Seniors give more, take less: HSBC

Some of our collective preconceived notions of post-retirement life may be in need of revision. Far from being frail and on the receiving end of society’s generosity, today’s seniors are making a vital contribution to their community, according to a new survey.

In its third annual report on the Future of Retirement, HSBC found that aging populations around the world are not the drain on government resources that demographers had earlier predicted.

“Many times, the older folks seem to be cause for alarm, when we talk about funding crises, dependency ratios and health services,” says Martin Sims, executive vice-president and regional sales director at HSBC Securities (Canada) Inc. “But what the survey showed was that these older folks actually give more than they take in terms of contributions to their societies.”

Thanks to its global reach, HSBC was able to interview 21,000 people between 40 and 79, in 21 mature and developing economies. In mature economies, the proportion of people over 60 who remain in the workforce ranges from one-fifth to half.

The survey found there are 1 million Canadians over the age of 60 still working at some form of paid employment, with an average work week of 25 hours, and contributing roughly $2.2 billion in taxes.

“These individuals, if they stay in the labour market, will have income. They’ll be paying taxes and contributing and have extra cash flow that they might not have had if they were in retirement a few decades ago.”

Those working past the age of 71 will present their own tax-planning challenge, as their RRSPs would have already been converted to RRIFs. Advisors seeking to mitigate the tax impact on these clients will have to do so through deductions — such as those for charitable donations — or investment products with built-in tax efficiencies.

The same age group is also performing a total of 415.7 million hours of volunteer work each year, worth an estimated $3.1 billion. Among those over 60, more respondents were giving support — in terms of money and care — to friends and family, than were receiving support.

Of those between 70 and 79 years of age, 36% had provided financial support in the six months prior to the survey, while 47% of those in their 50s had lent a helping hand. Only 2% of the 70 to 79 age group reported receiving assistance from family or friends.

In Canada, the rate of volunteerism increases with age, according to the survey, rising from 36% of people in their 40s to 48% of those in their 70s.

Volunteerism was highest in countries with more comprehensive state welfare systems, as programs such as social healthcare encouraged more active lives.

“Immediately after retirement, particularly in mature economies, individuals appear to experience a boost in health status, quality of life and feelings of control and independence,” the report says, dubbing this the Retirement Bonus.

The survey found Canadian seniors were the most optimistic about health issues, with 76% of those over the age of 70 reporting good health, followed by the U.K. (73%) and the United States (72%).

That could present a planning issue, as healthy retirees may not be as dependent on living benefits, but their more active lifestyle may require a higher income.

“Individuals need to recognize that there is the potential for a longer, healthy, active retirement, and they need to prepare for that accordingly,” says Sims. “The fact that people are going to be living longer in retirement should absolutely be taken into the decision-making process when it comes to selecting investment vehicles for their portfolios.”

The report points out that the family structure itself is changing, with each generation having fewer children than in the past, but with more generations living at the same time. These “skinny” families may require more detailed estate plans, as seniors may want to leave inheritances for each generation of progeny.

“There are other people in other generations that are involved and are important to the clients,” Sims says. “Being able to take care of those people is critically important to most folks.”

The study also found the majority of retired respondents missed work less than they had anticipated in their pre-retirement years. Among 70- to 79-year-olds, 69% said they were looking forward to the future.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(05/22/07)

Steven Lamb