The grey market of opportunities.
Canada’s population is greying at an unprecedented rate. It’s estimated that by 2030, one in four Canadians will be retirement age. While this phenomenon creates some challenges, it also opens the door to interesting opportunities for advisors. Along with an increased need for health care and other services to help support the very old, an interesting dynamic is now unfolding where Canadians are working longer, with retirement plans pushed further down the road.1
Freedom 55 may now be a worn-out cliché that deserves retirement itself; consider instead the notion of Freedom 85. Increasingly, whether because of financial constraints or the desire to pursue a new career challenge, Canadians reaching retirement age are choosing to stay gainfully employed – albeit on their own terms.
Boomers have earned the reputation of making change happen, and their influence on how we work and retire is expected to be significant. Companies may find themselves under increasing pressure to offer job-sharing programs and part-time options for retirement-age employees who are not quite ready to hang up their hats.2
In addition, many boomers are opting for the “second act” approach to retirement, leaving a long-held corporate job to follow a new career path or pursue a more personal side gig. A Statistics Canada survey of people aged 60 to 64 who had left long-term employment found that 43 per cent of them were employed again soon after leaving their jobs.3
This second career scenario may bode well for Canada’s economy. A recent survey by the Business Development Bank of Canada indicates that 39 per cent of small and medium-sized businesses are experiencing difficulty in finding employees, and that situation is expected to persist for the next decade. One strategy being actively explored is the hiring of “retired” workers; 33 per cent of those surveyed said they were considering hiring older workers to offset labour shortages.4
Josie d’Avernas, Executive Director at the Schlegel–UW Research Institute for Aging, says that the best strategy for a thriving Canadian workforce is one that is intergenerational. “Older workers bring stability, mentorship and corporate memory to the workforce,” she says. “They may be less open to change, more challenged by IT or physical limitations, but that is more than offset by the things they bring to their work. Baby boomers, generation X and millennials all bring different perspectives to the job.”
Canada’s immigration policy may also help to bolster employment levels for many companies. In fact, Canada led the Organization for Economic Co-operation and Development countries in population growth in 2017 thanks to immigration.
“What’s interesting about Canada’s immigration profile is that Canada also has the highest flow of workforce-ready immigrants,” says Frances Donald, Head of Macroeconomic Strategy at Manulife Asset Management. “These are immigrants that are most likely to join the labour force when they arrive. So this development in Canada has helped us support and offset some of the aging demographics and help produce growth levels over the longer term that are more supportive of better performance for companies and general demand.”
Retirement reality check
Security just as employment trends are changing with Canadians choosing to work longer, financial needs are also evolving. The 2018 Seniors and Money report finds that savings strategies, mortgages, supporting children and credit card debt are all very real concerns for those approaching retirement age.5 The Leger survey of 1,000 Canadians aged 60 and older found that:
- 35 per cent say they don’t feel they can afford to retire
- 28 per cent say they don’t have enough savings
- 13 per cent say they have too much debt
- 12 per cent are still helping children financially
Whether a person chooses not to retire because they need the financial stability of work or because of a desire to accomplish a new career goal, an advisor plays an important role in helping to approach this next chapter with confidence.
As indicated in the Leger survey, savings, debt loads and child support continue to be top-of-mind issues for Canadians approaching retirement age. Advisors can help alleviate the stress and worry that clients may be facing around these issues through understanding and solid financial planning.
On the flip side is the excitement of helping to get Career 2.0 off the ground. After years of dedicated service to an employer, your client may now be ready to bring their passion to life in the shape of a new online business, turning a hobby into a career or opening a consultancy to help guide the next generation. Advisors can offer sound advice on navigating a career change, which may include household budgets, training expenses, transitioning from employer to private insurance plans, and investment strategies that work for the individual.
If you have clients who are already running successful businesses, now is the time to begin the conversation on business succession planning.
Retirement-age clients may have longer-term objectives that involve tax planning during the sale of a family home, a business, a cottage or other assets. Estate plans may require adjustments to include adequate budgeting for senior care when the time comes, financial gifts for children and grandchildren, and even decisions around charitable contributions.
Finally, clients who choose to continue working past age 65 face complicated choices regarding government pension plans and converting their hard-earned RRSP contributions. Be prepared to clearly lay out their options, what they are entitled to receive and potential tax-saving opportunities.
The status quo of retirement at 65 may quickly become a thing of the past, but the opportunities presented by helping clients financially navigate these new waters may offer significant potential.
1 www.cbc.ca/news/politics/2016-census-age-gender-1.4095360 2 www.cbc.ca/news/business/rrsp/transition-to-retirement-1.3392141 3 www.cbc.ca/news/business/rrsp/transition-to-retirement-1.3392141 4 www.ctvnews.ca/business/labour-shortage-is-the-new-norm-that-will-last-a-decade-bdc-economist-says-1.4080392 5 https://fpcanada.ca/docs/default-source/news/fpsc_seniors_and_money_2018.pdf
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