Archive for the 'Finance' Category

Boomers Remain Generous to Charities

Lina Ko November 12th, 2009

In spite of a tough economic climate, most Canadian boomers are still giving generously when it comes to charitable donations of money and time. According to a new survey by the BMO Retirement Institute, an overwhelming majority of Canadians open their wallets to charities and other philanthropic causes, with an 84 percent donor rate in 2007 resulting in more than $10 billion. This represents a 12 percent increase or $1.1 billion over figures from 2004.

The report also indicated that Canadians’ generosity went beyond financial donations in 2007 as well, with 2.1 billion hours of volunteered time to charities – equating more than a million full-time jobs.

According to the BMO report, titled The Evolution of Giving: From Charity to Philanthropy, boomers also have lofty charitable goals for the next five years, with 82 percent saying they intend to at least maintain their current contribution rates.

I’ve blogged before on the subject of boomers wanting to give back to the community as they mature. Charitable causes might just continue to be recession-proof because of the boomers’ contributions!

Toronto Highly Desirable But Unaffordable

Lina Ko October 6th, 2009

According to the 2008 MasterCard index of 75 leading global centres of commerce, Toronto is 13th in liveability and fourth in ease of doing business in the world. And when it comes to innovation, we rank second place in North America and among the top 20 cities globally.  According to another Quality of Living survey, we also have a highly desirable quality of life as we rank 15th out of 215 global cities for the fourth year in a row. The Toronto Star reported that at home, our standing is equally strong. While we are still hurting from the impact of the global recession, we’ve done better than most cities in Canada. Toronto is the second wealthiest city in the country after Vancouver, with an average household net worth of $562,000.

Crime levels fell in 2008 for the fifth year in a row; water usage continues to drop; and we have greater access to healthy, local food as farmers’ markets proliferate. All sounds good, but we’ve got some bad news.

Toronto is rated ‘seriously unaffordable’, ranking 190th internationally, and 29th in Canada, with median household prices 4.8 times median household incomes. We’re also approaching the same company as Italy and Japan in the category of ‘countries with the world’s oldest populations’. Toronto  has the highest proportion of seniors in the GTA and nearly double the rate of low-income seniors in Ontario. Unfortunately, more seniors are living alone, cut off from family and community.  The youth unemployment rate surpassed 20 percent in June 2009, up five percent in just one year and four percent higher than the national rate. And there are twice as many youth gangs as in 2000.

I have blogged before that immigrants could be an important solution to an ageing population. Unfortunately, recent immigrants are three times more likely to have lost jobs due to the economic downturn than their Canadian-born colleagues. And the Star further reported that for those who still have jobs, the earnings gap widened significantly.  So in summary, if you’re poor, you’ve gotten poorer. If you’re old, you’re more likely to be poor. If you’re new to this country, the recession has hit you the hardest. And if you’re young, you’re not going to have an easy life ahead. Moreover, in Toronto, there will be more seniors than children in 25 years requiring supports and services at a level not yet available.

This certainly paints a very gloomy picture.  However, for us boomers, we need to continue to work harder and longer so that we can become self-sufficient in our senior years and not become a burden to society. As the Toronto Community Foundation says, we need to leverage all our unique advantages to find new solutions to new problems.  We need to create a more efficient city that can withstand the inevitable demographic shifts ahead. I also agree with the Foundation that the knowledge and creativity that rank us so high internationally can make us stronger and more resilient. And all of us in Toronto – old, middle-aged and young – have a role to play!

Who’s the Most Screwed Generation?

Lina Ko April 29th, 2009

I read with interest the Globe and Mail article yesterday about the Most Screwed Generation. During this worst economic crisis in the last six decades, seniors and long-time pensioners are the most hurt as their investments have been decimated and they don’t have enough years left to recoup their losses. Meanwhile, their grandchildren, Generations X and Y, are shouting out their pain as well – no job prospects, no houses and no more fine dining. We baby boomers are also complaining about everything – avoid looking at our RRSP statements; putting our retirement plans on hold; our houses have gone down dramatically in prices; and our pensions are in the toilet. Plus the sandwiched boomers who are worried about grown kids and senile parents.

Let’s face it – for boomers, we’re really not that bad. Most of us may not have fat pensions, but we have our houses or condos; we have our RRSPs and what comes down must go up one day. We can complain until the cows come home, but life is tough and only cautious optimists will survive the storm!

Boomers Cannot Rely on Public Purse

Lina Ko February 23rd, 2009

With the recent stock market reality, the Canada Pension Plan Investment Fund has reported a $10 billion loss in their last report, and that caused a lot of anxiety among baby boomers who are thinking of retirement. According to The Toronto Star, the official maximum government retirement payment is $884.58 per month, and the average payment in 2007 was just $481.46 a month. Part of the problem has to do with the fact that the CPP was designed in 1966, and it’s a very different world out there now.
 
Leading-edge boomers just simply have to delay their retirement plans since a lot of them have probably lost half of their investment income. Trailing-edge boomers (those in their 40s) are not much better off either because they are worried that by the time when they arrive at retirement age well after millions of other baby boomers, they fear the CPP Investment Fund will be dry. The Star predicted that while it’s unlikely any federal government would let the Investment Fund dwindle that low, many admit that plans must be made for the huge numbers of retiring boomers.
 
Michael Ignatieff, federal Liberal leader, has said that this would be the largest withdrawal of labour from the Canadian workforce in history and the largest withdrawal of CPP funds. “It is past time we found a resolution to this issue,” he said. As I’ve said many times before in this blog, most boomers wouldn’t need nearly as much money once they retire as they do now. However, if boomers want to maintain their quality of life, they should consult a financial planner on how to weather the current storm and still maximize their investment.

Advisors Needed On Spending, Not Just Saving

Lina Ko October 14th, 2008

According to The National Post, a recent McKinsey Consumer Retirement Survey discovered that 69 percent of consumers said their advisors had not spoken to them about their goals for retirement. Only one in four had received an overall retirement plan or a plan for how they would spend their money during their golden years.

The transition from wealth accumulation to drawing income is also a tricky one for boomers. Fickle near-retirees sometimes switch financial advisors because the incumbent do not address their concerns about spending their money, not just accumulating it. In addition to planning when they can afford to retire, boomers want to be reassured they could afford their annual golf dues, go to Florida every winter, buy a new car every five years and eat out in restaurants twice or thrice a week.

The investing behaviour of men and women is also quite different. Women are long-term investors while men are all about the desire to beat the market in the short term. Sixty-one percent of men admitted to buying a bad stock after having performed no research whatsoever. Women make better investors because they look further ahead.

Amidst the enormous market turbulence of recent weeks, many leading-edge boomers may have to delay their retirement plans. However, long-term investors who are not speculating should have no reason to panic.

Older Workers Worried About Retirement

Lina Ko September 15th, 2008

According to a 2007 survey by Statistics Canada, one-third of older workers approaching retirement age say they are worried about whether they will have adequate income when they leave the workforce. Concern about the adequacy of their finances to live through retirement is most prevalent among lower-income workers and recent immigrants, aged 45 to 59.
 
The report was received with mixed feelings. A private sector analyst said it’s not the poor, but middle-income Canadians who should be most concerned.  The Stats Can report found that three in 10 older workers have not had any retirement planning advice, roughly the same proportion as it found who are concerned about the adequacy of their finances to carry them through retirement. According to Terrence Yuen, senior economist with the Canadian Research and Innovation Centre Watson Wyatt Worldwide, the low-income workers can probably manage on the public pension system, but mid-income workers are more worried as they don’t have the savings to maintain their current lifestyles.
 
For those aged 55 or over, it’s probably too late for them to accumulate the necessary level of savings. There is also evidence suggesting that Canadians in their late 40s and early 50s have pushed back their planned age of retirement. While few plan to work beyond age 65, the report noted that labour force participation rates among 65- to 69-year-olds have returned to very high levels.
 
While most leading-edge boomers can get by if they retire at 65, it’s their quality of life that they are worried about!

Preparing for Boomer Years

Lina Ko May 26th, 2008

According to last weekend’s National Post, debt management by young couples during the first half of working life is more important than worrying about saving for retirement. Actuary experts argue that it’s about taking on debt responsibly and get rid of debt as soon as you can.

Many young Canadians graduate from university with heavy debts from student loans and credit cards. They subsequently marry and enter the housing market only to find sky-high house prices in many Canadian cities. Unlike the U.S., mortgage debt is not tax-deductible in Canada. Although the mortgage industry has tried to ease the cash-flow crunch by introducing 40-year amortization schedules, this idea only makes sense for those starting out with modest incomes but who expect hefty raises within a few years. For others, making minimum payments for 40 years is just financial slavery.

Contrary to popular belief, baby boomers are not always the big spenders they’ve been made out to be. They are quite frugal and have managed their money pretty well. The vast majority will be able to retire at a reasonable age with a good income and enjoy retirement very much. The early years of retirement are typically more expensive because of splurging on travel and hobbies. But most people do not have years of blow-out spending early in retirement. They are reasonably frugal and have a good time, but you don’t need to travel the world every year to enjoy a good retirement. Low-cost pastimes like reading, walking, bridge or watching movies and TV are also quite enjoyable.

Boomers May Keep Economy Going

Lina Ko May 12th, 2008

According to a recent survey conducted by Ipsos Reid on behalf of the Canadian Newspaper Association, Canada’s wealthiest demographic – baby boomers – still plans to spend big money in the coming months in spite of the slowing economy.
 
Eighty percent of the 1,980 boomers surveyed said they still had “big buying power.” And many indicated they fully intended to exercise that power with large purchases. Almost 40 percent of boomers said that taking a vacation topped their spending priorities for the next 12 months. Purchasing home electronics, appliances and a car – as well as mutual funds – also ranked high as priorities.
 
The Toronto Star also reported that the survey revealed that in a world where 74 percent of advertising money is directed at a younger audience, 40 percent of boomers feel neglected by ads. The survey also shows newspapers are the medium of choice for boomers, with 65 percent indicating they don’t see a time when their paper will be replaced by something else.
 
Advertisers and marketers are still ignoring an important demographic although I have to say there have been some improvements. In these times when we know the economy is shrinking, perhaps marketers should speed up in paying attention to the boomer demographic who still has money and is willing to spend.

A Strong Potential in the Business of Death

Lina Ko March 17th, 2008

When I appeared as a guest on CBC’s Fortune Hunters two weekends ago, program host Dianne Buckner asked me what businesses would be strong prospects for boomer-marketing. I mentioned anti-aging, health and wellness, travel and leisure, and financial services but forgot to mention the business which I believe is going to grow in the next two decades – the business of death.

According to the Globe and Mail, the entire business of death is predicated on a single, relatively stable number. In Canada, that number – the crude death rate – stands at 7.3 meaning that 73 out of every 10,000 random Canadians would pass away in the next year.

Prospects for family-run funeral homes used to be grim. This is no longer the case. People will always eat, get sick and die; it’s how they went about it that was changing. The huge funeral-home-operating companies such as Loewen and SCI are now finding it difficult to compete with family-run homes. At the core, death cannot be mass-produced. Family-run funeral homes have been succeeding in personalizing the services to each family. They turned to the wedding industry for inspiration. They’ve discovered that Canadians were willing to splurge on traditional ceremonies as long as they maintained control over the details. Creative funeral directors have become special event managers who decorated a room in the funeral home ranging from a hockey rink to a movie theatre for dead movie buffs.

For all of us who used to be fans of TV series, “Six Feet Under,” the idea of a family-run funeral home business has taken on a new meaning of reflections on life and death. With the growing number of leading-edge boomers moving towards their ’senior’ years, they would want to take control of even their death and plan their funerals to the last detail. Funeral home operators who can capitalize on this opportunity and begin to personalize and customize their offerings would reap the biggest profit from the business of death.

More Boomers Shacking Up

Lina Ko February 25th, 2008

According to a financial consulting firm, the number of baby boomers – a generation hard hit by divorce – in common-law unions increased dramatically between 2001 and 2006. The Toronto Sun reported that many people assume younger Canadians have a monopoly on non-traditional relationships, but the truth is that the boomer generation has embraced ‘grey area’ relationships at a time when they are earning and inheriting more than ever before.

These ‘grey area’ relationships come in many shapes and sizes – some with children from previous marriages, some with unfinished separations and divorces – all of which can have a significant impact on the new family’s financial and estate-planning realities.

Financial planners have many suggestions to help boomers deal with these new and complex relationships – from thorough, frank discussions up front about each partner’s expectations and responsibilities for the family’s financial affairs; to each partner’s expectation for how the family will spend, save and invest its money; to preparing a co-habitation agreement defining the financial terms of the relationship.

When young people decide to shack up, the risks are lower since both partners probably started with nothing. When boomers choose a common-law relationship, there’s a lot more to think about!

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