Canadian 55+ Facing a Double Edged Sword

Canadian 55+ Facing a Double Edged Sword

Canadian 55+ have been hit with a double-edged sword – rising interest rates combined with soaring prices of groceries and energy, has eroded purchasing power as pensions grossly lag inflation. Stats Canada reported a slight drop on inflation in September to 6.9% from 7.0% in August, which has paved the way for another interest rate hike.

Key stats:

  • Groceries are up 11.4% year-over-year, the fastest increase since 1981
  • Recent weakening of the Canadian dollar could continue to drive up grocery prices
  • Expected increases in energy costs due to the Russian invasion of Ukraine
  • Since March, the Bank of Canada has raised rates from 0.25% to 3.75%
  • Economists are also predicting another rate increase of 0.50% in December

How this affects Canadian homeowners 55+:

When world events happen at a rapid pace, seemingly all at once (war, price increases, rate increase), Canadians 55+ tend to “freeze-up and do nothing”. Psychologists have identified “Certainty” as one of the “Six Human Needs”. When life becomes uncertain, older homeowners live in fear, and their brain adapts by numbing it in one of two ways:

  1. Settling – These homeowners will tighten their belts and settle for a retirement that’s less than they deserve. Going without eating properly, not travelling, not getting out because it’s too expensive for gas.
  2. Procrastinating – Putting off decisions until “tomorrow”, or “when I have more time” is a classic delay tactic of a homeowner 55+ living in fear. Instead of addressing high interest credit card debt, they’ll wait until collection notices start piling up.

How you can help:

Being a financial expert gives you the privilege of being able to truly make a difference in the lives of your 55+ clients. They’re not going to come into your office and outright tell you they’re struggling financially; most are far too proud to do this. But you can watch for subtle clues, small talk such as “gas prices are going up again on Friday”, or “got another property tax bill to pay this month”, or “boy those credit card companies really stick it to you” are all tiny red flags where you can have a broader conversation about their current financial situation.

Bottom line:

The Ryerson Institute for Aging did a study and found that 93% of Canadians 55+ don’t want to sell their homes, preferring to age in place. House prices have increased by an average of 5.6% per year since 1982, creating many “house-rich” yet “cash-poor” 55+ homeowners. We have options to help these clients.

  • Roland Mackintosh