Job Termination

But is retirement ready for them?

Baby boomers ready to retire ...

The traditional concept of retirement -- a dozen roses, a golden handshake and 65 candles on the cake -- is changing rapidly as Canadians defer financial planning for retirement and also live longer, healthier lives.

MJ JAFFREY

[ 2007-11-28 ]

LESS-THAN-ROSY PICTURE

A recent national survey of workers across the country by Desjardins Financial Security reveals the financial impacts of starting work and family life later than previous generations. The survey also paints a less-than-rosy picture of Canadian baby boomers (born between 1945 and 1960) who expect financial security upon their exit from the work world, but are not investing or planning adequately to ensure that their nest eggs won't fly the coop before they do.

The age of retirement for the first wave of baby boomers is also becoming a moving target, as many continue to support dependent children well into their 50s and 60s.

"The effect of this stress on financial resources is aggravated by minimal budgeting and financial planning during working life," says Monique Tremblay, a senior vice-president at Desjardins Financial Security.

But even with the obvious factors of starting families later and supporting children longer, why is the most affluent generation in modern history failing to plan adequately for their golden years? In addition to lifestyle and economic factors, Tremblay says "magical thinking" is also to blame for shifting attitudes towards retirement. Baby boomers tend to think that good health and good times will always be there for them. But such head-in-the-sand strategies may make for some unpleasant surprises in terms of their financial security when they actually stop working.

The survey shows that of Canadians who expect to retire in five years or less, one in three do not even have a retirement plan. And by the time they're ready to retire, one-third of women and 29% of men have still not made adequate preparations for retirement; yet only 38% of them are concerned about outliving their savings.

What many do not know is that there's a good chance that their retirement could last longer than their working career. As well, the cost of long-term care could take a much bigger bite out of their retirement savings than those of their parents if they live into their 80s and 90s.

Add to this the fact that while most Canadians report that they expect to continue to work in some way after they retire, most do not. The resulting gap between their envisioned retirement portfolio, and the funds that will actually be available to support them into a good old age, might mean that this very independent-minded generation could end up relying on luck rather than careful financial planning.

"SAVING BEHAVIOURS"

"With life expectancies on the rise, we need to develop 'saving behaviours' that ensure we won't have to stay at work or return to work purely due to financial necessity," Tremblay says.

Michael Aziz, a regional vice-president with Desjardins, agrees: "Most people take a lot of time and care planning their African safari -- the cost of airfare, accommodations, entertainment --and they buy travel insurance to make sure they're not stranded or sick or penniless with no recourse," he says. "When it comes to planning for the rest of our lives, we must pay as much, if not more, attention."

Tremblay says working with a financial advisor is the best way to make realistic, long-term goals for retirement.

"Ideally, retirement planning should begin the day you start to work," she says. "But if the idea of a 30- or 40-year retirement seems too much to think about, break it down into five-year slices. What would you like to do as soon as you retire? When the kids are out of the house? Charting it out with dates and times can really help you get the big picture in terms of your own retirement needs and the income that you'll need to cover it."

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TALK TO A FINANCIAL ADVISOR

Health, longevity and economic factors can rob you of your hard-earned savings and expose you to risks that can put holes in your retirement safety net. It's important to talk to your financial advisor about these risks, and find out if you are appropriately protected. Ask him or her these questions:

1. Does my financial plan make sense?

2. Am I at risk of outliving my savings?

3. How well protected am I against poor market conditions?

4. How can I help offset the impact of inflation on my retirement savings?

5. How will interest rate fluctuations affect my savings?

6. What health considerations do I need to think about as I age?

7. Do I want to leave any assets to children, loved ones and friends?

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TOP THREE TIPS FOR RETIREMENT PLANNING

1. Go back to basics. Take the time to figure out where you are now and where you'd like to be during retirement. Plan, plan, plan!

2. Take inventory. What is the value of your assets? What are your total liabilities? What's your plan to pay down your debts? How much will you need to have the retirement lifestyle you dream about? Be realistic.

3. Reality check! Take your plan to a financial advisor and find out if your retirement dream is achievable.