Recently Bloomberg released an article (Click here) where the World Economic Forum made an estimate on the number of years retirees around the world will outlive their savings. The numbers were not surprising given the amount of prospective clients we meet with, most of whom have never been advised on the amount they will need in order to live the lifestyle they want to live throughout retirement.
Based upon data collected, women in Canada will outlive their savings by approximately 12.7 years, and men 9.9 years. This is largely due to people living longer, but it is also compounded by the fact that many employers no longer offer defined benefit pension plans, putting the onus individuals to save the amount needed to provide for their later years. It's also no surprise that with retirement becoming the individual's responsibility, Canadians are falling short.
Saving, is a form of delayed gratification, and delayed gratification is hard; especially when the gratification comes 20+ years down the road. In addition, the estimates provided were based upon the assumption that retirees would need 70% of their pre-retirement income. From my experience working with our clients, it's typically a lot more than this, but the answer is extremely individual and depends a lot on what you specifically want to do in your retirement years.
The answer to whether you 'have enough' will either be yes, or no. If the answer is yes, congratulations! But what if the answer is no? If the answer is no, generally you have four options that are within your control.
Is to retire later, though hopefully not too much later.
Is to save more money. The ability to do this will vary from family to family and can require an adjustment to your lifestyle.
Is to receive less income in retirement. For some this means not living exactly how they hoped, for others it could mean just scraping by.
Is working part time in retirement. For some this is something they are open to and others it's a last resort.
In worst case scenarios, individuals may have to utilize all four options in order to be able to retire at all. For those who have enough, going through the process of answering this question has more benefits that just knowing you're going to be fine. It provides you a road map to securing more income in retirement, if you choose to do so. Whatever your situation, it starts with knowing. Determining the amount you need or want is the important initial step. Young or old, setting a target helps uncover what combination of the options above will be required to get you where you want to be.
It's why every client that walks through Endeavour's doors goes through a comprehensive discovery, which creates the foundation for their financial plan. Financial planning is our core competency so it's not surprising that almost every new client that's chosen to work with us, has stated that the reason they chose Endeavour was due to our ability to help provide them clarity of where they are today and what they need to do to get where they want to be.
If you can't answer the question of whether you have enough, or you have no idea what you need to do in order to get to where you'd like to be, you put yourself at risk of not having enough. The sooner you know what changes need to be made, the greater effect they have on your overall plan. For those who have enough, maybe you'd like more? Whether you're on track or not, just knowing you have a plan in place that is helping you take the steps you need to take will allow you to live a happier and healthier life.
- Brandt Butt, Investment Advisor
Brandt Butt is an Investment Advisor at award winning firm Endeavour Wealth Management with Industrial Alliance Securities Inc. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Brandt Butt who is a Investment Advisor for Industrial Alliance Securities Inc. (iA Securities) and does not necessarily reflect the opinion of iA Securities. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
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