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Are You on Track for Retirement?

Clients often ask me if they are on track for retirement - in other words, how they may compare with other Canadians who are either living in retirement or who are preparing for retirement.   This spring, Fidelity Canada released their 14th annual Retirement Survey, which reveals good insights on how Canadians are approaching that next stage in their lives.  I will summarize four main areas where the report provides insights that may help you with your retirement planning.  

Activities:

Retirees reported spending more time than expected with hobbies, family and friends, and online activities.   They reported spending less time than expected on sports, fitness, arts, entertainment and travel.   Respondents often stated plans to be volunteering in their communities in retirement.  The key is to envision your retirement lifestyle, and how you want to spend your time.  You can try out some of these activities while you are working, to get a better sense of activities you like to do.  

Financially:  

High levels of debt can prevent you from having cash flow to put towards retirement savings.  Over 40% of Canadian retirees had long-term debt when they retired, and only 20% of retirees reported being debt-free.  Of the retirees surveyed, 34% said that they continue to work in retirement.  For some it is for financial reasons, while for others it’s to keep mentally or physically active, or to have a sense of purpose.  Of the pre-retirees surveyed, fully 70% believe they will still be working in retirement, stating they might reduce their hours with their current employer, or work part-time at a new employer, or do some part-time consulting or freelance work.  Perhaps we need to redefine retirement, as retirees continue to work, volunteer, and be active in their communities.  

Timing:

Fewer than 40% of pre-retirees plan to retire before age 65, and 20% expect to retire later than age 65.   Married or common law couples are more likely to retire earlier than singles.  Of those who are currently retired, more than half retired before age 65, yet of those not yet retired, far fewer expect or plan to be able to retire before age 65.   it becomes harder to have enough retirement income As our life expectancy extends 90, and working part-time or past 65 are good ways to be more certain of not running out in later life.  Last month, the Canadian Institute of Actuaries urged later retirement age for governement funded retirement incomes.  They recomend moving Old Age Security and Canada Pension Plan from age 65 to age 67, which would increas these benefits by 14% to 16%.  The Institute stated that deferring retirement age may be necessary given our long life expectancies, reduction in employer pensions, and our aging demographics. 

Outlook:

Knowing your future is funded can be empowering.  Pre-retirees expect their retirement income to come from government, Registered Savings, Pensions, and increasingly from employment anad from home equity.  We all have competing financial priorities that can distract you from a fully funded retirement.  Pre-retirees reported savings various savings goals such as retirement, a vehicle, home renovation, travel, cottage, children’s education or wedding, and supporting an elderly parent.  Regardless of when or why you retire, having a written plan can support your decision-making.  A financial plan can include details about sources of retirement income, an estimate of the total savings you will need to retire, an estimate of your spending in retirement, In fact 88% of Canadian pre-retirees who have a written financial plan have a positive outlook on life in retirement.  Work with a Financial Planner to create a sustainable plan that fits your vision.

For news and views, please visit my website at:  www.elainekelly.ca

Elaine Kelly MBA CFP FCSI

Senior Investment Advisor, Manulife Securities Incorporated