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Why Canadians still lack retirement plans, how advisors can help

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The ongoing struggle with high inflation, Van Cauwenberghe says, brings the question of ‘will I be okay’ into focus for many Canadians. It forces people to estimate what daily necessities and retirement dreams like travel may cost in the future. It’s an area of acute need where advisors can demonstrate their value in the short and long-term. As Canadians grapple with the prospect of high inflation for longer, advisors can talk through plans for if their income doesn’t rise to match that rate and for when they transition to retirement and stop earning. Those plans can be instrumental in the eventual success of someone’s retirement.

Despite the value an advisor can bring to a retirement plan, Van Cauwenberghe notes that the study highlights some of the inertia among Canadians currently saving for retirement. Because we have a fair bit of guaranteed retirement income in the form of OAS and CPP, as well as a historically strong housing market, many Canadians think that simply contributing to their RRSPs will be enough for retirement to work out. She views this more laissez faire attitude as potentially dangerous and something that can lead to disappointment. It’s an attitude borne, in part, out of past generations’ circumstances that are less prevalent today.

One of those circumstances is the prevalence of defined benefit pension plans. Where Canadians in previous generations had defined benefit pension plans, Van Cauwenberghe notes that many Canadians now have defined contribution plans or no plans at all. Moreover, people move between employers more frequently and often take gig work, which means employer sponsored plans of any kind are less commonly available. The lack of pension income, therefore, needs to be planned for.

So does the management of any major debt. Because of historically low interest rates for much of the past decade, Van Cauwenberghe notes that many Canadians have retired without fully paying off their homes. Now that interest rates are higher, many of those Canadians may be regretting the decision not to pay off their home while they worked, as higher monthly mortgage payments could impact their lifestyles.

All of these issues drive home the importance of the work advisors do. Van Cauwenberghe says that at IG Wealth Management, the approach has to involve clear communication to clients about what a plan looks like and what its benefits are. With that clear understanding laid out, advisors can inform clients about their progress and what decisions need to be made along the way to keep up with their plans. That process of clear communication can also help bring in younger investors who may not see the immediate value of a plan or recognize that they need to begin to prepare for their retirement.

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