Generally, people make investments because they want to gain greater financial security for themselves and their families. But a recent study indicates that in today's economic climate, volatility has many Canadians worried about their retirement savings.
According to global financial services firm Russell Investments and its Russell Financial Health Index, sentiment is considerably low, on par with where it was in early 2010.
Between July and September, the RFHI - an online calculator that measures the financial well-being of Canadian investors - was 47.47, which is on target with where it was last year and slightly above the all-time low that was set in 2008.
The RFHI is measured by gauging Canadians' sentiments about 14 variables, such as physical health, unexpected events, family responsibilities and financial planning. Of the 14 variables, Canadians showed a dramatic increase in their concern for two things: the financial impact of the death of a spouse and how they would be able to provide for their children and aging parents.
Combining this with the European debt crisis and the United States' credit downgrade, Keith Pangretitsch, director of national sales at Russell Investments Canada, said the results are not surprising.
"An increasing number of baby boomers are finding themselves caught in the 'sandwich generation,'" said Pangretitsch. "[T]hey struggle to cope simultaneously with the costs of caring for aging parents, while helping children pay for school or launch careers - all the while attempting to fund their own retirement."
To help individuals achieve their financial aspirations, advisors often recommend investing in life insurance and annuities. But as a separate survey indicates, Canadians can also benefit their fiscal future by better informing themselves about the tax filing process.
According to BMO Financial Group and its "Mind Your Taxes in Retirement" report, a small percentage of baby boomers know how to maximize their tax savings.
For instance, the study found that 80 per cent of Canadians 45 and older did not know how dividend income and capital gains were treated from a tax perspective. In addition, 41 per cent were unaware of how withdrawing from a Registered Retirement Income Fund affected their tax burdens.
"It's critical that retirees be tax smart and adopt a long-term approach that will allow them to pull their income from the most advantageous sources," said Tina DiVito, head of the BMO Retirement Institute. "Doing so will also ensure that those with a higher retirement income don't exceed the thresholds that allow them to continue to receive government benefits and credits, which could have a significant impact on their total annual income."
