Money123: The ‘staggering’ retirement readiness gap

Ready to retire?

Just because you’re about to exit the workforce doesn’t mean you’re financially ready to retire.

That’s backed up by a new Deloitte Canada report released this week that shows 55 per cent of Canadians aged 55-64 will likely have to make “significant” cuts to their lifestyle to be able to absorb all the unexpected costs that come with retirement.

Hwan Kim, partner with Deloitte Canada, told Global News that the gap in retirement readiness is “staggering.” Deloitte found many Canadians are underestimating the impact of inflation and health-care costs on their budget in retirement.

“They just haven’t saved enough to be able to sustain their lifestyle, especially against the rising-cost environment that everybody is experiencing today,” he says.

But experts who spoke to Global News say that even for those gearing up to call it a career, a few years’ time can be enough to change your savings strategies to make the transition to retirement a little smoother.

Read more here.

Your mortgage and the bond market

Soft economic data and jobs numbers released this week reaffirmed opinions from most big bank economists that the Bank of Canada will hold rates steady next week.

But for Canadians in search of mortgage relief, experts say recent easing in the bond market could help them secure a lower rate at renewal.

November has seen yields drop on a number of benchmark bonds after a run-up in the market earlier in the fall, says James Laird, co-CEO of Ratehub.ca.

Fixed-rate mortgages are tied to the Government of Canada’s bond yields — so when the five-year bond yield drops, Laird says that lenders will (eventually) lower their own rates.

“It’s exciting that bond yields are coming down, if you require a mortgage in the near-term,” Laird tells Global News.

Read more about how the bond market affects your mortgage rate.

What is ‘inflation isolation’?

The rising cost of living is having a well-documented effect on Canadians’ pocketbooks, but it’s also weighing on their social lives and mental health, new Ipsos polling released this week shows.

The poll found that higher costs and interest rates are causing “inflation isolation,” as more than half the respondents (51 per cent) said they are staying home more to save money.

A third of respondents to the poll commissioned by debt consultancy MNP Ltd. also said they are spending less time socializing or hanging out with friends in order to cut costs.

According to the poll, younger Canadians and those earning less than $40,000 were most likely to reduce their socializing, leading to more isolation and loneliness.

MNP president Grant Bazian said Canadians are experiencing “mental anguish” when it comes to spending money.

“People are scared of spending money and as a result, they’re staying at home and not doing things they normally would and feeling isolated,” he told Global News.

Read more on what Canadians can do to balance debt and socialization.

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– THE QUESTION –

“My husband and I have recently made a couple of big purchases — a $4,000 vacation next year and a $15,000 used car, both of which we agreed were things we needed and were in our budget. But my husband has not been satisfied ever since, and has regularly been on edge and anxious about how much we spent. It’s not the first time he has had this reaction over bigger purchases. Is there anything I can tell him, or things we can start doing, that might be it easier to swallow big purchases when we need to make them? Again, we have not sacrificed our long-term savings and still have an emergency fund with a few months of expenses on hand.”

— A Money123 reader 

“There are two primary lenses through which we can look at the situation. There is the financial lens and the emotional lens. Often, when people are experiencing anxiety around money, it’s a combination of the two.

Let’s start with the financial lens. Some things to explore and consider – are there any changes upcoming that might be causing your husband to worry about money? For instance, many folks are currently experiencing anxiety around mortgage renewal. If you’ve been in a fixed mortgage at a low rate, with a looming renewal at the prevailing higher interest rates, that would be an example of a meaningful immanent change that could be causing your husband to second guess the decision. When this type of concern is the root cause, it is usually helpful to see your financial planner do a deep dive into your finances to help model “what if” scenarios and confirm the sufficiency of your financial resources and current savings rates. For some people, being shown in detail that they are truly secure and on track brings a sense of peace.

If the above has already been done, and your husband is still second-guessing the decision and experiencing anxiety and regret, the issue is likely an emotionally rooted one. While it is common for people to experience money anxiety despite having a secure financial reality, the deeper reasons for this vary widely. For one person, it could be that they absorbed or inherited fears around money from their parents despite not being in financial danger. For others, their financial worries could be grounded in their lived experiences and financial traumas they have personally experienced that have formed their perspectives and belief systems around money. The causes are incredibly varied, and I highly recommend professional assistance with surfacing and unpacking these beliefs.

Ultimately, your best bet is to seek professional advice from a financial planner to help you both gain clarity on the sufficiency of your resources. The Financial Planning Association of Canada has an excellent directory of professionals. Or, if the anxiety is stemming from an emotional origin, I recommend a therapist. The Financial Therapy Association has a directory of mental health and financial professionals specializing in this area.”

–  Natasha Knox, principal, Alaphia Financial Wellness

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