Aging Canadian baby boomers are increasingly being targeted by financial planners and senior care professionals. Peter Wouters, director of Empire Life Investments, says the industry needs to rethink pensions and what it means for practices.
Wouters describes the “silver tsunami” of leading baby boomers who began turning 70 two years ago; in fact, 12,500 North Americans turn 50 every day – one every seven seconds.
It reminds advisors that their clients know what they’re retiring from, but many have only a vague idea of ​​what they’re retiring from.
When industry representatives interview retirees, they believe they will lose money once they retire, but in practice, most retirees miss social interaction; many of them do not retire or start their careers as an encore.
And advisors are aging along with their clients: Wouters points out that the average age of an advisor in Canada is now 58. Most of their clients have not tried to redefine who they will be in the future, so many return to work, which is how they identify with others. This is one of the reasons why most advisors do not retire themselves.
With so much unknown about how long retirement will last – the trend is towards longer lifespans and longer working periods – there is still a lot of fear and uncertainty about how long money will last in retirement. Wouters says only four in 10 people know how much future retirement income they will need; 61% of wealthy boomers know this number, but only 28% of middle-income people know this number. And even if they know the number, they don’t know if it’s enough. “The good news is that we will live a long, long life,” he says. “The bad news is that we will live a long, long life.”
This uncertainty creates a planning opportunity for professionals prepared to focus on this cohort. 56% need help understanding which investments best suit their needs; 53% want to know how retirement portfolios will react in certain markets; 53% need help adapting their portfolios to respond to specific markets; and 51% need help deciding how much they will need in retirement.
Older people want to be treated holistically and need someone to bring it all together and make sense of the plans, products, documentation and issues surrounding them.
There is a big difference between wealth accumulation and deaccumulation, also known as decumulation. As Wouters puts it, if you’re a pre-retiree person who’s still working, investment income is just burdensome income that you have to reinvest and pay the taxes you pay every year. However, once decumulated, it becomes one of several important sources of income, along with two sets of CPPs, two sets of OAS, LIRAs, RRSPs, segregated funds, etc., all taxed and reported differently. The challenge is to recreate multi-source income that previously could only come from one or two streams of work income.
Most investors would give up 100 or 200 basis points of annual return in exchange for regular, meaningful contact with an advisor, Wouters says. “This means that regular contact is more important than having the lights go out on results that in their heads they know are not sustainable.”
READ: Find the perfect financial planner »
Nathan Kupusa, president of Solutions for Aging, says counselors need to “update” their practices because their clients have also changed. Most financial advisors are specialists who focus on life events earlier in the life cycle: career, marriage, first home, children, paying off debt and building savings.
However, they are less prepared to cope with older adults’ life events, including the eight stages of retirement, health problems, loss of independence and mental capacity, and family issues such as the empty nest and the sandwich generation. Expertise is also needed in fraud prevention, housing, end-of-life issues and funeral arrangements.
Kupusa’s own practice is designed for seniors and offers adequate office space with accessible parking and mobility, no background noise and soft skills such as patience, empathy and listening.
Health and care is a huge issue: approximately eight million Canadians care for a chronically ill or disabled friend or loved one. With longer life expectancy come more chronic health problems, dementia and cognitive loss. “Health is always more important than finances, caused by the crisis.”
Health care costs in Canada are approaching $216 billion a year, or 42% of Ontario’s annual budget, and that number is expected to rise to 50%. “Government funds are drying up and change is coming.”
Yet despite the huge role health care will play in consumers’ lives, only 22% have saved or planned for health care, while 53% are concerned about drug and medical costs in retirement. 47% are worried about staying in long-term care longer than they are financially prepared for. “76% are stressed and cite money, money, money as their three main factors.”
You can’t plan without knowing the costs: Kupusa reports that long-term care costs range from $2,300 to $2,500 a month, and retirement homes cost $2,800 to $4,500 or more. Home-based personal care workers charge between $21 and $25 per hour, while a registered nurse costs $45 per hour.
The meaning of money Contributing Editor Jonathan Chevreau hosts Center for Financial Independence and can be reached at the address (email protected).
