2014

When the world gives you negative news, the smart start planning

Fidelity Investment's Peter Drake urges Canadians to see beyond the headlines and introduces the Top 10 reasons why Canada is a great place to retire

VANCOUVER, May 28, 2012 /CNW/ - Addressing the Canadian Institute of Financial Planners annual national conference today in Vancouver, Fidelity Investment's Peter Drake highlighted the disconnect many Canadians may be feeling about their retirement prospects given the almost constant barrage of negative economic and business news surrounding them.

In his presentation to attendees, entitled The Shift to Retirement Income: Beyond the Headlines, Drake, who is Fidelity's Vice President of Retirement and Economic Research, urged financial advisors and their clients to put the negative news in context and not become paralyzed with fear.  The presentation focused on the positive role financial advisors can play in helping investors focus on what they want to achieve in retirement so that they can properly plan and emotionally prepare for this life transition.

"Everywhere you turn these days, you can find headlines about the slowing global economy, the need to work longer, underfunded pensions and how Canadians are not saving enough for retirement. While there may be truth in these views, they often sensationalize the actual situation," said Drake. "What we don't read enough of is that Canada is one of the best places in the world to retire. Look at our solid economic position, our healthcare system and the demand for older workers. There's little doubt that Canada is attractive for both people retiring as well as those who want to work past the traditional retirement age."

Top 10 reasons why Canada is a great place to retire 

To balance concerns Canadians may be seeing and hearing about the state of retirement in Canada, Fidelity introduces the Top 10 reasons this country provides many truly great retirement opportunities:

10. Canada's labour market provides opportunities for older Canadians: The participation rate of older workers in Canada is on the rise and Fidelity's research found that 79% of pre-retirees expect to work at least part-time in retirement. Contrary to what one might expect, their reasons for working in retirement are not purely financial. Top reasons included the desire to stay mentally or physically active and keeping busy to help pass the time. On the demand side of the equation, employers are increasingly looking to older workers to provide much needed experience as the number of new entrants to the workforce slows. A combination of both growing supply and demand for older workers forecasts a positive outlook for Canadians in the years ahead.
9. Rising Canadian housing prices have added wealth for boomers: The net worth of Canadians has increased substantially as Canada's housing market took off over the past decade. While there may be concerns about overheating in some urban markets, it is likely that most retirees and near retirees who purchased homes in the prime of their accumulation years, could weather a housing correction and still have added value that could be used to generate income in retirement if needed.
8. Canada's fiscal position in good standing relative to other countries: The Canadian government's deficit and debt position is in good shape relative to much of the developed world. For Canadians, this strong fiscal standing helps ensure the sustainability of the types of retirement benefits Canadians rely on for the foreseeable future.
7. Workplace pension coverage likely to improve: While there are ongoing discussions about which route governments should take to improve employee pension coverage including adopting Pooled Registered Pension Plans or enhancing the Canada Pension Plan, it is positive that the federal and provincial governments are actively looking for ways to help Canadians better prepare for retirement.
6. Low and predictable inflation: The strong record of the Bank of Canada of keeping inflation low and predictable is very positive for retirees. Inflation affects retirees more than any other demographic group as it can reduce the purchasing power of their savings. Inflation that is both low and predictable is one of the most important aspects to planning for twenty to thirty years of retirement.
5. Flexibility in Canada's retirement system for saving, investing and generating incomeCanada has a flexible retirement income system. There is more than one way to save and invest for retirement and more than one way to generate retirement income.  This means that Canadians have choices about what works for them.
4. Health Care - 70/30 rule: 70% of expenses are covered by the government, 30% by the individual: Fidelity research in the United States concluded that Americans should save $240,000 for health care in retirement1 - a cost most Canadians won't have to face. While everyone in Canada is covered for basic health care expenses, Canadians do need to be aware of what they are covered for and plan for potential out-of-pocket health costs. The good news is that it is unlikely that Canadians will be hit with an unexpected, catastrophic medical bill.
3. Sustainability of Canada's Public Pension system: The federal government's actuary regularly checks the health of the Canada Pension Plan (CPP) and it has been declared solvent to pay all its liabilities for at least the next 75 years.
2. Canadian life expectancy among highest in the worldCanadians are living longer, healthier and more active lives than ever before. Retirements of 25 plus years are now the norm, not the exception. To enjoy this gift of time, Canadians need a written retirement plan to help ensure they do not outlive their savings. Fidelity's research shows that only 23% of respondents have a written retirement income plan, a number that hasn't changed in the seven years of Fidelity conducting research in Canada. This number needs to increase.
1. Canada is a great place to live: Canada is recognized globally as one of the best countries in the world to live. From stable governments, to strong individual rights, accessible health care, and abundant resources from clean water to commodities envied by the rest of the world, Canada has enormous wealth and the ability to provide for its citizens. With proper planning, retirees can live the lifestyle they plan for filled with opportunities.

Drake concluded by reiterating the importance of having a retirement plan. "There's always a reason not to plan for retirement," said Drake. "Investors could pick any year from the 1987 crash to the tech bubble to the recent financial crisis and ongoing market volatility - there will always be something to focus on versus thinking about retirement planning.  We know from our research that Canadians who have taken the time needed to prepare for their retirement are feeling good about their future.  While the news of the day might be daunting, you have a better chance of living the life you want in retirement if you take the time now to plan, save and invest for your future.  And you'd be smart to get professional financial advice."

About Fidelity Investments

Fidelity Investments Canada ULC is part of the Fidelity Investments organization of Boston, one of the world's largest providers of financial services. 2012 marks 25 years of success in the Canadian marketplace, where Fidelity manages a total of $67 billion in mutual fund and institutional assets. This includes $13 billion in assets for institutional clients including public and corporate defined benefit pension plans, endowments, foundations and other corporate assets on behalf of clients across Canada.

Fidelity Canada provides Canadian investors a full range of domestic, international and income oriented mutual funds, as well as asset allocation and managed solutions and the high net-worth program, the Fidelity Private Investment Program. Fidelity funds are available through a number of advice-based distribution channels including financial planners, investment dealers, banks, and insurance companies. Fidelity is a proud supporter of the Boys and Girls Clubs of Canada and we are dedicated to helping young Canadians realize their full potential as productive, responsible and caring citizens.

1 Fidelity Investments, Fidelity Viewpoints, May 16, 2012, "Retirees face estimated $240,000 in medical costs".  The estimate assumes no employer-provided retiree health care coverage and average life expectancies after age 65 of 17 years for men and 20 years for women. The estimates of retiree health care costs will vary considerably, based on mortality assumptions.

 

SOURCE Fidelity Investments Canada Limited




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