Horizons Retirement Report 2013

We’ve just completed the 2013 edition of the Horizons Retirement Report. This survey is done with Canadians who are approaching retirement. We’re trying to find out their goals and objectives and also their greatest fears and concerns. 

The number one objective for this group is to travel more - 85% of the respondents indicated that travel was a top priority in retirement. Not surprisingly, the second most important issue for individuals as they approach retirement is to maintain their current health. And the third most important priority is to make sure that they have enough money to maintain their lifestyle during their retirement years. 

Since this is an annual survey, we would also like to ascertain what the changing priorities in this group are. One of the most dramatic changes is that the concern about market volatility has dropped significantly since 2012. In 2012, 35% of the respondents had market volatility as a significant concern but in 2013, this dropped to only 19%. Of course, as the market starts to improve, this concern becomes less relevant to the average person approaching retirement. This has long-term implications because, as you approach retirement, a large stock market correction right before retirement can significantly reduce your ability to maintain your standard of living in retirement. During retirement, you need to be prepared for a stock market correction every day and thus your concern with the market should not go up and down with short-term market fluctuations.

There are still also some disturbing trends that have not changed over the years. Only 60% of this group plans to go into retirement without debt, meaning 40% will go into retirement with debt. Debt in retirement can be very dangerous. If interest rates go up in the future (which they will), then the amount of income that you will have to fund your retirement activities will drop as more of your income will go towards servicing the cost of your debt. A hidden issue is that, if you decide instead to withdraw additional funds from your retirement savings to fund this debt level, it might push you into a higher tax bracket, further increasing the long-term cost of the debt.

Only 50% of individuals who are approaching retirement have a written financial plan. This means that 50% of Canadians right before retirement have no idea how much income they can generate in retirement. In addition, only 50% have a power of attorney. It is our opinion that a power of attorney is a very important estate planning document. If your spouse becomes disabled, you do not have the right to make decisions for them. We always suggest you have a power of attorney to try to keep the government out of your personal affairs. On a positive note, over 80% of this group has an updated Will. 

Financial literacy has become a very important topic and is even more important as individuals approach retirement as they will be faced with many decisions that will have long-term repercussions on how much income they can generate once they have retired. Unfortunately, the news is not very good. Only 50% of this group knew that bond prices will decrease when interest rates increase. Only 40% know that the maximum CDIC coverage for GICs (term deposits) is $100,000. And lastly, only 45% knew how capital gains were taxed. All three of these items are very important when designing a retirement income strategy. 

Unfortunately, this research is suggesting that, as the average Canadian approaches retirement, they have not done enough planning to ensure that they understand – or have done enough research to make – the difficult decisions that will need to be made to design the appropriate retirement income strategy for their particular situation. 

Your advisor at Rogers Group Financial is happy to provide you and your loved ones with the information needed to plan for a worry-free retirement experience. 

For a full copy of the report, please contact your advisory team.