Aging Canadian baby boomers are increasingly in the sweet spot for financial planners and eldercare professionals. Peter Wouters, a director of Empire Life Investments, says the industry needs to rethink retirement and its relevance to its practices.
Wouters describes a “silver tsunami” of leading-edge boomers who started turning 70 two years ago; indeed, 12,500 North Americans turn 50 every day—one every seven seconds.
He reminds advisors their customers know what they’re retiring from, but many have only a vague idea of what they’re retiring to.
When the industry interviews pre-retirees, they think they will miss the money once they retire, but in practice, most retirees miss the social interaction; many end up “unretiring” or launching encore careers.
And advisors are aging right along with their customers: Wouters points out that the average age of an advisor in Canada is now 58. Most of their clients have not tried to redefine who they’re going to be next, so many return to work, which is how they identify themselves to others. This is one reason most advisors themselves don’t retire.
Because of the great unknown of how long retirement will be—the trend is to greater longevity and longer work spans—there’s still a lot of fear and uncertainty about how long money will last in retirement. Wouters says only four in 10 know the amount of future retirement income they will need; 61% of affluent boomers know the number but only 28% of those with middle incomes do. And even if they know the number, they don’t know if it will be enough. “The good news is we will live a long, long time,” he says. “The bad news is we will live a long, long time.”
This uncertainty presents a planning opportunity for professionals prepared to focus on this cohort. 56% need help understanding what investments will best suit their needs; 53% want to know how retirement portfolios will react in certain markets; 53% need assistance adjusting portfolios for how they will react in certain markets; and 51% need help deciding how much they will require in retirement.
Elders want to be treated holistically, and they need someone to pull it all together and make sense of the plans, products, documentation and surrounding issues.
There is a big difference between wealth accumulation and de-accumulation, also known as decumulation. As Wouters puts it, when you’re a pre-retiree still in the workforce, investment income is merely nuisance income that you have to reinvest and pay taxes paid on annually. But in decumulation, it becomes one of several important income sources, along with two sets of CPP, two sets of OAS, LIRAs, RRSPs, segregated funds etc., all taxed and reported differently. The challenge is to replicate the income from multiple sources that previously may have come from just one or two streams of employment income.
Most investors would give up 100 or 200 basis points of annual return in exchange for regular, meaningful contact with an advisor, Wouters says. “That says regular contact is more important than shooting the lights out on performance, which in their heads they know is not sustainable.”
Nathan Kupusa, president of Solutions for Aging, says advisors need to “seniorize” their practices because their clients have also changed. Most financial advisors are generalists focused on life events earlier in the life cycle: career, marriage, first home, children, paying down debt and building savings.
But they’re less equipped to deal with the life events of the elderly, including eight stages of retirement, health issues, loss of independence and mental capacity, and family issues like the empty nest and the sandwich generation. Expertise is also needed on fraud prevention, housing, end-of-life issues and funeral arrangements.
Kupusa’s own practice is designed for seniors, with appropriate office space featuring accessible parking and mobility, no background noise and soft skills like patience, empathy and listening.
A huge issue is health and caregiving: some eight million Canadians provide care to a chronically ill or disabled friend or love one. With longer life expectancy comes more chronic health issues, dementia and loss of cognitive ability. “Health is always a priority over finances, triggered by a crisis.”
Health care costs are approaching $216 billion a year in Canada, while they make up 42% of Ontario’s annual budget, a figure expected to rise to 50%. “Government funds are drained and changes are coming.”
But despite the huge part health care will play in their clients’ lives, only 22% have saved or planned for health care expenses, even as 53% worry about the cost of drugs and medical treatment in retirement. 47% worry about being in long-term care longer than they are prepared for financially. And “76% are stressed out, citing money, money, money as the top three factors.”
You can’t plan without knowing the cost: Kupusa cites long-term care expenses of $2,300 to $2,500 a month, and retirement residences cost $2,800 to $4,500 or more. In-home nursing personal support workers charge $21 to $25 an hour, while a registered nurse costs $45 an hour.