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June 19, 2012
By Sheryl Smolkin
Peter Drake, Fidelity Investments Canada’s vice president of Retirement and Economic Research recently offered 10 reasons why Canada is a great place to retire. He did so in a presentation to the Canadian Institute of Financial Planners conference in Vancouver.
1. Quality of life: We are recognized as one of the best countries in the world to live. We have stable governments, strong individual rights, accessible health care, and abundant resources. We have the ability to provide for our citizens. With proper planning, retirees can live the lifestyle they hope for.
2. Life expectancy: We’re living longer, are healthier and have active lives. Retirements of 25 plus years are now the norm. To enjoy this gift of time, you need a plan to ensure you don’t outlive your savings. Fidelity’s research found that less than a quarter of Canadians have a written retirement income plan – a number that hasn’t changed in the seven years they have conducted research.
3. Public pension system: The federal government latest check of the health of the Canada Pension Plan (CPP) has declared it able to pay all its liabilities for at least the next 75 years.
4. Health Care: 70 per cent of expenses are covered by the government, 30 per cent by the individual. Fidelity research in the United States concluded that Americans should save $240,000 for health care in retirement. While Canadians are covered for basic health care expenses, we do face out-of-pocket health costs. Long-term care is another potential concern.
5. Retirement savings flexibility: There is more than one way to save for retirement and more than one way to generate retirement income. This means that Canadians have choices about what works for them.
6. Low inflation: The strong record of the Bank of Canada of keeping inflation low is positive for retirees. Inflation affects retirees more than any other demographic group as it erodes purchasing power.
7. Pension coverage may improve:There are ongoing discussions about which route governments should take to improve employee pension coverage including adopting Pooled Registered Pension Plans or enhancing the Canada Pension Plan. These initiatives will primarily benefit individuals who are early in their career.
8. Canada’s fiscal health: The Canadian government’s finances are good relative to much of the developed world. This strong helps ensure the sustainability of the types of retirement benefits Canadians rely on for the foreseeable future.
9. Rising net worth: Canada’s housing market has been strong in the past decade. While there may be concerns about overheating in some urban markets, those who purchased homes in the prime of their accumulation years, could weather a housing correction and still have added value that could be used to generate income in retirement if needed. Unfortunately it is more difficult than ever for many young people to afford their first home.
10. Jobs for older Canadians: The participation rate of older workers in Canada is on the rise. Fidelity found that 79 per cent of pre-retirees expect to work at least part-time in retirement. Contrary to what one might expect, their reasons include the desire to stay mentally or physically active and keeping busy to help pass the time. On the demand side of the equation, employers are increasingly looking to older workers to provide much needed experience as the number of new entrants to the workforce slows.
The phased in increase of higher age limits for Old Age Security and increasingly stringent rules for Employment Insurance may make working longer inevitable for older Canadians. Nevertheless, Drake makes some good points.
I’m hoping we will have more winters like the last one so when we finally kiss the world of work good-bye keeping the house warm and digging out from the latest storm won’t as much of a problem. But extended winter vacations in the sun are still a non-negotiable part of my retirement plan.