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How to Survive - and Thrive - During the Coming Retirement Income Crisis. BRIDGEFORCE 2014 RRSP Road Show. Demographic Trends are Troubling. Demographic Trends are Troubling. 2013. 5,674,123. 24,104,559. 5,379,622. 2036. 22%. 10%. 93%. 6,897,9000. 26,544,400. 10,379,300.
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How to Survive - andThrive - During the Coming Retirement Income Crisis BRIDGEFORCE2014 RRSP Road Show
Demographic Trends are Troubling 2013 5,674,123 24,104,559 5,379,622 2036 22% 10% 93% 6,897,9000 26,544,400 10,379,300 Under 15 15-64 65+ Statistics Canada, July 2013. Medium Growth Scenario.
Demographic Trends are Troubling • Largest Single Expenditure of the Federal Government OAS - $40 Billion • Largest Expenditure of the Provincial Governments Health Care ($148 Billion), 45% of this amount ($67 Billion) is attributable to Canadians 65+ • Between 2013 and 2036 the elder population will increase by 93%
Demographic Trends are Troubling • Largest Single Expenditure of the Federal Government OAS -$40 Billion • Largest Expenditure of the Provincial Governments Health Care ($148 Billion), 45% of this amount ($67 Billion) is attributable to Canadians 65+ • Between 2013 and 2036 the elder population will increase by 93%
Demographic Trends are Troubling • Largest Single Expenditure of the Federal Government OAS - $40 Billion • Largest Expenditure of the Provincial Governments Health Care ($148 Billion), 45% of this amount ($67 Billion) is attributable to Canadians 65+ • Between 2013 and 2036 the elder population will increase by 93% $107 Billion
Demographic Trends are Troubling • $40 Billion (OAS) x 93% = $37.5 Billion • $67 Billion (Health Care) x 93% = $62.5 Billion • 37.5 Billion + 62.5 Billion = $100 Billion • Working age population growth 014-2036): 10% An Additional
Demographic Trends are Troubling • $40 Billion (OAS) x 93% = $37.5 Billion • $67 Billion (Health Care) x 93% = $62.5 Billion • 37.5 Billion + 62.5 Billion = $100 Billion • Working age population growth (2013-2036): 10% An Additional
Demographic Trends are TroublingHow much is $100 Billion? • Total Federal Income Tax: $126 Billion* • Total Federal Corporate Tax: $35 Billion* • Total GST collected: $29 Billion* • Total of all Federal Taxes: $209 Billion* *Fiscal Year 2012/13
Governments are Retrenching • The Canada Health Transfer (CHT) is being reduced • Tough new Long-Term Home admission criteria (Long-Term Care Homes Act, 2007) • Changes to Canada Pension Plan funding and benefits • Changes to age of eligibility for OAS, GIS and the Allowances
Governments are Retrenching • The Canada Health Transfer (CHT) is being reduced • Tough new LTC Home admission requirements have been introduced (LTC Homes Act, 2007) • Changes to Canada Pension Plan funding and benefits • Changes to age of eligibility for OAS, GIS and the Allowances
Governments are Retrenching • The Canada Health Transfer (CHT) is being reduced • Tough new LTC Home admission requirements have been introduced (LTC Homes Act, 2007) • Canada Pension Plan funding and benefits have changed • Changes to age of eligibility for OAS, GIS and the Allowances
Governments are Retrenching • The Canada Health Transfer (CHT) is being reduced • Tough new LTC Home admission requirements have been introduced (LTC Homes Act, 2007) • Canada Pension Plan funding and benefits have changed • The age of eligibility for OAS, GIS and the Allowances is increasing
Pension Plans are Under Siege • Pension plan participation 46% in 1977 38% in 2012 • Private sector participation One in 3 workers 1977 One in 5 workers 2012 • Defined Benefit Defined Contribution/Hybrid
Pension Plans are Under Siege Pension Plan Participation 2013 21% 7% 62%
RRSP Participation is Pathetic • Only one third of eligible Canadians contribute to an RRSP • Canadians have used a total of 9% of their available RRSP room • The median RRSP amount, held by a households with a breadwinner between ages 55 and 64, is $55,000 - one third have nothing - one third have less than $55,000 - one third have more than $55,000
RRSP Participation is Pathetic 48% • Almost half of working Canadians have neither an RPP or RRSP • Less than one quarter of eligible Canadians make an RRSP contribution each year • Canadians have used 9% of their available RRSP room • The median RRSP amount, held by a households with a bread-winner between ages 55 and 64, is $55,000 - one third have nothing - one third have less than $55,000 - one third have more than $55,000 24% 9%
RRSP Participation is Pathetic • The median RRSP amount, held by a households with a bread-winner between ages 55 and 64, is $60,000 - one third have nothing - one third have less than $60,000 - one third have more than $60,000
Investment Returns Are Weak * January 1, 2000 – January 1, 2014
Summary • Demographic trends are going to put significant pressure on elder entitlements • Governments are already cutting funding and changing programs • Fewer Canadians are covered by a pension plan and those who are covered are seeing benefit reductions • Most Canadians have little or no RRSP savings • The few Canadians who have saved, have been sideswiped by weak investment returns
Summary • Demographic trends are going to put significant pressure on elder entitlements • Governments are already cutting funding and changing programs • Fewer Canadians are covered by a pension plan and those who are covered are seeing benefit reductions • Most Canadians have little or no RRSP savings • The few Canadians who have saved, have been sideswiped by weak investment returns A global retirement crisis is bearing down on workers of all ages. - CBC News, December 30, 2013
The Good News! • If forced to pay • Canadians are being asked to accept more responsibility when it comes to their own retirement planning • Low interest rates and difficult financial markets should encourage them to seek expert financial advice
The Bad News! • If forced to pay • Canadians have an unwarranted faith in government programs • They don’t appreciate the gravity of the current fiscal situation • They don’t understand the financial markets and recent volatility has unnerved them • They are actually saving less, not more • They are incredibly inept consumers
Helping Canadians become better consumers can help you: • Add Value • Build the Relationship • Free up Capital
Becoming a Better Consumer Automobiles Full-size Sedans – Wheelbase of 2,750 – 3,000mm – Under 1,850 kg
Becoming a Better Consumer Automobiles First Quartile Performance
Becoming a Better Consumer Automobiles First Quartile Performance
Becoming a Better Consumer Automobiles Well Equipped for $30,000 Well Equipped for $40,000-60,000
Becoming a Better ConsumerWhy do people believe German Sedans are superior to mid-market Asian sedans? • German sedans cost more • Their belief is widely shared • Their belief is reinforced through marketing
Becoming a Better ConsumerThe luxury automobile paradox • Rich people don’t buy luxury automobiles • Most of the purchasers of luxury automobiles finance or lease • Luxury automobiles are no more satisfying to drive or own than other automobiles
Becoming a Better Consumer What has this discussion have to do with retirement planning?
Becoming a Better Consumer Buy value - not bling Purchase experiences, not stuff Sweat the “big expenses” Trust no one - do your own homework
Becoming a Better ConsumerSweat the “big expenses” • After automobiles, one of your biggest single expenses will likely be real estate commissions • Depending on market conditions and the nature of the property being sold you may not require an agent • If you do need to list a property, it is important to understand that the sale will be driven through MLS (which attracts buyers and their agents) • The listing agent does NOT drive the sale. He prepares the initial paperwork, provides staging advice, and may provide some limited – but generally ineffective – marketing support. Why does he get paid 2 ½ - 3% Commission?
