Retired And Pre-Retired Canadians Have Some Regrets

Retired Canadians over the age of 50 with assets of at least $100,000 are enjoying retirement, with more than half (56 per cent) saying their quality of life has improved, according to the first annual RBC Retirement Myths and Realities Poll. On the other hand, only 38 per cent of pre-retirees in this same demographic group expect life to improve after retiring, with half (50 per cent) expecting no change.

“It’s natural to have concerns about retirement,” said Lee Anne Davies, head, Retirement Strategies, RBC. “With only three-in-ten pre-retirees thinking they will love retirement, it’s important to understand this is likely the fear of the unknown, an often unfounded fear. We recommend working with an advisor to plan for retirement. It can provide peace of mind knowing you have prepared.”

When it comes to regrets, just over half of retirees (55 per cent) and 65 per cent of pre-retirees have them. Some regrets among retirees include: not taking better care of themselves (13 per cent); not starting to save earlier for retirement (12 per cent); and not travelling enough (seven per cent). The main regret of pre-retirees was not starting to save earlier for retirement (18 per cent).

The vast majority of retirees say they are having a successful retirement (95 per cent), with the biggest secret to retirement success being realistic expectations (30 per cent). Other secrets to retirement success include: having saved enough money (16 per cent); good planning (13 per cent); and staying involved with people (13 per cent).

Davies gives a thumb-up to the 60 per cent of respondents who have a plan in place for retirement. “Retirement is a significant stage of your life and it’s important to keep realistic expectations when planning for the future. That’s where having a plan of action helps you make the most of your retirement dreams,” added Davies.

These are some of the findings the RBC Retirement Myths & Realities poll conducted by Ipsos Reid from March 10 -19, 2010. For this survey, a national sample of 2,143 adults aged 50 and over with household assets of at least $100,000 from Ipsos’ Canadian online panel was interviewed online. A survey with an unweighted probability sample of this size and a 100 per cent response rate would have an estimated margin of error of ±2.1 percentage points 19 times out of 20 of what the results would have been had the entire population of adults in Canada been polled. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.…

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Global Auto Industry Returns To Profitability

Strong sales gains have driven the global auto industry back to profitability, according to the latest Global Auto Report released today by Scotia Economics.

“The five largest auto manufacturers posted earnings of US$5.5 billion in the first quarter of 2010, a sharp turnaround from annual losses averaging in excess of US$22 billion from 2007 through 2009,” said Carlos Gomes, Senior Economist, Scotia Economics.

In the report, Mr. Gomes noted that profitability improved in every region last quarter, especially in North America, with the five largest automakers returning to profitability in the region. However, despite the turnaround in North America, Asia remains not only the auto market with the greatest potential, but is already the most profitable market in the world.

“The global economy continued to gain momentum through the first quarter of 2010, with growth picking up to roughly four per cent year-over-year – the fastest pace in two years,” commented Mr. Gomes. “This acceleration lifted global car sales 25 per cent above a year earlier, to a level only marginally lower than in early 2008. However, volumes still remain nearly five per cent below the industry peak set in mid-2007.”

Profitability per vehicle in North America jumped to more than US$1,500 in early 2010, compared with losses through September of last year, and will likely improve further in coming years as volumes expand. For example, light vehicle purchases in Canada, the United States and Mexico totaled an annualized 13.3 million in the opening months of 2010, and are expected to climb to 13.9 million for the full year, before rising to 14.6 in 2011.

“Of note, the jump in profitability occurred despite nearly a US$200 increase in industry-wide U.S. incentives through March, to more than US$2,800 per vehicle,” said Mr. Gomes.

The report also states that the five largest automakers reported a first-quarter operating profit of more than US$2.3 billion in emerging Asia – roughly 40 per cent of their overall total.

“This is particularly surprising, as the average car price in countries such as China and India averages less than US$12,000 compared with US$24,000 in North America and about US$20,000 in Europe,” stated Mr. Gomes. “In contrast, the industry still continues to lose money in Europe.”

The five largest automakers are still losing about US$400 per vehicle in Europe, with losses likely to increase in coming months, as recent austerity measures introduced in several countries act as a drag on economic growth and vehicle sales.

“We expect full-year sales in Western Europe to decline to 12.3 million units in 2010, down from an annualized 13.6 million in the opening months of the year,” concluded Mr. Gomes. “In fact, car sales in Europe fell six per cent year-over-year in April, led by a sharp fall-off in Germany. However, outside of Europe, purchases continue to strengthen – rising 23 per cent year-over-year – led by a 27 per cent gain in the BRIC nations.”…

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Canadian Economic Recovery In Full Force

Canadian Economic Recovery in Full Force in Q1

– Canadian real GDP grew by a stunning 6.1% (annualized) in Q1/2010, slightly above the market consensus expectation of 5.8%. This is the strongest quarterly gain in over a decade. A robust monthly gain of 0.6% in March provides a strong hand-off into Q2.

– The strength was broad-based with domestic demand at the top of the list. Consumer spending (+4.4%) and residential investment (+23.6%) contributed the most to economic growth. Meanwhile, led by a 7.6% gain in investment in machinery and equipment, business investment grew by 0.9% following a 9.8% decline in the previous quarter. Nonresidential construction is one component of GDP yet to head down the road of recovery.

– In nominal terms, GDP expanded by 10.4%, after posting a 9.9% gain in Q4/2009. A contributing factor was the positive swing in the terms of trade, bolstered by rebounding commodity prices and an appreciating currency. This helped to support strong gains in corporate (+39.1%) and personal (+2.2%) income.
– Compared to pre-recession levels, real GDP remains 0.5% lower while nominal GDP still has 2.2% to make up.

Key Implications

– After two consecutive quarters of above 5% real GDP growth, the blockbuster performance in unlikely to be repeated. However, the strong momentum heading into the second quarter suggests growth of around 4%.

– We are of the view that much better-than-expected consumer spending and housing market performances so far this year came at the expense of future growth. The recent spending spree has left consumers even more fatigued and highly-indebted than ever. As interest rates begin to rise (as early as this weak) and households have to devote a greater share of their income to servicing their debt, this may well constrain future consumer spending growth.

– The resumption in business investment was a missing ingredient until Q1, and is encouraging. Firming up of business investment and a continued healthy performance in Canadian exports related to a strengthening U.S. economy through the second half of this year should help to offset some of the weakness stemming from domestic demand.

– Putting it all together, real GDP growth will likely moderate into the range of 2.5-3% in the second half ofthis year.…

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Bank Of Canada Outlines Core G-20 Agenda To Reduce Systemic Risk

G-20 leaders are working towards global reforms that will put the world’s financial system on a more solid footing, Bank of Canada Governor Mark Carney said today.

In a speech to the International Organization of Securities Commissions meeting in Montreal, Governor Carney outlined the G-20’s core agenda to reduce systemic risk and create a more resilient global financial system.

The global financial crisis exposed the fallacy of composition that strong individual financial institutions collectively ensure the safety and soundness of the system as a whole,” Governor Carney noted. “Even the most vigilant, microprudential regulatory regime can be overwhelmed by systemic risks.”

The Governor outlined three principal strategies to mitigate systemic risk: increasing the resiliency of financial institutions; enhancing the robustness of financial markets; and reducing the interconnectedness between institutions and between institutions and markets. “These changes are radical, not incremental,” the Governor said.

Creating more resilient institutions requires more and better capital, improved balance sheet liquidity, and enhanced risk management, he noted. “The final capital proposals will make the global system look more like Canada’s. For the world as a whole, however, the changes will be substantial.”

Continuously open financial markets are essential, and require policies and infrastructure that reinforce the private generation of liquidity in normal times and allow for central bank support in times of crisis. The cornerstone of sound infrastructure is clearing and settlement processes with risk-reducing elements and greater transparency of trades and financial instruments.

To reduce interconnectedness among institutions, regulators should institute staged intervention regimes, and banks should develop plans to unwind themselves in an orderly fashion if they were to fail. There must also be methods to replenish the capital of a financial institution under stress without the use of taxpayer funds. “One promising avenue is to embed contingent capital features into debt and preferred shares issued by financial institutions,” the Governor noted.

At their recent meetings in Busan, South Korea, G-20 finance ministers and central bank governors refocused on the core reform agenda of capital, resolution, and market infrastructure, Governor Carney told the audience. “Later this month in Toronto, G-20 leaders can be expected to harden that resolve,” he said. “The time for debate and discussion is drawing to a close. Policy-makers now need to decide and to implement.”…

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Rates on the Rise: What’s In Store for Home Owners & Prospective Buyers?

The much anticipated announcement last week from the Bank of Canada raising its overnight rate has Canadian homeowners and those shopping for a home now wondering what they should be doing as interest rates begin to climb.

“While short-term interest rates are not expected to rise rapidly, they are expected to increase about three percentage points by the end of next year,” said Sal Guatieri, Senior Economist, BMO Capital Markets. “The era of historically low mortgage rates is coming to an end.”

So, what does this mean for home owners and prospective buyers? Is it too late to protect yourself? “The Bank of Canada’s recent rate announcement might leave some homebuyers believing they’re too late to take advantage of historically low mortgage rates,” said Jane Yuen, Senior Manager of Mortgages, BMO Bank of Montreal. “We continue to offer our low-rate 5 year fixed mortgage with maximum 25 year amortization, now at 4.25 per cent. We encourage customers to lock-in now as pressure builds for rates to rise.”

BMO advises Canadian home owners and prospective buyers to stress test their financial budget using a mortgage payment based on a higher interest rate. Here are the top tips to consider to ‘stress test’ your budget today so you don’t become ‘stressed out’ later:

Take a shorter amortization:

– The shorter the life of the mortgage, the less you pay in interest.

– Cutting your amortization period by five years from 30 to 25 years could save you over $53,000 in interest. You will be mortgage-free faster and your monthly payments will only increase by $84.

Make a larger down payment:

– Providing a bigger down payment is an excellent way to help you pay less interest over the life of your mortgage.

Make sure you can afford what you signed up for:

– Stress test your financial budget using a mortgage payment based on a higher interest rate.

– Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

Make pre-payments when you can:

Pay weekly or bi-weekly instead of monthly.

Take advantage of prepayment privileges:
Increase your mortgage payment (principal and interest) by a percentage over the current payment. At BMO this option can be exercised once each calendar year, at any time, without charge.

Pre-pay a percentage of the original mortgage principal each calendar year. At BMO this option can be exercised in minimum amounts of $100 without charge, some conditions apply.

Always make sure you save for a rainy day:
If you are up to your maximum in debt, you may not be well prepared for the leaky roof along the way.

Think carefully about fixed vs. variable:
While variable rates mortgages have been a winning strategy over the long term, fixed rate mortgages (currently at historic lows) come with the peace of mind of being insulated against rate increases.…

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One-Third Of Canadian Credit Cardholders Prefer Cash Back

One size does not fit all Canadians when it comes to credit card reward choices. A recent RBC poll shows that one-third (33 per cent) of Canadian cardholders prefer cash back over any other type of incentive, including merchandise (27 per cent) and travel rewards (23 per cent).

“While travel and merchandise rewards remain popular, many Canadians want a straightforward reward card that gives them cash back on everyday purchases,” said Sean Amato-Gauci, vice-president, RBC Credit Cards.

RBC’s payment survey conducted by Ipsos Reid, found that more than half (58 per cent) of Canadians hold a credit card with some type of reward program. Nine-in-ten credit cardholders (88 per cent) say they pay for travel using their card and more than half (53 per cent) use it to pay for retail purchases. Fifty per cent indicate they use their credit card for dining, entertainment or gas purchases, while a third (34 per cent) use it to pay for drug store purchases.

The survey also found Canadian families spend on average $628 at the grocery store each month. The majority (53 per cent) use their debit card at the cash register, with the others split between using cash (21 per cent) and credit cards (26 per cent) to pay for groceries.

“Many cash back cards have complicated earn rates or thresholds that Canadians find confusing and misleading,” noted Amato-Gauci. “Our clients have told us they want a simple and straight forward cash back card, with no tiers to calculate, no clubs to join, or points to track.”

The RBC Cash Back card offers the following features:
– One per cent cash back on all purchases
– Five per cent cash back on grocery store purchases until December 31, 2010
– Purchase Security and Extended Warranty insurances
– Zero Liability fraud protection

The RBC Cash Back card tracks rewards on the cardholder’s monthly credit card statement and pays out the cash back in January each year. A cardholder who spends about $500 a month on groceries, and $500 on other monthly purchases using their RBC Cash Back card for the remainder of this year would earn over $200 by next January.

“The cash back you receive can add up quickly based on the day-to-day spending habits of an average Canadian family,” added Amato-Gauci.

Amato-Gauci provides the following tips for optimizing your credit card rewards:

Don’t spend more, spend smart – If you never carry a balance and always pay your bills on time, you can actually make your card work for you by using it frequently for all kinds of purchases and expenses. Many people rely on their credit cards for larger purchases but may not use it for everyday shopping instead of using cash. Groceries, gas, restaurant and clothing purchases add up quickly and may earn rewards at a higher rate than some other categories of spending. You can also use your card to pay monthly expenses such as utilities (hydro, cable, mobile phones) daycare, tuition, gym memberships and newspaper subscriptions, to bump up your rewards.

Put your monthly payment on autopilot – Choose a card that allows you to set up a monthly payment that automatically pays off your entire balance or the minimum payment. By using your credit card for everyday purchases and paying it off at the end of the month, you will earn cash back but not pay any interest.

Consider insurance benefits – A card feature that is often overlooked is purchase protection which insures against loss, theft or damage up to 90 days after purchase. Another valuable feature is an extension of the manufacturers’ warranty period which can provide additional protection for larger ticket items such as home electronics or appliances.

Double dip if possible – Certain retailers let you earn points for purchases in their own reward program or in other independent programs. If you are a member of these programs, you can present your program card to the retailer to earn the applicable points, while at the same time earning cash back rewards by using your credit card to pay for the purchase.

Look for rewards that offer convenience – With some reward programs, points expire so you need to remember to use the points or call the card issuer to request your rebate. Others send your rebate to you when you hit a certain threshold or credit your account automatically at the beginning of each year. Either way, it makes sense to use a card that gives rewards without any prompting from you.…

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Vacancy Rate In Seniors Housing Residences at 10.8 percent

The vacancy rate in seniors residences surveyed in Canada Mortgage and Housing Corporation’s (CMHC) National Seniors Housing Survey increased from 9.2 per cent in 2009 to 10.8 per cent in 2010, according to CMHCs Seniors Housing Report, Canada Highlights edition.

“Vacancy rates and rent levels in the seniors housing market are higher than those in the traditional rental market,” said Bob Dugan, Chief Economist for CMHC. “Seniors residences provide a wide variety of amenities and services to their tenants. These services and amenities contribute to rents that are higher than in the traditional rental market. These higher rents, coupled with more frequent turn-over, result in higher vacancy rates.”

The national vacancy rate applies to standard spaces, which are defined as:
private units such as a bachelor, one-bedroom or two-bedroom apartments occupied by a single individual or a couple; one unit is considered as one standard space;
semi-private units (one unit is considered as two standard spaces);
ward units (one unit is considered as three standard spaces or more).

The vacancy rate is calculated for all standard spaces regardless of whether the occupant participates in a meal plan or requires medical services. The vacancy rate covers only spaces that accommodate residents who receive less than 1.5 hours of care per day.

Vacancy rates varied considerably across the country, from a low of 6.2 per cent in Saskatchewan and New Brunswick to a high of 18.1 per cent in Newfoundland and Labrador. The vacancy rates for standard spaces in Ontario (16.4 per cent), Nova Scotia (15 per cent) and Alberta (12.2 per cent) were above the national average of 10.8 per cent, while the rates in British Columbia (10.4 per cent), Quebec (8.4 per cent), Manitoba (7.9 per cent), and Prince Edward Island (7.1 per cent) were below the national average.

The average rent for bachelor/private units, where at least one meal is included in the rent, was $1,857 per month. Quebec posted the lowest average rent at $1,329, while Ontario posted the highest average rent at $2,585.…

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