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Chief Minister (5k+ posts)
- Why Canada is a top spot to retire
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People, don't let the daily flood of negative, global economic news steal the jelly from your doughnut: Canada remains the best country in the world in which to retire and provided you've a sound retirement plan in place, you'll live out your golden years well.
That was the message Peter Drake had for attendees at the Canadian Institute of Financial Planners (CIFP) annual national conference in Vancouver recently. Drake, vice-president of retirement and economic research for Fidelity Investments in Toronto, highlighted the disconnect many Canadians may be feeling about their retirement prospects given the almost constant barrage of negative economic and business news surrounding them.
"For some investors, it tends to paralyze them. They think about the negative news and they don't think about all the other things they can do," he says. "Investing and returns are obviously a very important part of financial preparation for retirement. But there are other things to focus on."
Bear in mind what type of lifestyle you want in retirement, how much you're saving, and talk to an advisor so you fully understand where you're invested and what your risk profile is.
"You don't want to get to retirement and say to yourself 'okay, now what do I do?' The sense of relief some people feel from getting out from under the daily grind only lasts for a short period of time," he remarks. "Negative (economic) news also tends to take their focus off of their own investments and that's what matters."
Lots of Baby Boomer without retirement plans
Drake's timing couldn't be better. Newly released data from Statistics Canada shows this country has a higher proportion of seniors than ever before, with the population of those over the age of 65 surging by 14.1 per cent since the last official Census.
But according to Fidelity's tally, only 23 per cent of Canadians have a written retirement income plan in place. In the seven years Fidelity has been keeping score, that number hasn't fluctuated much.
"I find it surprising and it's surprising that it's consistently low. We ask this question annually in our retirement survey and the number hardly changes," Drake says. "We're talking about a written plan that envisages what your projected expenses are to be and prioritizing them.
"Most people don't like to plan for the future and they're reluctant to plan because most people don't want to face reality. Another reason why people don't have plans is some will say 'things change' and that's true. But it's far easier to change a plan that exists than trying to craft something from scratch."
Cynthia Caskey, vice-president, portfolio & sales manager, TD Waterhouse Private Investment Advice in Toronto, says a recent TD customer poll finds only 14 per cent of respondents have a clear idea of what they want their retirement to be.
"Having a clear idea about retirement is actually quite a daunting task," she says. "Relatively speaking, the Canadian economy is doing well compared to other parts of the world … for many people, a lack of a retirement savings is partially a case of not having started yet."
What makes Canada a great place for retirees?
Low and predictable inflation is one measure by which Drake says Canada is the place for retirees to be. The Bank of Canada's record of keeping inflation low and predictable is one of the most important aspects to planning for 20 to 30 years of retirement.
"Inflation is never a good thing. It distorts decision-making, it transfers purchasing power from fixed-income retirees to people in the workforce (in general)," he continues. "The Bank of Canada has a really good track record for keeping inflation low and predictable and keeping expectations low and predictable. That's important because if you let expectations go up, there's a good chance the rate of inflation will."
Fidelity Investments outlined its' top reasons Canada provides great retirement opportunities:
*Lots of opportunity for older workers: Fidelity's research found that 79 per cent of pre-retirees expect to work at least part-time in retirement and employers are increasingly looking to older workers to provide much needed experience as the number of new entrants to the workforce slows.
*Soaring housing prices provide added wealth for Boomers: Most retirees and near retirees who purchased homes in the prime of their accumulation years, could weather a housing correction and still have added value that could be used to generate income in retirement if needed.
*Deficit? What deficit: The Canadian government's deficit and debt position is in good shape relative to much of the developed world. Ahem, Eurozone anyone?
*Workplace pension coverage likely to improve: Discussions are ongoing about which route governments should take to improve employee pension coverage including adopting Pooled Registered Pension Plans or enhancing the Canada Pension Plan (CPP).
*Our health care system: 70 per cent of expenses are covered by the government, 30 per cent by the individual.Fidelity research in the U.S. concluded that Americans should save US$240,000 for health care in retirement, a cost most Canadians won't have to face.
*Sustainability of Canada's Public Pension system: The federal government's actuary regularly checks the health of the CPP and it has been declared solvent to pay all its liabilities for at least the next 75 years.
*Canada is a great place to live: We have stable governments, strong individual rights, accessible health care, abundant resources, and enormous wealth.
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