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A survey of people between the ages of 55 and 75 by RBC Bank of Canada found that 33 per cent of people who had just retired said they had retired earlier than expected, and 30 per cent of those who were about to retire had changed their plans because of the epidemic.
RBC said the epidemic appeared to be affecting people’s retirement plans, with 34 per cent saying they had left early as a result. Another 30 per cent of those who have not yet retired said they planned to change the retirement date because of the pandemic.
For some recent retirees, things are not as smooth as they had hoped. 25% said they spent more than expected, and 41% said they had been hit by unexpected expenses, including expensive home repairs and rising health care and transportation costs, or had to provide financial support for their families.
In the face of rising inflation and rising interest rates, it is a challenging period for household spending. Compared with the same period last year, inflation in March reached 6.7%, the highest increase since January 1991, and spending on gas stations and grocery stores has had a big impact on consumers.
At the same time, the Bank of Canada has made it clear that it will continue to actively raise interest rates to control inflation. The central bank raised interest rates by 50 basis points in April, bringing the key interest rate to 1%, and does not rule out raising interest rates by another 50 basis points at the next meeting. Higher interest rates will eventually increase the cost of borrowing for mortgage and home equity credit lines, putting additional pressure on households.
Selene Soo, director of wealth insurance at RBC Bank, said: “the epidemic of the past two years is affecting Canadians, including those who are about to retire, coupled with the current high rate of inflation, many people are worried about their purchasing power and increasing spending.”
In fact, 78 per cent said the impact of inflation on their finances was their biggest concern. Another 48 per cent said they were worried that they would live longer than their savings could afford.
The C.D. Howe Institute report shows that most retiring Canadians are on a stronger financial footing than they were 20 years ago. The assets and net worth of older Canadians doubled from 1999 to 2019, in part because of rising house prices. Over the past 20 years, the average price of a house has risen from 180000 yuan to 400000 yuan, an appreciation of 119 percent, the report said.
Retirement assets, including registered retirement savings plans (RRSP), tax-free savings accounts (TFSA) and workplace pension plans, are also growing. The average value of all these assets was 73200 yuan in 1999 and increased to 158000 yuan by 2019.
However, 25% of Canadians between the ages of 45 and 64 have no retirement savings at all. Moreover, for those who do not receive a pension through work, RRSP and TFSA have low savings, which can be said to be “disappointing”.
“these realities suggest that some future elderly people may find it difficult to maintain their standard of living after retirement,” the report said. ”
This may mean that some Canadians will eventually postpone retirement rather than retire early, as many have done recently.
Homeowners can use other solutions, such as reverse mortgages, home equity credit lines, or even completely sell the house and move to a smaller home to get cash.
RBC Bank says financial planning is critical for any Canadian who plans to retire.
“it’s important to protect the money that Canadians have worked so hard to save,” Su said. “but for many people who may retire longer than planned, the right thing to do is to ensure that a guaranteed income or savings are sufficient to leave a legacy.”