companies like Sun Life, wealth management is a growing part of its business and is generating higher profits every quarter.
However, even Canada’s third largest insurer isn’t immune to the impact of financial market volatility. The company has warned it will post a loss of about $621 million in the quarter ended Sept. 30 from volatile markets, low interest rates and other factors.
Other insurers are also expected to be hit by the market volatility in the latest quarter, although, if markets recover, so will the industry’s bottom line.
As far as a retirement plan, picking a target retirement age can help. The rule of thumb is for the retired to earn about 70 per cent of their working income.
Plans should be dynamic and updated every few years.
People should start thinking about retirement plans at age 45 to 47 and focus on how to save, invest and protect themselves from various shocks – from a market crash to a health emergency.
As they get closer to their retirement goal, the focus should shift to how to make savings last a lifetime, especially given that people are living much longer.
CARP president and ZoomerMedia Ltd. CEO, Moses Znaimer, said retirement planning is critical for Canadian seniors facing uncertain economic times.
“Generally speaking CARP members are living longer and better than ever,” he said in a release.
“Many have planned or are mindful about the need to plan for their complete, or semi, retirement; but are concerned about the world situation’s impact on their savings and the possibility of outliving their money.”
