Clients’ path to retirement will impact planning

As you’ve no doubt seen in your practice, clients take many different paths to reach retirement. But unless they have a gold-plated pension, many will not simply quit work on retirement, never to work again. This month’s Global View examines employment trends and how they affect retirement planning.

Retirement in the “gig economy.” In the past several decades, employers have been increasingly replacing full-time employees with independent contractors and part-time workers, most of whom don’t have retirement benefits. This report by William G. Gale, Sarah E. Holmes and David C. John for the U.S.-based think-tank Brookings explores the plight of “contingent workers” and suggests several ways of increasing their retirement security, such as exploiting innovations in technology and developing retirement accounts that follow workers from job to job.

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And the future is…semi-retirement. BNN staff put together this story exploring the reasons behind a 22% increase in the number of older Canadians working – nearly 20 times the growth rate for younger workers. And Jonathan Chevreau’s MoneySense article builds on the subject, making the case that even those who’ve worked steadily and full time may not go gently into retirement. Boomers are going to be largely responsible for retiring the word retirement, he argues. Instead they will enter a new “hybrid stage of life,” that involves working at least part time.

The impact on retirement planning. Obviously, the gig economy and a move away from defined benefit pension plans means less security for workers in retirement. But here are a few alternatives that might help clients find the security they crave:

• Brooking’s William G. Gale, David C. John and Bryan Kim look at differing types of rate-of-return guarantees, and who bears the costs of financing those assurances for workers not protected by an iron-clad government pension.
• Writing for the Financial Post, Fred Vettese suggests that clients – at least middle-income clients – would increase their retirement security considerably if they held off on receiving CPP to age 70.

Finally, this Money story by Penelope Wang makes the case that the much-maligned reverse mortgage might actually prove a viable alternative for retirees looking to delay taking government pensions. While the article focuses on the U.S. market, some of the same principles apply. Clients considering this alternative might also want to read Dale Jackson’s article on BNN on deciding whether to tap a house for cash.