Does a written retirement plan help Canadians manage fears about inflation and healthcare costs?

Recent research from Fidelity Investments Canada finds that those of us with “a written financial plan” are “more financially, socially, physically and emotionally prepared for retirement than those without one,” and may feel more ready to face inflation and rising healthcare costs.

Results of the research are highlighted in a media release from Fidelity.

“With stubborn inflation, market volatility and global uncertainty, it’s not surprising that Canadians are anxious about their future and their retirement,” states Peter Bowen, Vice President, Tax and Retirement Research, Fidelity Investments Canada ULC in the media release. “However, Canadians continue to demonstrate the value of advice and planning: those with financial plans feel more secure and prepared for retirement. Those without a plan should seriously consider the benefits it could have for their overall well-being,” he continues.

The research found that 83 per cent of those with a written financial plan felt “financially prepared” for retirement, compared to 47 per cent of those without one. Eighty-three per cent of those with written plans say they worked with a financial advisor to get one, the release notes.

However, only 23 per cent of those surveyed say they have such a plan. Amongst Canadians, Quebecers have the highest proportion of citizens with a written financial plan (30.7 per cent), the release adds.

The research took the temperature of Canadians on their main retirement concerns.

Rising inflation and market volatility were identified by pre-retirees as “key risks” through the research, and concerns over these two factors have increased dramatically since this annual study was launched eight years ago, the release states.

For those already retired, inflation was the top risk identified, with healthcare costs seen as the second highest.

Sixty-two per cent of pre-retirees surveyed felt inflation is “holding them back from retiring when they would like,” a jump from 56 per cent in last year’s edition of the research, the release notes. Of that same group, 66 per cent felt “that inflation will reduce the purchasing power of their savings and have a negative impact on their standard of living,” the release points out.

Ontarian pre-retirees are the most concerned about inflation’s impacts — 69.9 per cent of them feel inflation is a top concern, while overall Canadians worry “the rising cost of living brought on by higher inflation is exacerbating these savings concerns and making many Canadians feel less comfortable about their retirement plans,” the media release concludes.

Lots to digest here. Clearly, having a written financial plan authored by an advisor seems to equip many of us with confidence. Inflation is trickier, and we can see that many folks thinking of pulling the chute on work may worry about what their spending power (on a reduced income) will be like when they land.

If you have a workplace retirement program of some kind, you’re ahead of the game here. If you don’t have a program — or, as the owner of a business, would like to offer one to your employees as a way to attract and retain them — have a look at the Saskatchewan Pension Plan. SPP’s open, voluntary defined contribution plan has been successfully delivering retirement security to both individuals and organizations since 1986. Find out what SPP can do for you today!

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Pandemic a bigger challenge to retirement saving than Great Recession: report

Unless all your retirement savings are invested in low-risk securities like GICs or government bonds, you’ve probably spent a lot of time watching the pendulum swings in the market since March.

A new report from Fidelity Investments Canada says it’s clear that today’s pandemic-influenced markets are worse for savers than the shaky markets of the “2008-2009 Great Financial Crisis.”

“Data shows Canadians near and in retirement are more negatively impacted by COVID-19 than the Great Financial Crisis,” states Peter Bowen, Vice-President, Tax and Retirement Research in a media release from Fidelity. “However, we are in this together and there is help. By seeking financial advice and writing down an action plan, Canadians can feel better and navigate the uncertainty,” he states in the release.

The data was gathered for Fidelity Canada’s annual Retirement 20/20 survey, which gathered data from Canadians “already in and approaching retirement.”

Here are some of the key findings mentioned in the media release:

• 40 per cent of retirees reported “a negative outlook on their life in retirement,” the worst score in this category since 2014.
• 40 per cent said their earnings had decreased owing to the pandemic, and 50 per cent said that fact, in turn, means they are “reducing the amount of money they are able to save.”
• Those (80 per cent of pre-retirees and 92 per cent of retirees) with a written financial plan felt “positive about their (future) life in retirement.”
• Eighty-five per cent of those with a plan said they worked with an advisor.

What’s different about this market rollback from the 2008-09 crisis?

According to Nicolas Samaan of Manulife, interviewed by Wealth Professional, this crisis has a different element to it.

“You’ve seen on LinkedIn people posting about losing their job and people helping each other,” Samaan tells Wealth Professional. “You see that human interaction, not just financially but in general, people making sure others are okay.

“It’s more about wellness – that is so much more important. I’ve always said to people, if you don’t have the health to do your (personal projects), it’s not going to work. In that sense, this crash was very different than what we’ve seen in the past,” he states in the article.

Samaan is right. The last crisis was scary but on a strictly economic basis – will banks fail, will the economy tank? This one has the overlay of a worldwide health crisis – will we find a way to cope with, or become immune from, this virus, and will the economy be able to hold on until that happens?

Picking stocks when markets are uncertain is not something for the faint of heart. Having professionals handle the investing is especially valuable at times like these. It’s nice to realize that the Saskatchewan Pension Plan has averaged an eight per cent rate of return since its inception in the 1980s, a period of time that included the Tech Wreck in 2000-2001 and the Great Financial Crisis a decade or so ago. The pros can make adjustments when markets take an unexpected turn, and can look at alternative ways to grow your money. Check out the SPP today.

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