With persistent inflation, an unsustainable budget deficit, and a pandemic still fresh in our minds, retirement planning might not be top of mind for most Canadians. Inflation tends to carry a negative association that can distract us from other financial matters. It is a topic that dominates headlines and makes its way into most dinner conversations. Unfortunately, inflation is out of our control and we’re at the mercy of central banks to “tame the trend”. Understanding the relationship inflation has to Canadians' retirement planning can ease some of those feelings of helplessness.

Domestically, Canada saw some positive movement in the inflation percentage over the summer, dropping from a high of 8.1 percent in June to a flat 7.0 percent in August. While the downward trend is positive, it’s still well above the Bank of Canada’s 2% target. While Canadian statisticians predict the number to trend downward to the target in 2023, this means little to everyday consumers as they continue to navigate rising prices on essential items like groceries and gas.

Given the spread between the current inflation rate versus the target, Canadians may feel there’s little that can be done at an individual level. While this is somewhat true from a budgetary perspective, this isn’t the case when it comes to planning for their retirement.

So, what can be done to protect our financial nest egg and be proactive in these uncertain times?

The first step is to recognize that high (or low) inflation rates won’t be here to stay and that pricing on consumer goods will ebb and flow throughout our lives.

The second step is to ensure you’re keeping the “big picture” in mind when assessing your retirement goals and forecasts. Canadians count on their assets, which may include real estate, stocks, alternative asset classes, GICs etc., to grow and be there to support them comfortably throughout the various life stages of retirement.

The third step is to ensure your hard-earned money is “working hard for you”, whether retired or not. In addition to taking advantage of depressed valuations of good quality companies, there are several tax planning opportunities that should be considered. This includes topping up RRSP’s, Tax Free Savings Accounts, reviewing whether registered withdrawals should take place (depending on the income situation), implementing an Individual Pension Plan etc.

Inflation has the potential to have severe impacts on retirement incomes if proper guidance isn’t in place. As an example, based on current and forecasted inflation estimates, $100,000 in retirement income today would be worth roughly 61% less in 25 years time (see chart below). While statistics can change over time, the financial impact of being inefficient with your assets and getting caught up “in the noise” can have dire consequences for retirees’ ability to maintain their mid to long term goals.

Even the most seasoned investment professionals don’t have access to a crystal ball, Warren Buffet included. Their best course of action is to provide strategic counsel based on your personal financial situation that take into account what you’re looking to accomplish at various stages of life. Successful advisors incorporate a holistic approach which includes retirement planning, tax management, estate considerations, trusts, defensive portfolio construction etc. and navigate the economic situation to best accomplish their clients’ goals.

Wes Ashton


Harbourfront Wealth Management was one of Wealth Professional Magazines 5 Star Brokerages for 2022. Wealth Professional is a free online information resource for all Canadian advice and planning professionals. This is not a paid award Harbourfront Wealth Management is not a sponsor.

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