More clients these days are deciding to work past typical retirement age, but their financial advisors may not always be up to speed on their clients\u2019 plans. That\u2019s why advisors should be moving from a straight focus on transactions to a more interpersonal approach, says Gordon Neufeld, a consultant in Hamilton, Ont.
Creator of the Best-Half program, which helps employees plan for retirement, Neufeld says: \u201cBoomers want help determining where they\u2019re going with their lives. They need a plan. And once they have that, the money usually sorts itself out.\u201d
In fact, lots of would-be retirees take some time to settle these issues, even changing course after they\u2019ve officially retired.
Peter Drake\u2019s story makes the point. Although Drake retired from his position as an economist with Toronto-Dominion Bank<\/b> when he was 60, he had planned to do some part-time consulting for TD while spending much more time on his passions, canoeing and cycling. But after two years, Drake found himself missing the stimulation of work. \u201cI\u2019m a failed retiree,\u201d he laughs. \u201cI realized that I have more fun working than not, and I really don\u2019t like to work alone.\u201d
So, when Toronto-based Fidelity Invest-ments Canada ULC<\/b> came calling five years ago, Drake seized the opportunity to return to work full-time. Today, as Fidelity\u2019s vice president, retirement and economic research, he\u2019s busier than ever. \u201cI do a lot of public speaking and write a monthly magazine column,\u201d he says. \u201cAnd I travel a lot \u2014 I took 18 flights from September to mid-October alone.\u201d
Drake\u2019s path reflects a trend that is reversing retirement patterns of the past. Earlier trends saw the median retirement age for Canadians fall to 60.6 from 65 between the mid-1970s and 1997. Since then, it has started climbing again, reaching 61 in 2005. And a 2010 Ipsos-Reid Corp. poll for Toronto-based Royal Bank of Canada<\/b> found that 30% of Canadians between the ages of 35 and 54 expected to work during retirement. As well, the 20th annual RBC RRSP Survey<\/i>, released in late 2009, indicated that almost one in three Canadians who were still working said they would never retire.
\u201cBaby boomers are redefining retirement,\u201d says Tina Di Vito, head of Toronto-based Bank of Montreal<\/b>\u2019s Retirement Institute. \u201cIncreasingly, we\u2019re seeing people transitioning into and out of the workforce, with the aim of getting the most from their lives while they\u2019re still healthy.\u201d
The reasons for delaying retirement and\/or returning to work vary with the individual, Di Vito says. In January 2009, BMO revealed that more than half of the pre-retirees it had surveyed were thinking of delaying their retirement, while 45% of those who were retired had said they would probably return to work in the coming year.
The BMO survey found that respondents were motivated to work longer primarily to earn money rather than for self-fulfilment, which had been the principal motivator in a similar survey three years earlier. In early 2009, of course, many people were just coming to grips with the financial crisis, which savaged so many retirement savings plans.
\u201cIn some cases, people simply don\u2019t have enough money to retire,\u201d says Drake. \u201cBecause of increased longevity, retirement savings have to last longer; so, you need more to begin with. And the current environment of economic uncertainty has made people nervous; a segment of the population is so concerned that they\u2019re still working although they don\u2019t have to.\u201d
But there\u2019s more at play than simple economic necessity. We\u2019re living longer: at 65, Canadian women can expect to live another 22 years on average, while Canadian men have an average of 17 years ahead of them.@page_break@We\u2019re also healthier. Canadians aged 65 have, on average, 15 years of healthy living to look forward to, says demographer David Foot: \u201cAs long as she\u2019s healthy, the average boomer doesn\u2019t see herself doing nothing professionally for 15 years. She wants to be intellectually challenged and make a contribution to society. That\u2019s one major reason that many people will probably want to keep working, but not necessarily full-time.\u201d
Lee Anne Davies agrees. Davies, a gerontologist and head of retirement strategies with RBC, says that while many boomers aren\u2019t ready to retire, they don\u2019t want to work the same way they always have: \u201cBoomers want to keep working but on their own terms, whether it\u2019s seasonal so they can escape winter or mornings only so they can volunteer in the afternoon. This is especially true of women in their 60s, many of whom are well educated but took time off to raise families.\u201d
In light of this reality, employers are becoming more flexible and some are willing to hire long-time employees on a contract basis, she says: \u201cThat\u2019s why we encourage people to talk to their employers before making any major decisions.\u201d
Employment in retirement will intensify in the years ahead, says Drake: \u201cThere will be increased demand for older workers because fewer young people are entering the labour force.\u201d
Fidelity\u2019s research indicates that the largest proportion of those who work post-retirement do so for four or five years after retiring. One clear benefit of this shift is that it delays the age at which people start drawing on their retirement savings.
BMO\u2019s Retirement Institute has created an interactive transition tool \u2014 Take Charge of Your Retirement \u2014 that provides a snapshot of the impact that working longer can have on retirement. This tool allows users to compare the options of working full-time a little longer to increase savings vs working part-time and transitioning into retirement.
According to Drake, the most difficult part of retirement planning isn\u2019t financial: \u201cThe really hard part is envisioning what you want your retirement to look like.\u201d
What\u2019s required is a customized approach to retirement planning, says Foot: \u201cFrom now on, every client will be unique. Some will be accumulating, some will be drawing down and others will be doing both at once.\u201d That means advisors will need greater flexibility in their use of retirement-planning models. \u201cIf a client wants to keep working, how do you manage a pot of money that has income going in and going out in the same year? You need new models and calculations to do that. It\u2019s certainly within the [financial services] industry\u2019s expertise, but advi-sors don\u2019t think in those terms yet.\u201d
Davies cautions advisors against making assumptions about their clients\u2019 retirement intentions: \u201cJust because someone has reached a certain age doesn\u2019t mean they\u2019re ready to stop working. It\u2019s up to you to ask relevant questions and listen carefully to the answers.\u201d
RBC\u2019s Your Future By Design program guides clients through a series of \u201clife cards\u201d designed to identify top priorities. \u201cOnce we have a deeper understanding of what the client wants from their retirement,\u201d says Davies, \u201cwe customize a financial plan to meet those needs and address any obstacles we may have identified.\u201d
The trend toward later retirement has permanently changed the planning conversation between advisors and their clients, agrees Di Vito: \u201cIt\u2019s not just about asset accumulation and allocation anymore. You have to consider all the factors that go into planning for a successful transition to the next phase of the client\u2019s life.\u201d\t IE<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
Canadians past the age of retirement are increasingly choosing to keep working, often part-time. They need help from their financial advisors to assess what they want to do in the workplace, and how they will do it<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3013,3018],"tags":[2346],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/317614"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=317614"}],"version-history":[{"count":1,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/317614\/revisions"}],"predecessor-version":[{"id":363319,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/317614\/revisions\/363319"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=317614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=317614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=317614"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=317614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}