Seniors are now twice as likely to rely on their home equity to fund their retirement than before the financial crisis, says a Fidelity retirement survey. They’re also more likely to work in retirement, provided they can find employment.
Since 2005, the number of Canadian retirees relying on home equity to fund retirement has more than doubled from 14% to 36%, says the survey, commissioned by Fidelity Investments Canada ULC.
Conducted by The Strategic Counsel, the 10th Fidelity Canadian Retirement Survey of retirees or workers 45 or older also finds:
• Since the financial crisis, the number of retirees saying it has been more difficult than expected to retire has dropped from 28% in 2009 to 20% in 2014
• More pre-retirees expect to work full or part-time in retirement (62% in 2014 compared with 55% in 2005)
• An increase in reliance on savings held inside a RRSP or RRIF (58% in 2014 compared with 53% in 2005)
• Despite changing trends over the past decade, the vast majority (85%) of Canadian retirees have a positive outlook on life in retirement
Half retired earlier than planned
Fidelity says 48% of retirees polled had retired earlier than planned, often for involuntary reasons. Of this group, 19% had to retire early because of health problems. Another 9% attribute early retirement to work stress and another 9% said “work stoppage” was the reason for early retirement.
Of those retirees not working, one in five would like to work if they could. The main reasons for retirees not being able to work are heath (38%), feeling employers are not interested in employing retirees (23%) and not being able to find a job (15%).
Planning to work is not a retirement plan
“Planning to work in retirement is not a retirement plan,” says Peter Drake, vice president of retirement for Fidelity Canada. “Having a viable plan in place to generate sustainable income in retirement is arguably the most important aspect of retirement planning. Working with a financial advisor and setting goals for retirement is the best way to ease uncertainty and reduce stress around how to create the retirement paycheque. A good retirement plan should have flexibility in case circumstances change, as they often do.”
The survey of 1,390 adult Canadians was conducted online between October 22 and November 3, 2014.
Here’s my latest MoneySense blog, entitled Why you should re-think Early Retirement. This is a topic I’ve been researching for several months, going back to some blogs I wrote on Mark Venning’s ChangeRangers.com, which challenges readers to “envision the promise of longevity.” He also sensibly counsels that we should “plan for Longevity, not for Retirement.”
As you can see by clicking through to the blog (also reproduced below), some of this message was articulated in a speech delivered Wednesday evening at the Financial Show, and which I also gave Monday night at the Port Credit chapter of Toastmasters.
By Jonathan Chevreau
I recently delivered a talk about how longevity changes everything. I began by showing the front cover of the latest Bloomberg Business magazine, which shows a woman celebrating her 173rd birthday. Read more
Earlier this week there was extensive mass media coverage of the latest Sun Life “Unretirement” survey, which found more Canadians now expect to work full-time at age 66 than the number who are retired.
Given that the traditional retirement age has been 65, and remains the age many older investors think of collecting Old Age Security and the Canada Pension Plan, the general tone of this coverage was that the idea of working to such an “advanced” age is in itself scandalous.
Regular readers will know what I’m about to say, and did say Wednesday night on a CTV item on the survey. With rising trends to longevity, more and more people are choosing to work longer or feel financially compelled to do so. Indeed, governments around the world generally would love to see us all work longer and pay taxes longer, which is why the age of OAS onset is being bumped up to 67 for younger Canadians.
Plan for Longevity, not Retirement
Our sister site, the Financial Independence Hub, attempts to be a North American portal running content that may interest readers on either side of the 49th parallel.
This isn’t always easy; sometimes it runs blogs from people like Roger Wohlner, The Chicago Financial Planner and perforce the content (like this blog he adapted for the Hub) will be mostly US-specific: touching on topics like IRAs, 401(k)s, Roth IRAs and all the rest of it.
By the same token, its Canadian contributors often write about things like the TFSA or Tax Free Savings Account, which is the equivalent of America’s Roth IRAs and variants of same.
As fate would have it, the Financial Post (my former employer until 2012), asked me to contribute an article comparing the tax and retirement systems of the two countries. You can find it here under the headline Canada vs. the US: Whose Retirement grass is greener?
Findependence is legitimate cross-border topic
I was happy to take the assignment because I’ve been grappling with US/Canadian tax and retirement issues ever since I wrote the book that spawned this and other web sites. The original edition of my 2008 financial novel, Findependence Day, was meant to be a transborder financial love story, covering the tax and retirement topics of both countries through the eyes of characters residing in both countries.
My feeling was then and remains that when you get right down to it, the main lessons of Financial Independence are pretty similar in the two countries. The Post article addresses the similarities and differences head on.
As I explained when we launched the site, we do not perceive the Hub as being a tactical personal finance site: such sites do need to be specific to one country or the other. Nor is it a Retirement site per se: it covers the entire life cycle of investing starting with Millennials graduating with student-loan and credit-card debt and moving all the way up to Wealth Accumulation, Encore Careers, Decumulation & Downsizing and finally Longevity & Aging. These are universal topics not restricted to being on one side of the border or another. In fact, I play a lot of Internet bridge and most of my partners are Americans: it never occurs to us that the border makes a scrap of difference.
Asymmetry in US and Canadian financial content
However, when it came to marketing the book, I soon realized that while Canadians are happy to read US personal finance books, it doesn’t work in reverse. The US is after all a country with ten times more people and is arguably the most important economy in the world. Most Canadians have significant investments in US stocks and if we loaded up when the loonie was near parity, we’re glad we did: with the loonie now near 80 cents US, our retirement accounts are 20% larger to the extent they hold investments denominated in U.S. dollars.
But on the other side, I find with a few exceptions Americans have little reason to bone up on Canadian investments: Canada makes up only 4% or so of the global stock market, compared to close to half for America.
All of which explains why I decided to publish an all-American edition of Findependence Day in 2013. I challenge readers to find a single reference to Canada! Plus, last fall, I released two short Kindle e-books that are summaries of the book, and which cost just US$2.99. I describe A Novel Approach to Financial Independence as a kind of “Cliffs Notes” summary for American readers, and in Canada it’s a “Coles Notes” summary. Again, just like the retirement systems, citizens in both countries grew up with yellow-and-black “cheat” sheets to help us get through school: Cliffs and Coles are almost identical concepts.
When the original book was published, we billed it as a “North American” edition, since it would mention things like RRSPs and IRAs in the same breath. But with the launch of the all-US edition, we now call the original book the Canadian edition. I hope to do an all-Canadian edition on the Kindle sometime the next year or two.
I recently delivered my debut “Ice Breakers” talk at the local (Port Credit) chapter of Toastmasters, an organization I highly recommend for anyone who wants to polish their public speaking and leadership skills.
I began by pulling out a $5 bill and dropping it at my feet. I asked how many audience members would pick one up if they saw a stray fin on the sidewalk. Most would, but also admitted they probably wouldn’t bother to stoop to pick up a penny or a nickel. I also remarked that when you pull a green $20 bill out of your wallet and consider what it can purchase, your attitude to that bill’s value is probably about what it was to a purple $10 bill some two decades earlier. Inflation, it seems, is forever with us.
If this is inflation, bring it on!
But if you ever wanted a concrete demonstration of the value of a lowly blue $5 bill, then go the website fiverr.com. That’s FIVERR, a “fiver” with an extra R. You may even see ads for this site elsewhere here at FindependenceDay.com as well as at MoneySense.ca, where this blog may also appear.
FIVERR is a wonderful example of the global trend to technology-enhanced outsourcing of personal and business services. You search for some task you want performing and a bunch of people from anywhere in the world offer to take on the “gig” for as little as $5. They may want to upsell you, which is perfectly fine, but my experience with the site was it did exactly what I asked for the price offered. The cover of my new e-book released earlier this week, and shown below, was designed for $5 (US dollars, mind you!).
The other gig I needed to publish the e-book at Amazon was to format my Microsoft Word manuscript into the format required by the Kindle. This task too was performed for $5. I don’t know where in the world these people are located. I assume some are in the United States but for all I know — and as in the case with 99 Designs, which we looked at a few weeks ago — it could be half way around the world, where $5 may buy what $100 purchases in North America.
You can offer gigs as well as utilize them
It costs nothing to join fiver.com and of course you’re as free to be the provider of services for $5 a gig as you are to be the purchaser.
In fact, if there are any services out there that readers think I could perform for $5, drop me a line at email@example.com.