LAURA LEYSHON FOR THE GLOBE AND MAIL
Keep on truckin'
Their RRSP portfolios deflated along with the economy, many Canadians are facing a longer wait for retirement. But there are benefits to working longer, and, as one expert says, 'You never want to retire in a bad market'
She may be bumping up against traditional retirement age, but Diane Beaton has put the pedal to the metal with no intentions of slowing down.
The 61-year-old has driven from her mind all thoughts of exiting the fast lane of the working world, and is now busier than ever running an airport shuttle service in Vancouver for international students.
With five vehicles and several staff who help her greet students at the airport and shepherd them to their new residences, she's often on the job more than 10 hours a day, every day of the week. "It really is a lot more than anyone should be doing but it's a small business and we're still building it up," Ms. Beaton says.
She started Beaton's Meet & Greet in her mid-50s, after many years of working as an employee in administration and management. "It was a choice I made to jump in, and I knew it would be a lot of work, but it's what I always wanted to do."
Ms. Beaton's husband, Owen, 66, works as a newspaper dispatch delivery driver and does maintenance work for a local church. He also has no plans to retire.
"I guess like most of us, when we were in our 30s and 40s, we figured by the time we were 65 we'd have things set in place financially so we could do whatever we wanted to do," Ms. Beaton says. "But we didn't focus on that, so we found ourselves in a position now where we have to work at something to bring some money into the house to live."
The Beatons are far from alone in putting off retirement. According to a recent survey conducted for Sun Life Financial, nearly half of working Canadians believe they will stay on the job past the traditional retirement age of 65. That's a remarkable departure from just a few years ago, when Statistics Canada reported that the average retirement age was 61.
Financial considerations weren't the only reason Canadians said they are opting to work longer - so were intangibles such as remaining mentally active and enjoying their careers.
But there's little doubt the deterioration in the economy and RRSP portfolios is playing a role.
Those working into their so-called retirement years will reap the rewards of a steady paycheque or income stream. That should help them avoid withdrawing funds from their registered retirement savings plans, giving that money more chance to recover from the deep losses likely experienced since the markets began tanking.
Working longer also means they can keep making contributions through age 71 from the income they earn.
"You never want to retire in a bad market," says Tina Di Vito, director of retirement strategies at Bank of Montreal Financial Group in Toronto and a chartered accountant.
If you have the choice, postponing retirement can be a prudent move to ensure you won't run out of money later in life.
"Even if you don't make any more RRSP contributions, just leave that account intact for a couple of years and use other employment earnings, whether it's a part time job or just not leaving your full time job, to supplement that," Ms. Di Vito suggests.
If you haven't reached 65, that extra income can also help you resist the temptation to begin withdrawing early from the Canada Pension Plan.
Canadians are eligible to start collecting CPP at age 60, but at a reduced monthly payment that works out to be 30 per cent less for the rest of your life than if you had waited until age 65, Ms. Di Vito notes.
And those who are between 60 and 65 and already withdrawing from CPP should not fear losing their benefits if they decide to re-enter the work force.
"It used to be if you collected CPP earlier than 65, and had any other employment earnings, the government would not consider you retired and would take away your CPP," Ms. Di Vito explains. "But now they have a new rule saying as long as you basically have no income for the month before and the month you start collecting CPP, you can go back to work at a later time and it won't jeopardize your collection of CPP."
For those who need the money, individual circumstances - such as overall savings and tax brackets - dictate whether it's wiser to dip into RRSPs or take the early CPP benefits before age 65. But it's almost always better, when faced with having to make withdrawals from savings, to do it first from non-registered accounts so it's not taxable, Ms. Di Vito says.
Those who are delaying retirement may be tempted to reallocate more equities into their portfolio in the belief that, once markets bounce back, they can recover from losses more quickly.
But Ms. Di Vito, for one, cautions against this: "The fact that a person takes a more aggressive stance with their investments may not necessarily mean in a year or two, when they want to retire, that the market will have co-operated to the extent that they needed. "And in being more aggressive, I find individuals tend to put their money into investments that they don't quite understand, are a little too complicated, and at the end of the day they are not sleeping well."
That doesn't necessarily mean shifting money into safer, lower-yielding investments that will limit growth potential, either, says Ron Harvey, a certified financial planner with Independent Planning Group in Ottawa.
"The important thing for retirees to understand is they are not going to consume all of that retirement income in the first year - it's got to remain with them over the balance of their lives," Mr. Harvey says.
"The impact from a downturn is seen more as a percentage of the value [of your portfolio] coming out immediately.
"But the balance is not coming out, and still has to grow going forward, so you don't want to collapse everything into fixed-income securities for that reason today," he says.
Ms. Beaton describes her own RRSP investments as being on the conservative side, but says she hasn't checked recently to see how they are doing. "I've been afraid to look, to be honest."
The focus for her and her husband is to do work that they enjoy and helps to pay for their living expenses. "I think you have to be pro-active with what you do every day, and not just put money away and sit back and think, 'That's great, I'm going to retire in two years.' Because that may not happen."
Special to The Globe and Mail