During the next several years, many of your clients will be making important decisions on where they will live in retirement, weighing the pros and cons of staying in their own homes, making the transition to a smaller residence or even relocating to another city or country.
Although many Canadians dream of a balmy southern lifestyle in retirement, the reality is that only a small minority uproot themselves geographically during this stage of life. Most prefer to stay close to the familiar routines, family ties and social networks of home. Others find that their dream of a change in residence may meet certain requirements in terms of weather but comes with the costs of additional health-care coverage and travel expenses if they intend to reside outside of Canada or even move to another province.
“Home values have increased dramatically in Canada, and that gives retiring homeowners a lot of options, including switching to a smaller home or cheaper geographical location,” says Ted Rechtshaffen, president and CEO of Toronto-based TriDelta Financial Partners Inc. “But a $1-million home sold to move into an $850,000 condo in an expensive neighbourhood is not downsizing after legal fees, real estate costs and the expensive monthly maintenance fees that come with it. These days, you can buy a home in Florida for $150,000. You don’t have to go as far as Costa Rica, although there are complications and tax issues that come with that.”
In a survey on where Canadians plan to retire and why, Bank of Montreal‘s BMO Retirement Institute found that 85% of Canadians aged 45 or older plan on staying in Canada despite harsh winters. Only 5% of respondents plan to relocate –the U.S., 2% to Europe and 1% to Mexico, South America and Asia.
“The overwhelming majority of Canadians plan to stay in Canada when they retire,” says Marlena Pospiech, senior manager of retirement strategy with the institute. “In many cases, they will be downsizing to smaller homes or moving to smaller towns from large urban centres.”
The majority of people prefer to age in their own home rather than in a retirement residence, Pospiech says, and that means staying close to friends and family. Many also have long-established relationships with trusted professionals, such as doctors and lawyers, as well as household and personal service providers. If retirees stay in Canada, they are able to maintain this network of connections, which can be difficult to replace. Women are less likely to choose relocating over men, Pospiech notes, which could be because many women have spent more time nurturing families and creating stronger bonds outside a couple relationship.
For those planning to remain in Canada, BMO’s research found that many retirees are seeking the most moderate climate in the country, with 15% indicating they would like to live in Victoria. Other popular choices include small towns in Ontario (14%), Montreal and the Eastern Townships (11%), and Toronto (11%).
“Victoria remains the retirement capital of Canada,” Pospiech says, “which is not surprising, considering the top factor in choosing a retirement location is weather. However, finances are also an important part of the equation. Victoria may not be as affordable as other places, and people may end up settling somewhere in the vicinity.”
The 2011 government census data indicate certain communities are becoming popular with retirees. For example, Parksville, B.C., on Vancouver Island and Elliot Lake in northern Ontario have populations that are more than one-third seniors, compared with the national average of 15%. In Peterborough, Ont., and Trois- Rivières, Que., 20% of the population is over age 65. On the other hand, Calgary does not appear to be attractive to retirees, with less than one in 10 people more than 65 years old. Seven of the 10 Canadian municipalities with the highest proportion of seniors are in British Columbia, including Victoria, Sidney and Kelowna.
According to BMO’s research, the top factors for relocating after retirement include weather (57%), financial reasons (54%), proximity to family and friends (45%) and better access to health care and support services (35%).
However, many people looking for better weather become snowbirds who leave Canada regularly for southern climes for a few months of the year but do not actually change residence. Pospiech says it’s important to make sure clients have adequate health coverage for out-of-country travel – even if they leave Canada for as little as one day.
“As people get older, there is a higher likelihood of having some kind of health emergency, such as a heart attack or stroke,” Pospiech says. “If they aren’t covered by adequate health insurance, the costs of medical care can be huge and can severely damage retirement funds.”
There’s also a risk that the regular Canadian provincial health coverage can be lost if Canadians stay out of the country – or even their home province – for too long. It’s also important to check the details of each province’s health-care plan and apply for suitable coverage if relocating to a new province. Wills, estate plans and power-of-attorney documents also need to be redone to comply with the laws of a new province or country.
According to a report by Royal Bank of Canada‘s wealth-management division, Canadians who spend more than four months in the U.S. every year should file an annual U.S. tax form to avoid being deemed a U.S. resident for tax purposes. In addition, Canadians who own U.S. real estate may be hit by U.S. estate taxes or state probate taxes upon death. It’s key to consult with a tax advisor who specializes in U.S. taxes to determine the individual’s obligations under U.S. estate tax laws.
BMO’s survey found that residents of Alberta, Manitoba and Saskatchewan are most likely to relocate in retirement, with Albertans indicating the highest desire, at 61%. Residents of Atlantic Canada are least likely to move, with 37% citing “proximity to family” as the most critical factor.
Changing residence becomes more difficult as people age, and most clients don’t wish to make multiple moves in retirement. When clients make the transition to being empty nesters but can adjust to new surroundings and make new friends, it can be a good time to make a residence change that will suit them as they move through their retirement years.
Factors to consider in choosing a new location include access to short-term and long-term health care and social programs for seniors, as well as the ability to get around without the use of a car should their driver’s licence be revoked. Clients also need to assess the suitability of their home, or their ability to renovate it, Pospiech says, in the event they become physically disabled or visually impaired. IE
Sniffing the lavender
Financial troubles in Europe and the weakening euro are creating opportunities for Canadians looking for inexpensive retirement options.
Countries such as Italy, Greece, Spain and Portugal have long been popular tourist havens because of their warm weather, interesting architecture and slower pace of life.
With locals falling upon tough economic times and foreigners unnerved by the violent reactions to government austerity measures, real estate prices and rental rates are dropping, according to International Living, a magazine and website specializing in living abroad.
Even in the south of France, traditionally an upscale haven for the well-heeled, bargains can be found for those who want to walk the sun-drenched hills and sniff lavender. Property prices have also dropped dramatically in Ireland.
European housing options range from hilltop villages overlooking vineyards to sparkling, whitewashed homes perched at the edge of the Aegean Sea. Locally produced food and wine are inexpensive and tasty.
If buying in the troubled eurozone, keep in mind that there could be some currency risk if the euro drops further or if a country such as Greece leaves the European Union and reverts to its own currency.
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