Retired Canadians aged 50 and older are finding unanticipated costs, health issues, and higher-than-expected tax bills to be the biggest retirement surprises, according to a new poll from CIBC. Many of the retirees also left the workforce earlier than expected, which has put an added pinch on their retirement income and made them wish they had started planning sooner.
“[I]t's important to remember retirement planning is much more than checking your annual RRSP contribution off the list,” said David Nicholson, vice president of the CIBC Imperial Service. “The key to mitigating surprises or coping with the cost of health issues is planning ahead for the life you want to live.”
Canadians who were unpleasantly surprised upon retirement said they were caught most off-guard by higher spending and unexpected costs (30%), such as renovations, financial support for offspring or parents, and costs of long-term care; health issues (24%); and steeper-than-expected taxes (15%).
Exacerbating the problem is the fact that nearly half of retired Canadians (48%) exited the labor force before they thought they would. Among those who retired unexpectedly early, 33% did so due to an unanticipated health issue, and 22% were asked to retire by their employer.
Among the retirement-related regrets expressed by respondents were wishes to have planned earlier (38%), saved more outside of their RRSP (38%), and retired later (22%).
“Many Canadians underestimate their spending in retirement, or don't realize that they may have to retire earlier than they expect,” said Nicholson. “While travellers can expect to spend more, those staying put may be surprised by the costs of all that free-time to explore new interests or may dip into savings for renovations put off during their working years.”
The poll also indicated that some retirees loaded up on their RRSP savings and have decided to convert their RRSP income into registered retirement income funds (RRIFs), leaving them with a surprising tax bill. Consequently, some may also suffer claw-backs on income-tested government benefits – a situation that could have been prevented with earlier planning.
“Making the transition from saving for retirement to funding retirement can be complicated,” said Nicholson, who emphasized the importance of working with an advisor to navigate the shift.
The importance of helping clients through tough times
More cash-strapped Canadians are dipping into their RRSPs