At What Cost?

Moses will return next issue.

GREAT TO SEE YOU. Cocktails are on the deck at 4:30. Until then, lawn chairs are in the yard and the library is open .” For an introvert like me, it was the best possible welcome.

I’d arrived at my friend’s converted schoolhouse, about two hours north of Toronto. Her warm welcome morphed into a relaxing weekend.

But as we chatted over crème de Bourgogne (bubbly from Burgundy) and pissaladière (onion pie), there was a somber undertone. Frankie had retired a few years ago, and she can’t help worrying about whether she’ll outlive her savings or be forced into drastic changes in her lifestyle.

Frankie is luckier than most; she does have assets to draw down and she can sell her beautiful schoolhouse (or take out a reverse mortgage). But her bank account isn’t bottomless and, at a healthy 65, she will hopefully have many years ahead of her.

While Frankie’s situation is a far cry from that of a vulnerable senior with no income and no options, her stress is real. And she’s not alone, I’ve spoken to many other CARP members who feel the same.

Retirees like Frankie are feeling the strain of living in a low-interest rate environment. Low rates are terrific if you’re paying off a student loan but, for retirees seeking safe investments, living well often means drawing down assets to cover the costs of a comfortable lifestyle.

Even retirees like Frankie, with more than half a million dollars in savings, aren’t immune. If she invests in GICs, she’ll only earn $5,000 to $10,000 annually, with anything more than $7,500 being pretty exceptional given today’s rates.

Higher earnings are possible but come with their own risks. While stock markets have historically provided better returns than GICs over time, many retirees are invested in funds that enrich their advisers rather than themselves. Others have been snookered into lucrative-sounding investments that leave them with glossy brochures and nothing in the bank. (But more about that in a future column!)

For those on fixed pensions who cannot risk investment losses, prudent spending is crucial. This isn’t unreasonable, but what happens when the costs of necessities rise radically?

That’s the reality of life for many Ontario residents whose hydro rates doubled over 10 years while CPI increased less than 20 per cent. It’s tough when your spending power is fixed but prices rise steadily. Knowing that utility costs are sky high because of cancelled contract penalties (the situation in Ontario) makes paying them even more distasteful. Seniors also face rising costs on other fronts. A Statistics Canada study revealed the cost of goods typically purchased by seniors rises faster than those bought by non-senior families.

CARP believes we need to do two things to protect all retirees from unreasonable cost hikes that threaten their financial security and peace of mind. First, the federal government must keep its election promise to index OAS to the basket of goods that seniors actually buy. Second, all utility companies in every province should be compelled to provide lifeline programs: programs that extend services to the financially vulnerable, retiree or otherwise, so no one has their power cut off because they are simply unable to pay their bills.