When it comes to Retirement Readiness, w e’re facing a crisis of epic proportion.
Many Canadians have no idea how far Behind The Retirement Planning 8 Ball they really are.
Whether you’re retired or very close to it, whether you’ve accumulated a couple hundred thousand dollars or several million, planning for your retirement is more challenging today than ever.
Let’s look at a snapshot of Retirement Readiness in 2013. In North America combined, there are 87 million baby boomers that are reaching retirement age at the rate of 12,000 a day for the next 18 years. Sadly, baby boomers will be the first generation since the 1930’s that will be worse off in their older years than their parents.
You can’t watch TV or read a newspaper today without being reminded of the uncertain times we’re in, including disappearing jobs, stock market volatility, massive deficits, escalating health care costs, and the overall rising cost of living.
The fact is…the vast majority of Canadians haven’t saved enough during their 40 years of work to fund a 20 to 30 year retirement, and 40% have saved nothing at all. The savings rate has plunged from 20.2% in 1982 to just 3.5% today. No wonder 61% feel they’ve come up short when it comes to retirement savings.
The money we used to sock away has been diverted to pay down debt or keep up with the Jones’.
For th ose that think Canada’s Retirement Income System will take care of you, think again. The “maximum” monthly benefit for CPP is $986 a nd $540 for Old
Age Security
. Combined…that’s $18,000 a year, which puts you just under the poverty threshold.
When there’s enough pain, people take action. The pain becomes very evident when you shine a spotlight on the real disconnect between what retirees should have set aside as they enter retirement, and what they have set aside.
Most haven’t planned ahead…and they’re ill prepared and they need help. One in five Canadians are counting on the lottery, inheritance or CPP to make up for their failure to save.
This is not your parents ’ retirement, where your employer held a going away party, presented you with a gold watch and a nice pension with a guaranteed paycheck for life.

Unfortunately, pensions are going the way of the dinosaur. Both private and government pension plans across Canada are facing deficits due to falling stock market returns, low interest rates, and changing demographics among baby boomers. To keep pensions on solid footing, pension managers have 3 tools at their disposal. They can raise premiums, raise eligibility, or reduce retirement benefits.
And speaking of retirement? What retirement?
…74% of baby boomers expect to continue working once they are “retired” and 40% plan to work “until they drop.”
On the savings f ront, it’s even worse, with 46% of all workers having less than
$10,000 saved for retirement, while 29% have saved less than $1,000. Sadly, the majority of Canadians live paycheque to paycheque, with 59% saying they would be in financial difficulty if their paycheque was delayed a week.
And we’re in debt…4 in 10 Canadians had outstanding debt when they retired, with seniors piling on debt faster than anyone. Seniors are 17 times more likely to file bankruptcy today than in 1990. Bankruptcies among 55 thru 64 year olds jumped almost 600%. The most startling rise occurred among those age 65 and up, soaring 1747%.
Household debt has risen to 164% of income. That means for every $1
Canadians earn they owe $1.64. And as debt was skyrocketing, annual savings plummeted by two-thirds. Baby boomers have two choices. They can either postpone retirement or carrying debt into retirement. Canadians are now more indebted than Americans or the British.
Retiring before 65 is a significant financial goal for most Canadians, but saving sufficient funds to retire is increasingly difficult. Years ago, Boomers were told that
“freedom” was waiting when they reached 55.
While early retirement may have been the focus, few Canadians can or do retire in their 60s, let alone 50s.
The average Canadian expects to retire at 68, which is a year later than was recorded just last year.
No wonder 72% of Canadian s are worried about “maintaining a comfortable standard of living in retirement”.
The old adage that people spend more time planning a 2 week vacation than they do their retirement seems to be partly true.
Retirees spend 40 years in the accumulation phase building their nest egg. But for most, that nest egg c learly isn’t big enough. As they transition from the accumulation phase to the spending phase, there are a number of issues that must be addressed.
Issues such as Longevity. How does longevity affect funding a retirement that could well last 30 years or longer? Retirees today have to plan for the longest

retirement ever. In 1900, life expectancy was 48. By 1930, it inched up to 61.
By 1960, it was 71. Then it rose to 78 in 1997, inched up to 81 today, and by
2040, it’s expected to be 84 years of age.
R eaching age 65 in good health means you’ve got a 50% chance of living to 85 or 88, and a 25% chance of living to 92 or 94. With Canadians living 3 years longer, on average, than Americans, t here’s a very real possibility that you may need 30 or more years of retirement income.
The question becomes…Will you outlive your money or will your money outlive you?
Aside from Longevity, one of the greatest areas of concern is Health Care. How does the rising cost of health care affect your retirement planning? 72% are worried about rising health care costs and the impact they will have on their savings and quality of life. Health Care costs are rising much faster than inflation.
When it comes to health care…Most Canadian are flying blind.
While most value their health coverage, few understand how benefits are funded.
What's more, a significant number expect health benefits to continue after retirement.
What's worse, many employers are scrambling to cancel, scale back, or cap their soaring retirement obligations.
There’s a misconception that employer and government programs will be enough to cover future care costs. The reality is…they won’t. It’s one thing to know how big of a nest egg you
’ll need in retirement. It’s another to know whether or when to tap that nest-egg to manage through a critical illness in retirement.
But how many times can you tap your nest egg before it cracks and how do you plan for critical illnesses, long term care and a longer life expectancy, all at the same time?
It’s a difficult balancing act, but it starts with education and factoring the cost of healthcare into your retirement planning.
Most Canadians have never had that conversation with their advisor, yet few issues generate higher anxiety today. For example, three quarters of Canadians admit they have no financial plan to pay for long-term care, yet, 70% of those who reach 65 will require long-term care services during their lifetime.
We believe it’s prudent, even essential to have a discussion about what rising health care costs could do to your retirement planning.
And how about your nest egg? How big of a nest egg do you need set aside to retire comfortably? Over the last decade, the increase in housing wealth was larger than the total increase in wealth from ALL other assets. Real Estate comprises half of Canadians net worth today, up from 36% in 2000.
But many experts see a potential housing bubble on the horizon. Based on historical house-to-income ratios, home prices may be overvalued by as much as
35%.
Many retirement nest eggs are still recovering from the financial crisis. Shortfalls

in company pension plans and registered retirement savings plans have investors scrambling to make up lost ground, sometimes taking undue risks that are ill advised, making planning for retirement more complicated than ever.
Just 14% ar e “very confident” they will have enough money to live comfortably in retirement. More than 56% haven’t even tried to calculate how much they’ll need to save.
So how do you know if you’re saving enough? As a general rule of thumb, you’ll need to have saved eight times your final salary by age 67 if you want to maintain a lifestyle similar to the one you had while working. To reach that number, here are some checkpoints along the way. You should have one times your annual salary saved by age 35. By 45, 3 times your salary. At 55, your savings should have risen to five times your salary and eight times by age 67.
AARP’s own figure is nine times. While Money Magazine says more like 12x.
For example, if your final salary is $100,000. A t 8x, you’ll need $800,000 set aside in a nest egg. For many approaching retirement, they have a retirement shortfall and the challenge becomes just how big that shortfall really is. If you have a retirement shortfall, the time to address it is now, while there’s time to make adjustments.
Another way to calculate it is The Rule of 20, which suggests that for every $1 of a nnual retirement income you want, you’ll need to have $20 saved.
If you need
$50,000 a year over and above CPP and OAS
, then you’ll need $1,000,000 set aside by the time you retire.
Fifty-two percent of Canadians feel they will need between $750,000 and $3 million to live comfortably in retirement.
In addition to your nest egg…You also must address Inflation. Here’s a great example. The penny is now officially retired. It was costing 1.6 cents to make every penny. It costs 20 pennies today to purchase what one penny could buy back in 1914. That’s inflation.
It affects every retirement portfolio and it’s especially problematic for retirees on fixed income. A recent headline in the Wall Street Journal said
, “Low Interest
Rates Crack Retirees Nest Eggs.
”
That’s the problem in a low interest rate environment.
In 1981, Canada Savings
Bonds paid 19.5 percent…guaranteed. Today, just over 1%. That doesn’t even keep pace with inflation.
With inflation, your money is worth less each year…So how do you preserve your buying power for the next 30 years? That’s a tall order…but it can be accomplished.
Historically, inflation has averaged 3.24 percent. At 3.24% inflation, a 62-year-

old baby boomer living off of $100,000 per year today would need more than
$138,000 in annual income at age 72, $189,000 per year at age 82, and
$260,000 per year to preserve their buying power over their probable life span.
After longevity, withdrawal rate risk is one of the big challenges retirees face.
Most Canadians have no idea how dangerous it is to withdraw too much from their nest egg each year. So, what is the appropriate spending rate from a nest egg?
The Wall Street Journal said that a 2% withdrawal rate is bullet proof, 3% is considered safe, 4% is pushing it, and with 5% or more, you run the risk of possibly running out of money. Have you ever wondered how long your money will would last if you stop working today?
How about Canada’s Retirement Income System? The number of recipients of
OAS are expected to double by 2030 . The costs are expected to triple, while the number of workers supporting each retiree keeps declining. In 1981, there were 6 workers support ing each retiree. Today, it’s down to 2 to 1. The culprit is the baby boom generation. When they retire, they stop working, stop contributing, and start receiving benefits.
The fastest growing segment of the population is the oldest, those 80 and over.
More and more people are living in to their 80’s, 90’s and beyond, which is one reason they’re raising eligibility from age 65 to 67 in 2029.
All of these factors call into question the longer-term viability of government retirement programs.
Consider Ca nada’s National Debt. It recently topped $600 Billion dollars.
Canada is amassing debt at the rate of $40,145 per minute, $2.4 million an hour and $57.8 million a day. Your share is over $17,000.
With CPP and OAS having to accommodate an unprecedented and overwhelming number of healthy, longer-living retirees, ytu may be able to count on a check, but will it be enough? You’re being forced to assume more and more responsibility for your retirement. That explains why 81% of retirees felt a detailed Retirement Income Plan is “very important,” yet only 18% actually had one.
Whether retirement is many years away, just a few years in the f uture or you’re already retired, i t’s never too early or too late to take control of your retirement.
Here’s the 6 step process we go through in creating a Retirement Income
Analysis.
Step 1: We will ask you to articulate the retirement you’ve always envisioned, sharing your hopes, dreams and goals. What does it look like? What are you

doing? Where are you doing it? And who are you doing it with? Does the retirement you envision include starting a business, working part time, moving and relocating, volunteer work, a new hobby, a vacation home, travel abroad or going back to school?
Step 2: We will take an inventory of all of your assets, savings and investments.
In order to create a sustainable Retirement Income Plan, we’ll be looking at your assets such as retirement plans, mutual funds, annuities, insurance, stock and bonds and a host of other assets.
Step 3:
We’ll calculate and get a pretty good idea of what your expenses in retirement will be. Some expenses will increase in retirement, while others may decrease, but we’ll focus on areas such as housing, food, transportation, clothing and personal items, health care, entertainment, and travel to name a few.
Step 4: We’ll total up your income from all sources in retirement. In retirement, you’ll likely have a patchwork quilt of several sources of income from areas such as CPP, OAS,
RRSP’s, stocks, bonds, mutual funds, CD’s, inheritance, annuities, and money market funds for starters.
Step 5: The previous 4 steps will help us determine in Step 5 if you have a projected retirement surplus or a shortfall.
After knowing what you envision your retirement to be, looking at your assets, savings and investments, having calculated your income in retirement less your estimated expenses, we’ll be able to tell you if you have a retirement shortfall…and if so, how big.
Step 6: If there is a shortfall, we’ll lay out the various options available and explain the associated trade offs with each one.
A Retirement Income Analysis is the easiest way for you to know with confidence if your Retirement Income Plan is sustainable.
This is our mission and how we see our role as objective advisors.
For more information, go to (YOUR DOMAIN NAME PRESENTS.COM) For over
(# of years years), (YOUR NAME) has pursued a singular mission to develop retirement income plans to help clients insure their “golden years” are just that, truly golden, and in the process, help clients create an income stream for life.
(YOUR NAME) is the founder of (YOUR COMPANY). (FIRST NAME) can be reached at (YOUR NAME) or (YOUR EMAIL ADDRESS) If you would like to have a no cost, no obligation, Retirement Income Analysis created just for you, contact (FIRST NAME) at (YOUR NUMBER).