Healthcare not factored into retirement plans: Advisor

Healthcare not factored into retirement plans: Advisor

Healthcare not factored into retirement plans: Advisor A recent study out of Canada claims that four in five Canadian are financially on track for a retirement, but a Toronto wealth advisor says the study overlooks the rising costs of healthcare.

“I don’t believe that the research took the potential for rising health care costs into consideration,” said Rona Birenbaum, a wealth advisor with Caring for Clients.  “I believe many people are overestimating the Ontario Governments ability to finance and deliver the long term care needed by the boomer generation.”

Her comments shortly after the release of the report last week, which cites that four out of five Canadians are financially on track for a retirement, or 83 per cent, according to the consultancy.

The survey analyzed the finances of 9,000 households with employed people and 3,000 individuals with who are retired and the findings showed that the biggest factor to determine where or not a household is on track stems from their access to pension plans.

The report contradicts a lot of the rumblings heard over the last few years in that a majority of Canadians are either not ready for retirement or don’t feel confident about their prospects.

Advisors interviewed by WP had mixed reactions about the contents of the report, who largely agreed with the findings but highlighted other concerns that weren’t addressed.

“Retirees need less income after retirement than while working unless they want to live a more expensive life in retirement,” Birenbaum said.  “So there is a difference with being able to cover your costs, and enjoying life to the fullest.”

Statistics Canada says the average Canadian spends about two-thirds of what they did in their retirement comparative to their working years — a measuring stick on which the McKinsey survey based their data.

Approximately 60 per cent of people don’t contribute anything to a defined-contribution plan but are still on track for a comfortable retirement. That compares with 84 per cent among those who contributed at least six per cent of their income to one, according to the report.

The report also says if even a small percentage, say 30 per cent, of the value of respondents' real estate holdings were included, the percentage of people on track for a comfortable retirement increases to 87 per cent.

“The perception gap regarding retirement readiness can be explained in part by an overestimation of consumption needs in retirement," the report said.

Laurie Bonten, a wealth advisor at the National Bank in Winnipeg, agreed with the findings and said most of her middle-aged clients have their affairs in order and are on track for a good retirement.

“I do not see too many clients 35-50 who are too off track for retiring around 60 on average,” said Bonten in an interview with WP.  “The odd few have not planned at all, but the majority I have met over the years have done a decent job. The biggest problem we see is some clients we meet have either too much risk for their age, or too little. Balance is key in these markets.”