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The push and pull (back) of guaranteed lifetime income

Investments, Personal Finance

Posted by Peter Wouters

Aug 15, 2019 12:15:49 PM

Directeur, Planification fiscale et successorale et planification de la retraite, Gestion de patrimoine
Placements Empire Vie

Revenu viager garanti : les facteurs incitatifs et les facteurs dissuasifs

Why do aging Canadians want more guaranteed lifetime income? I’ve written and spoken a fair bit about this. Here are some push factors in favour of guaranteed lifetime income:

Push factors

  • It’s easier for them to maintain their lifestyle. 
  • It simplifies their financial management and allows them to focus on their lifestyle, and lastly
  • it makes it easier for family or caregivers to manage finances when these aging Canadians become incapacitated.

Health, mobility and cognitive issues can impede peoples’ ability to access financial services and make financial decisions. Health, mobility and cognitive issues can impede peoples’
ability to access financial services and make financial decisions.

 

Elders do not want to be a burden on their children. Health, mobility and cognitive issues can impede peoples’ ability to access financial services and make financial decisions, act on them promptly and be protected from financial exploitation, elder abuse and fraud as they age. Social isolation, loss of control and independence are key worries that plague aging Canadians. Having a certain amount of guaranteed lifetime income or cash flow coming in to handle regular or fixed expenses simplifies the lives of aging individuals and the family members who may need to step in and help manage their finances while juggling their own financial affairs.

 

6/10 Canadians aged 50+ experienced a major life event that challenged
their prior financial plans. 1
6/10 Canadians aged 50+ experienced a major life event that challenged their prior financial plans. Source: The Brondesbury Group, Financial Life Stages of Older Canadians, by Edwin L. Weinstein (commissioned by the OSC) (2015), at p. 1, http://bit.ly/2CkINcC.

 

Complicating all of this are the realities that these things affect different people in different ways, to different degrees and at different times in their lives. People also need to plan and prepare for the unexpected.

The Financial Life Stages of Older Canadians report found that 6/10 Canadians aged 50+ experienced a major life event that challenged their prior financial plans.  

Here are some pull (back) factors against adequate guaranteed lifetime income easing worries about maintaining a worry free, comfortable lifestyle later in life:

Pull (back) factors

  • Most aging Canadians don’t have a retirement plan.
  • They don’t have a retirement income plan, and 
  • They may have little desire to actively and consistently engage. 

Less than 1/5 aging Canadians have a retirement income plan. Less than 1/5 aging Canadians have a retirement income plan.

 

Money seems to be little cushion against the worries of future financial comfort. Only 45% of those with financial assets equal or greater than $100,000 are highly confident of their ability to maintain their standard of living in retirement.2 Less than 1/5 aging Canadians have a retirement income plan. Let’s look at Ontarians for example. Investor Office’s 2017 Investing as we Age report found that only 14% of Ontarians age 45+ had a formal, written retirement plan; over half had no plan at all. Most leave it too long and devote comparatively little time to the process.

These push and pull factors place individuals in a quagmire when it comes to addressing concerns over maintaining their lifestyle later in life. As the ancient philosopher, Cicero put it; the enemy lies within. Like most people around us, the overall quality of our lives will be determined in large part by our willingness or unwillingness to deal with the discomforts of fear and procrastination. These are the factors that keep us in a pattern of wishing for a better life without actually taking the necessary action to do something about it.

We can all use some quality help in this area. Look for an accredited financial advisor, educated and trained in the area of retirement income planning to show you options, share some tactics and get you started or help you improve your plans and actions for a better financial tomorrow.

 

© 2019 by Peter a Wouters. Republished with permission by Peter Wouters. For the complete list of articles, please visit here.

 

Related Articles:

What keeps you up at night?

Value of guaranteed lifetime income

Age Gender and Retirement Perspectives


1 The Brondesbury Group, Financial Life Stages of Older Canadians, by Edwin L. Weinstein (commissioned by the OSC) (2015), at p. 1, http://bit.ly/2CkINcC.

2 2018 Canadian Guaranteed Lifetime Income Study, Greenwald & Associates and CANNEX

This blog reflects the views of the author as of the date stated. This information should not be considered a recommendation to buy or sell nor should it be relied upon as investment, tax or legal advice. Empire Life and its affiliates does not warrant or make any representations regarding the use or the results of the information contained herein in terms of its correctness, accuracy, timeliness, reliability, or otherwise, and does not accept any responsibility for any loss or damage that results from its use.  

August 2019

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