Veteran advisor shares from-the-practice insights on jet-setting retirees’ budgeting, currency management, and other decisions
As the head of a high-net-worth practice focused on retirees, Rob McClelland could almost certainly write a book about financial planning for Canadian snowbirds – and he’d probably start by explaining just how much variety there is within that group.
“I used to think of snowbirds as just people going to a house in Florida or somewhere similar for six months. Some of my clients do that,” says McClelland, Senior Financial Advisor of the McClelland Financial Group at Assante Capital Management Ltd. “But many of them just travel.”
Snowbirds’ travel habits: not just south for the winter
McClelland’s snowbird clients include people in their 60s, 70s, and 80s, with twice as many people choosing to travel the world compared to those with a permanent residence abroad. His jet-setting retiree clients may go on organized trips and cruises, though some choose to self-travel by building their own itineraries and schedules.
In recent years, McClelland says some of his snowbird clients have stopped traveling; roughly a quarter of those clients stopped due to their age, and around the same number due to the impact of COVID-19. But for some, the global pandemic created an opportunity for forced savings, part of which they’re now able to add to their annual travel budgets.
"Approximately one-third of them own a place, and the other two-thirds rent," he says. “Sometimes people need to go down and rent in different places for a few years before they find the group they're most comfortable spending their winters with.”
When creating financial plans for snowbird clients, McClelland says life expectancy is a crucial consideration. For those expected to live up to 95 years old, traveling until the age of 85 might make sense, though that will still depend on their specific financial and health situation.
Budgeting, snowbird style
At McClelland’s practice, snowbird clients’ travel budgets can range from $20,000 to $100,000 per year, with an average of $30,000 to $40,000. Those sums have to be allocated across different expenses and options.
Aside from the cost of rented or owned accommodations, McClelland says snowbird clients have to decide between different transportation options. They also have to plan for travel-related risks by budgeting for international medical coverage, potential emergency healthcare costs, and travel insurance.
Currency exchange costs can be an important factor to consider. To help simplify planning and financial transactions for their winter getaways, he says many snowbird clients choose to maintain US dollar accounts.
"Most of those clients have a US dollar account with us, and they've got anywhere from $50,000 to a couple of hundred thousand dollars in it. When they need money, we get it from that account,” he says.
“If they've got $150,000, and they need $15,000 to cover rent, for example, we take it out of the account and reallocate it into 60/40 balanced funds, so it's growing a little, and they take it out when they need it. … That seems to work fairly well."
While market conditions are part of any financial plan, McClelland says they haven’t been a primary concern for his snowbird clients generally. Some are having to make adjustments, particularly those who were already stretching themselves to afford a months-long escape abroad – but those discussions are rare.
"My number one conversation with clients in their 70s or 80s and traveling is telling them to fly business class,” he says. “They've worked hard, they've saved all this money. … They need to enjoy their retirement because they've earned it."
Opinions expressed in this article are those of the author only and do not necessarily reflect those of Assante Capital Management Ltd. Assante Capital Management Ltd. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization (CIRO).
