Do clients need to work longer to protect pensions from inflation?
“If they retire before they see some inflation impact on their salary and directly on the value of their pension plan, they won’t see their pension increase with the impact of inflation,” he said. “They will get into retirement and not have post-retirement indexation, so lose purchasing power.
“It’s a really good question to ask them if they should not delay their retirement for two or three years, if possible, if they have the energy and health to continue working to recoup, to some extent, the impact of pre-retirement inflation.”
Tremblay noted this would benefit clients in two ways. First, they could recoup the inflation they’re losing in their salaries. Second, they could also leave their money in the market longer.
“Advisors really need to ask clients if working an extra two, three, or four years could provide them with those benefits, so they can erase some of the losses that they’ve incurred in the last year,” he said. “At the end of the day, both from a DB (defined benefit) or DC (defined contribution) perspective, maybe retirement plans should be adjusted to, if possible, extend the working life before getting into retirement and before crystalizing the retirement income.”
While that is an issue that pre-retirees may need to face, Tremblay said there’s a retirement wave going on right now – and those with plans may not realize their vulnerability with how inflation is impacting their retirement income unless their advisors point it out and suggest working longer.
