Couples divided on retirement savings

Furthermore, a poll by Bank of Nova Scotia reveals that although few people, in general, had planned to contribute to an RRSP for 2011, that was especially true for women — only 35% said they intend to make a contribution, vs 42% of men.

And, finally, a third survey conducted by Bank of Montreal suggests that regardless of the savings vehicles used, clients often don’t have a clear idea of their spouse’s plans for retirement. BMO’s annual Valentine’s Day study found that although 69% of couples surveyed had discussed their retirement plans, the details were a little vague. For example, only 47% of survey participants said they and their spouses had talked about their ideal retirement lifestyle. Similarly, only 36% of those surveyed had discussed whether to sell the family home or live there in retirement.

Although it may never be possible — or even wise — to bring a client couple completely together on investment strategies, you have a responsibility to ensure both clients feel comfortable with their investment portfolios.

“My approach is always to make sure [clients have] that comfort level,” says Matt Phillips, a portfolio manager and director, wealth management, with Toronto-based Richardson GMP Ltd. in Guelph, Ont. “If you have people who are not comfortable with what’s inside their portfolio, it can quite often lead to much longer and more emotionally charged meetings down the road.”

Advisors can act as a bridge in creating a plan that will let both partners in a client couple feel at ease by starting a conversation about their dreams and goals for retirement instead of jumping right into the numbers, says Jason Round, head, financial planning support with RBC in Toronto.

You can begin by pointing out some of the disconnections between your two clients’ ideas and work to build a consensus by sitting down with those clients and formally writing out their goals, Round says. Once your clients know where they want to go, the next step is to talk about specific investments.

In addition to revealing the different attitudes toward RRSPs and TFSAs, the RBC RRSP survey further pointed out that men and women also approach investments differently. Although 56% of men surveyed prefer longer-term investments such as mutual funds (vs 37% of women), women prefer more conservative products, such as guaranteed investment certificates, and tend to think about more short-term savings plans. Men also are twice as likely than women to invest in equities.

In order to find out your client’s true comfort level with investment products, you may have to do a little explaining.

Advisors have an opportunity to talk to clients about different kinds of investment products, says Round, and perhaps demystify some of those product’s complexities. “Make sure everybody has the same level of knowledge,” he says, “[so you and clients together] can make the right decisions.”

Remember that if there is a different level of investment knowledge within a couple, warns Phillips, never talk down to the client who has less understanding.

Another way you can bring together a couple with different savings strategies is by emphasizing the financial pluses of planning together.

“One of the advantages that couples have in terms of savings is that some tax strategies are available to them that aren’t available to [single] people,” says May Fung, senior manager, retirement planning, with BMO in Toronto. “Knowing about those things gives [couples] some incentive to save together.”

One of those benefits is a spousal RRSP. However, according to BMO’s survey, only 27% of couples take advantage of that joint savings vehicle.

“When pension income-splitting came in, people thought that the spousal RRSP was no longer [relevant],” says Fung. “That’s not actually true because it does provide bigger, wider income-splitting than pension income-splitting alone can provide.”

As part of a spousal RRSP, the partner with the higher income can open an RRSP for the spouse earning little to no income and use the higher-income earner’s contribution room to save, says Fung. Those savings can help reduce the tax load for the higher-income spouse today as well as in the future, when both spouses have retired.

Of course, sometimes simply getting your clients to save anything at all, regardless of the vehicle or products used, is a challenge.

According to Scotiabank’s poll, only 39% of Canadians planned to contribute to an RRSP for 2011. Furthermore, only 60% of those surveyed said they even had an RRSP, down from 79% last year.

However, Phillips argues, although saving is important, it’s not enough to ensure a retirement nest egg: “If you’re saving, you want to do it intelligently. And make sure that you’re taking advantage of all the rules and advantages that are available.” IE