Most Canadian retirement portfolios are ill prepared for the inevitable rise in interest rates, according to a recent poll by Toronto-based CIBC Asset Management Inc.
The survey, released on Friday, found that 58% of Canadians do not realize that higher interest rates will mean trouble for some of their investments, such as bonds.
Furthermore, 65% of baby boomer investors do not understand the impact of interest rates on their fixed income investments, according to CIBC, despite the fact that they generally hold more bonds than other demographics.
“Canadians understand the impact that rising rates have on household expenses, such as mortgages and loans,” said Steve Geist, president, CIBC Asset Management, in a statement. “But, it’s equally important for Canadians, especially those approaching retirement and preparing to draw income from their portfolios, to be aware of the impact that rising rates can have on their investments.”
Few people are considering altering their current investment strategy, however, despite the likelihood of a rate increase in future. According to CIBC’s survey 54% of Canadians and 62% of boomers specifically have no plans to change their current retirement investment strategy.
To help mitigate interest rate risk, CIBC recommends investors consider floating rate investments, the interest from which will move with benchmark rates, and to look for shorter bond durations.
Leger, a research and marketing firm, collected results for the CIBC poll came from 1,503 online surveys completed in December 2013 by Canadians 18 years of age and older.