A growing number of retirement wannabes are working past traditional retirement dates, either because they want to — or they need to. And many such clients will be turning to their financial advisors for help with what amounts to a fundamental shift, both in the workplace and at the personal level.
“This boomer generation sees no reason to observe the social construct of leaving work at 65 — or that age 65 has any real meaning,” says Susan Eng, vice president of advocacy at Toronto-based CARP. “While many would prefer to keep working past retirement age, many others had their savings devastated in 2008 and have to keep working. That’s the new labour landscape today.”
Indeed, many people approaching retirement appear to be unprepared. A 2013 study by Bank of Montreal (BMO) found that Canadian boomers believe they will need, on average, $658,000 to be financially secure in retirement. However, average savings among the survey respondents were only about $228,000, leaving a massive $430,000 shortfall.
And boomers seem well aware of their predicament. The survey also found that about 46% of boomers aren’t confident they will be financially secure in retirement, up from 20% seven years ago.
Perhaps it’s not surprising, then, that a Statistics Canada survey found that retirement doesn’t mean age 65 and a gold watch anymore. In fact, 43.1% of Canadians at age 66 are still working; at 75, almost one in five seniors, or 18.2%, are still working.
But wanting to work and being able to find an appropriate position are two very different things. For one, many seniors will be competing with younger — and, often, less expensive — workers for the same jobs. But, Eng says, the challenge is not insurmountable.
Anecdotal evidence points to senior information-technology (IT) managers who move into independent IT consulting and retired teachers who work as supply teachers. When possible, it appears that people stick with things they know, enjoy and are good at.
There may also be assistance for clients from governments and local economic advocates trying to boost employment. Winnipeg-based <b>Third Quarter</b> is a non-profit, online service created by the chambers of commerce in Manitoba, Saskatchewan, Alberta, British Columbia and the Atlantic provinces in 2010 and is supported by the feds. This program helps match companies’ needs with those of workers aged 45 and older. Eng is hopeful more organizations like this will emerge, and that more companies will find that there is a competitive advantage in hiring experienced people who happen to be older.
Phased-in retirement is another alternative. This allows full-time employees to ease into retirement by moving to a part-time schedule. Clients considering this option should check to see if they will still be eligible for benefits, particularly health and dental, when participating in this option, says Eng. They should also find out if there is a cut-off age.
Some provinces, including Manitoba and Quebec, have enacted phased-in retirement laws for those who have pensions. To be eligible for phased-in retirement benefits in Manitoba, for example, the individual must be an active member of his or her pension plan and be at least either age 60 or 55 and eligible for an unreduced pension. If that’s the case, the individual can receive up to 60% of the accrued pension while continuing to work part-time. As ongoing members of the pension plan, those eligible can continue to accrue benefits.
Self-employment is yet another route, for those with the skills and temperament to make the shift. Chris Buttigieg, senior manager, wealth planning strategy, with BMO, recommends that you help these clients to do their homework before opting for entrepreneurship. Otherwise, they may find themselves jumping into an empty swimming pool.
Buttigieg mentions points such as finding out who the competition is, how soon the new entrepreneur expects to be profitable and ensuring there is a nest egg to provide support while the business gets off the ground.
But it’s unlikely that clients can have it all, as much as they may want to. Many older clients, working or not, need to modify their spending. This may be easier, however, if they no longer have all the expenses associated with full-time employment.
The temptation to keep spending is real. A recent study by Toronto-Dominion Bank found that seniors gained more than $6,000 in new debt, on average, or 15% more than in the previous year, while younger Canadians were cutting back. IE