Additional retirement planning may be necessary to deal with the effect of Covid-19
The Walton Financial Group in Barrie offers professional retirement planning services and advice
Over the past few decades, the concept of retirement has grown increasingly more sophisticated. Canadians preparing for retirement have been able to contemplate a variety of highly personalized approaches—from early (or even very early) retirement; to active, phased, or working retirement; and more.
All of these variations on the retirement theme have been built on a relatively steady set of economic conditions and assumptions: that housing and financial markets will remain stable, the economy will continue to function, and Canadians will continue to pay the Canada Pension Plan premiums and income taxes that keep CPP and Old Age Security payments flowing.
But what happens to retirement when the world is grappling with a global pandemic and the resulting worldwide economic fallout? Here are some ways the coronavirus could reshape retirement in Canada.
1. Working Longer
More Canadians may opt to remain in their paid employment (if they’re employed) longer. That employment income will allow them to cover living expenses as well as putting aside savings for retirement, when it comes.
In general, however, today’s workers are likely to be facing more challenges in saving for retirement than in a pre-COVID world, meaning the average age of retirement will likely rise.
2. Consider Debt
The economic fallout from COVID-19 also means that many highly indebted Canadians will need to take a fresh look at the spending that got them where they are, because the security of the income or assets they expected to use to retire the debt has diminished or even disappeared.
3. Evaluate Discretionary Spending
Amidst the dark clouds of COVID-19, the good news is that the pandemic is spurring many households to discover how much of their monthly income has been spent on discretionary purchases (such as eating out) and work commuting (gas, parking, insurance, and maintenance)—expenses which they may be able to whittle down over the long term to reduce overall spending.
4. Consider a Life Insurance Annuity
If you’re planning for retirement during a global pandemic, securing your sources of retirement income becomes a new priority when an uncertain horizon is revealed. Many Canadians are hoping to retire on more than what CPP and OAS will provide, however. As a result, in the search for stable income, life annuities might gain new prominence. A life annuity is a financial product, sold by an insurance company, that pays a guaranteed monthly income to the annuitant(s) for as long as they are alive—sort of like a “DIY version” of a defined-benefit pension. The conditions may be ripe for the income annuity to shine as a source of retirement income that’s backed by a well-capitalized life insurance company.
Today, many of the unwritten assumptions that have underpinned our ideas about retirement are being re-examined in the search for strategies to adapt to less certainty. In re-evaluating where we are now, Canadians need to re-think the risk in their approaches to retirement savings, the operating assumptions that have led to high consumer debt, and the value of guaranteed income once you’ve left the world of work. Retirement is about timing, and when the times change, we’re smart to review our retirement plans.
Call the Walton Financial Group in Barrie Ontario and arrange for a retirement planning review and consultation with an experienced financial advisor
