Nearly half of retired Canadians over 50 years old stopped
working earlier than expected and many regret not planning for
retirement sooner
TORONTO, Feb. 24, 2017 /CNW/
- CIBC (TSX: CM) (NYSE: CM) -- Retired
Canadians aged 50 and over are finding that unanticipated costs,
health issues and higher than expected tax bills are their biggest
surprises in retirement, finds a new CIBC poll. Complicating
the situation for these retired Canadians is that many left the
workforce before they expected to, putting pressure on their
retirement income and leaving many wishing they had started
planning sooner.
"There's a lot we can learn from Canadians about their
retirement experiences to help us steer clear of costly surprises,"
says David Nicholson,
Vice-President, CIBC Imperial Service. "Heading into the final
weekend of RRSP season, it's important to remember retirement
planning is much more than checking your annual RRSP contribution
off the list. The key to mitigating surprises or coping with the
cost of health issues is planning ahead for the life you want to
live."
Key poll findings:
- Retired Canadians who faced surprises upon retirement say they
were most surprised by higher spending and unexpected costs
(30 per cent) including repairs and
renovations, financial support for children/grandchildren/parents
and costs of long-term care; health issues (24 per
cent); and, a higher tax bill (15 per
cent).
- Compounding the issue, nearly half of retired Canadians
(48 per cent) stopped working earlier than
expected. Reasons they retired earlier include:
- 33 per cent due to an unexpected health
issue
- 22 per cent were asked to retire by their
employer
- In hindsight, retired Canadians with retirement regrets say
they wish they'd started planning sooner (38 per
cent), saved more outside of their RRSP (38 per
cent), and would've retired later (22 per
cent).
"Many Canadians underestimate their spending in retirement, or
don't realize that they may have to retire earlier than they expect
to leaving them unprepared to manage higher expenses than expected
on a lower income than planned," says Mr. Nicholson. "While
travellers can expect to spend more, those staying put may be
surprised by the costs of all that free-time to explore new
interests or may dip into savings for renovations put off during
their working years."
Taxes can impact retirement cash flow Before
2009, when Tax Free-Savings Plans (TFSA) were introduced,
Registered Retirement Savings Plans (RRSP) were among the few
tax-efficient retirement savings vehicle. The poll indicates that
some retirees bulked up on their RRSP savings, and are now facing a
surprising tax bill as they convert their RRSP income into
Registered Retirement Income Funds (RRIFs). As a result, some may
also experience claw-backs on income-tested government benefits,
which could have been avoided with earlier planning.
"Making the transition from saving for retirement to funding
retirement can be complicated," says Mr. Nicholson. "Whether
you retire earlier, later or not at all, it's important to work
with an advisor to understand how your income will be taxed at
different stages of retirement, and ensure you're not leaving any
of your hard earned money on the table."
Tax tips for fewer retirement surprises:
- Create your retirement plan - Getting a sense of
your retirement goals and what they will cost you is the first step
to building a tax-efficient retirement plan. Your retirement
plan is personal to your goals and income needs, so speak to
an advisor to help you build the plan that's right for
you.
- Maximize tax-advantaged savings as you near
retirement – Now is the time to accelerate your savings
by maximizing your RRSP and TFSA contributions. Not only will your
savings grow without tax within these plans, when you withdraw
funds in retirement you'll likely do so at a lower income so you'll
pay fewer taxes (with an RRSP) or no tax at all (with a TFSA).
- Withdraw RRSP funds strategically – and re-invest in a
TFSA – Although funds can remain in your RRSP until age
71, consider how early withdrawals may help to reduce your overall
tax bill in retirement. Use the CIBC Retirement Calculator to
understand how all of your income sources (benefits, pensions,
savings) work together, and identify where you may be able to top
up income at lower marginal rates. For added savings, consider
re-contributing after-tax RRSP withdrawals to your TFSA, to
continue tax-sheltered growth.
- Retiring early? Time your withdrawals to maximize your
benefits: If you're retiring early or entering
semi-retirement, speak to an advisor about the benefits of using
your savings or delaying your CPP/QPP benefits to fit your income
needs for retirement.
KEY POLL FINDINGS:
Canadians aged 50+ who faced surprises upon
retirement:
I experienced unexpected health
issues
|
24%
|
I had to pay more taxes than I had
anticipated
|
15%
|
I had to carry debt or mortgage into
retirement
|
11%
|
*Unexpected home repairs or renovations forced me to
use some of my savings
|
9%
|
*I spent more money than I thought I
would
|
7%
|
I wasn't financially prepared for a change in my life
circumstances
|
6%
|
*Travelling cost me more than I had
anticipated
|
5%
|
*I didn't anticipate providing financial support for
my children/grandchildren
|
5%
|
*I didn't realize the costs of long-term care for
myself or my spouse
|
2%
|
*I wasn't prepared for the costs or loss of income
due to caring for my aging parents
|
2%
|
Other
|
8%
|
* Total of 30% for "Unexpected Expenses"
Top three things Canadian retirees aged 50+ who would go back
and change anything pre-retirement:
I would've saved more
outside of RRSPs (e.g. TFSA, cash savings)
|
38%
|
I would've started my
retirement planning sooner
|
38%
|
I would've retired
later
|
22%
|
Time of retirement for Canadians 50+:
1-2 years
earlier
|
16%
|
3-5 years
earlier
|
32%
|
On-time
|
39%
|
1-2 years
later
|
6%
|
3-5 years
later
|
7%
|
Canadian retirees top reasons for retiring earlier than planned,
by percentage:
I retired earlier due
to an unexpected health issue
|
33%
|
I was asked/incented
to take early retirement by my employer
|
22%
|
I had enough savings
to retire earlier than planned
|
17%
|
CIBC Retirement Surprises Poll
Disclaimer:
From February 6 to 9, 2017
an online survey was conducted among 662 retired Canadians over the
age of 50 who are Angus Reid Forum panellists. The sample
outgo was balanced on age, gender and region to Census Canada. For
comparison purposes, a probability sample of this size has a margin
of error of +/- 3.8%, 19 times out of 20.
About CIBC
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11 million personal banking and business clients. Through our three
major business units - Retail and Business Banking, Wealth
Management and Capital Markets - CIBC offers a full range of
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SOURCE CIBC - Consumer Research and Advice