Get ready for some retirement surprises

VANCOUVER (NEWS 1130) – Get ready for some surprises if you’re heading into retirement.

A new poll reveals unexpected costs, health issues, and higher taxes are among the things taking people entering their “golden years” off guard.

The CIBC survey also finds nearly half of retired Canadians over 50 years old stopped working earlier than expected and many regret not planning for retirement sooner

“The biggest surprise is just how much things cost in retirement. What they are telling us is they didn’t anticipate costs like home repairs and renovations, financial support for their kids and parents, and unexpected health costs,” says Dave Nicholson, vice-president of CIBC Imperial Service.

The poll also finds tax liabilities and bills impact retirees’ cash flow more than many expected.

Nicholson points out some retirees bulked up on their RRSP savings, and are now facing a surprising tax bill as they convert their RRSP income into Registered Retirement Income Funds (RRIFs).

As a result, some may also experience claw-backs on income-tested government benefits, which could have been avoided with earlier planning.

“People often use rules of thumb to plan for retirement and they don’t actually take the time to think through what their retirement will look like specifically and how much money they will need,” he tells NEWS 1130.

“They sometimes forget to build in a contingency. What if their health fails and there is long-term care to pay for, or there’s more to pay for travel medical insurance. What if they are forced to retire early, either because their health doesn’t allow them to continue working or because their employer asks them to retire early? There might be a longer retirement than they otherwise expected.”

Nicholson says some people don’t take the high price of private retirement homes, which can be up to $10,000 a month, into account.

“People don’t necessarily understand how much that cost can actually be. Compound that with healthcare costs and other expenses and it that can often be a big shock.”

Nicholson recommends working with a financial planner to properly prepare for retirement, minimizing surprises and building a tax-efficient retirement plan.

The poll also asked current retirees what they would choose if they were given one “do-over.”

“The top one is they wish they had really started planning sooner. Sometimes when people are a year or two away from retirement, that’s when they start to think about it,” he says.

“You can really optimize your plan if you start thinking about it five, 10 or frankly even many, many years prior to retirement to set yourself up.”