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Capital accumulation plan members continued to see an uptick in their plan outcome for the second quarter of 2024, as gross income replacement ratios remained at multi-year highs, according to a new report by Eckler Ltd.
The consultancy’s latest CAP income tracker found a typical male member retiring at the end of June 2024 achieved a gross income replacement ratio of 64.5 per cent, while a female member achieved 62.9 per cent.
For retirees or near retirees, lower interest rates can translate into lower interest payments on existing debts such as mortgages, personal loans or lines of credit, said the report, noting they may find it easier to manage their debt obligations and add to their retirement savings with the increased cashflow.
Read: CAP member outcomes increasing in Q1 2024: report
The report also found lower mortgage rates present an opportunity for retirees looking to downsize, relocate or access home equity lines of credit. However, lower rates may contribute to higher home prices.
“Given the negative correlation between interest rates and bond yields, for retirees and near retirees who rely on income from bond or fixed income investments, a decrease in interest rates may require a change in spending plans or adjustments to their asset allocation,” said the report.
“Retirees and pre-retirees may need to adapt their financial plans and investment strategies to navigate the evolving economic landscape and seek financial advice to ensure a sound plan for achieving retirement goals.”
Read: CAP member outcomes continue to rise in Q2 2023: report