Briefly: “Saving only half of retirement puzzle” and more of Wednesday’s news

With so much emphasis on funding retirement, it appears that many Canadians don’t plan for their first year actually in retirement, according to the 19th annual RBC RRSP Poll.

The survey found that 76% of retirees had no idea how much money they spent in their first year after retirement. Among the 24% who did, 46% said they spent more than they expected, while 12% said they spent less. The remaining 42% just didn’t have any spending expectation at all.

“Before retiring, it’s important to be aware of how much money you think you’ll spend once you’ve retired,” said Lee Anne Davies, head, advanced retirement strategies, RBC. “Take the time to get an idea of what your day-to-day expenses are. This way, you’ll also have more time to make adjustments in your investment strategy — to ensure that your nest egg can provide the retirement lifestyle you’ve been planning for.”

The most common problem for retirees was that 39% of them faced costs they had not anticipated. Among these, home repairs were the most common (45%), followed by unexpected health care costs (42%).

Not surprisingly, 75% of retirees said they made big purchases in the first three years of retirement, while they were still young enough to enjoy them. Travel was most common (41%), followed by a new car (38%) and home improvements (37%).

But everyday expenses add up as well and account for about 58% of annual expenditures in retirement. Pre-retirees tend to underestimate the drain and estimate that day-to-day costs will account for just 47% of their annual spending.

“When it comes to retirement planning, professional advice has never been more important than it is today,” said Davies. “Successful planning takes discipline, knowledge and experience. It’s key to ensuring your retirement dreams won’t be sidetracked by unforeseen costs or large purchases.”

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Money worries taking a toll

The market downturns of 2008 and the threat of more losses down the road have shaken Canadian investor confidence, according to the 8th annual TD Waterhouse RSP Poll.

The latest survey found 24% of investors have lost confidence in their ability to manage their own investments, compared to 9% in last year’s survey.

“With 2008 being one of the most stressful trading years in history, we know that investors have more financial worries than ever,” says Patricia Lovett-Reid, senior vice-president, TD Waterhouse. “People shouldn’t let market volatility dictate their long-term financial planning, and they should speak with an advisor who can help keep their retirement plan on track.”

The survey found that roughly half of investors have lost sleep over their finances. The list of primary concerns ranges from declining investment values (22% of respondents) to paying bills (19%) to saving for retirement (14%).

Sleepless nights were more common among investors between the ages of 35 and 49, with 51% reporting tossing and turning on occasion. Older investors, aged 65 to 69 were less likely to be kept up worrying about money (40%).

“Some Canadians may be tempted to store their money ‘under their mattress’ in this volatile economy, but, in fact, hardly any Canadians follow through with it,” says Lovett-Reid.

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Canadians miss out on tax credits

While tax cuts and new credits may improve a government’s approval rating, many Canadians fail to follow through and claim new credits, according to a poll conducted for tax-preparer H&R Block.

Nearly 75% of survey respondents said they did not take advantage of any new credits on their 2007 taxes.

“Last year, a number of tax credits and changes were introduced that would benefit just about every Canadian taxpayer,” says Cleo Hamel, senior tax analyst, H&R Block Canada. “But if you don’t claim all the credits and benefits you are entitled to, you are overpaying the government with your hard-earned money.”

The new credits and benefits included the Children’s Fitness Credit, Child Tax Credit and pension income splitting.

The most popular credit claimed was the Child Tax Credit, with 18% uptake among survey respondents who claimed any new credits. Pension splitting saw 16% uptake, while 15% opted for the Transit Pass Credit.

“Not every Canadian will be able to claim the Child Tax Credit, but there are others, like the Canada Employment Credit, that had little awareness among Canadian taxpayers,” says Hamel. “This credit is available to anyone with employment income, but only 7% of those surveyed said they claimed the $1,000 non-refundable credit.”

Interestingly, the uptake for the tax credits varied across Canada, with Conservative strongholds more likely to see people take advantage of the measures. In Alberta, Saskatchewan and Manitoba, 42% said they claimed the credits. In Quebec, only 18% did.

More easily explained is the breakdown by age. Respondents between 18 and 34 were most likely to claim the Child Tax Credit (30%) and the Transit Pass Credit (24%), while those aged 35 to 54 were more likely to claim the Children’s Fitness Credit (26%). Forty-eight per cent of Canadians over age 55 took advantage of pension income splitting.

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GrowthWorks CEO staying put

GrowthWorks has announced that its president and CEO, David Levi, will remain in those two roles.

“Because of the recent downturn and turbulence in the financial markets, I have decided to remain in the role of president and CEO of GrowthWorks and its managed funds,” said Levi.

In August 2008, Levi had announced that he would transition out of the president and CEO role, to become officer, director and shareholder of GrowthWorks. Les Lyall, senior vice-president, was slated to replace Levi as chief executive.

(02/04/09)