The impact of COVID-19 on some Canadians’ finances has been devastating. The pandemic crisis has affected approximately 60% of Canadians financially, with over a million jobs lost in March of 2020 alone. Of those affected who continued to work, almost a third saw their hours cut.
It has not just been income that has been affected. Due to the market crash, where stocks plummeted by as much as 30%, many Canadians saw their savings decimated. While much of that loss has been regained, confidence in the stock market has unfortunately not fully recovered.
This combination of lower income, unstable employment and retirement savings uncertainty has meant that not only is early retirement in Canada less likely for many people, but retiring in Canada at any time can feel out of reach. Many Canadians affected by COVID-19 are asking themselves, “When should I retire?”
Why Canadians are rethinking their retirement timing
The effects of the COVID-19 crisis have led many Canadians – two million in total – to stop making regular retirement savings contributions, potentially ruining many early retirement plans. Many other Canadians deferred mortgage and other loan payments for six months, which put back their retirement financial planning even further.
Of pre-retirement adults, only 39% now feel confident with their retirement financial planning, compared to 54% before the pandemic. When it comes to when to retire, not surprisingly, one third of them now believe they will have to do so later than previously planned.
There are several effects from the COVID-19 crisis that have led people to rethink their retirement options:
- Their income has shrunk
- Investments have lost value
- They have dipped into their savings
- They’re now giving financial help to their adult children
- They no longer know how much they’ll need for retirement
With increased debts and no foreseeable way to pay them off, never mind replenish retirement savings, many feel that the only solution is to delay their retirement. Early retirement in Canada is a pipe dream for many of them now.
Why it could make sense to postpone your retirement
For those affected by the pandemic and wondering about retiring in Canada, postponing retirement may be the only option, especially if they want a comfortable retirement.
There are a number of benefits to retiring in Canada later than you initially hoped:
- You have longer to pay off debts
- You can build up your retirement savings
- You have fewer years of drawing from your retirement savings, so they won’t need to last as long
- It increases your retirement plan options
- Delaying receipt of CPP and OAS will increase the amounts you receive by 7.2% for every year deferred, up to the age of 70
Of course, these benefits will depend on you being gainfully employed, with a decent level of income, until you do eventually retire. If you’re unemployed or underemployed, it could be even more difficult to retire comfortably.
If you’ve been impacted financially and still decide to stick to your original retirement plan (effectively taking early retirement) you could be forced to accept some compromises on how you envisaged your retirement.
There could be less travelling and fewer vacations, a reduction in your standard of living (less dining out, for example) and you could even be forced to move out of your home so that you can use the equity to boost your income.
How can you get back on track with your retirement financial planning?
If the health crisis has disrupted your retirement planning, the first thing you need to do is to put together a new retirement savings plan. Ideally you would do this with the help of a financial advisor. Advisors don’t just help with early retirement plans, they can also help you get your retirement savings back on track.
Taking a second job can quickly boost your retirement plan options, as can starting up your own business. Establishing a business could also lead to continued revenue into retirement, which could mean early retirement if it brings in enough money.
Reducing your outgoings and saving the difference can also help get you to have either an early retirement or a more comfortable one.
Retiring in Canada as planned, without compromises, is still possible
There is another way to help you take early retirement or retire as you originally planned, with the income level you anticipated pre-COVID-19.
The CHIP Reverse Mortgage® allows you to cash in up to 55% of the value of your home without downsizing. You can receive the money in a lump sum, regular monthly payments or a combination of the two.
If the pandemic has made you consider delaying your retirement, the CHIP Reverse Mortgage can help:
- The money can be used to boost your monthly retirement income, pay for vacations or anything else that delivers the retirement you’ve always wanted
- You only pay back what you owe when you sell your home or move out, so it has no impact on your retirement income
- You may be able to use it to pay off any outstanding mortgage debt, which could drastically reduce your post-retirement expenses
- It allows you to choose the best time to retire and enjoy your retirement years, rather than working through them
Call us at 1-866-758-2447 to find out how much you could borrow so that you get to decide when you retire.