Nearly two-thirds of Canadians are concerned about retirement planning. The other third will worry about it later… but will it be too late? We discussed the topic with Natalia Sandjian, Financial planner.
Generally speaking, do people start planning their retirement too late?
People start to think about their retirement around the age of 50, and that’s far from ideal. You should start planning your retirement once you enter the job market. It’s important to know that ultimately, things will be easier for you if you start saving for retirement early. Compound interest will do a lot of the work for you… if you give it time!
Do people in the workforce see retirement differently than the previous generation of retirees?
Retirement isn’t considered to be the twilight years anymore, it’s a second life. Nowadays, new retirees think, “Now I can try something new!” They want to take on new projects, and keep working on the side, because they want to… or need to.
Has retirement planning become more complex?
Most of all, the reality is different. In some cases, people are retired for as long as they worked. In addition, workers need to be self-sufficient: private retirement plans are increasingly rare, or less substantial, and government pensions are lacking.
In addition to all of this, retirees have a higher debt rate. In the previous generation, mortgages were paid off at retirement. Now, people in their 50s and 60s are coming to see us to refinance their properties.
Since there is less guaranteed income and more expenses over a longer period of time, it has never been so important to properly plan your retirement to keep things simple.
Do your clients have retirement “dreams” that are sometimes… unrealistic?
Yes and no. Basically, clients want to maintain their lifestyle when they are retired.
A decline in their standard of living is by and large their greatest fear. They are afraid that they won’t be able to keep doing what they love. These are far from big, unrealistic dreams! In fact, people keep themselves from dreaming because they are too worried about the financial aspect of their retirement.
Rather, it’s their expected return on investment that is unrealistic: future retirees don’t understand all of the actions that they have to take to make their retirement goals a reality, even if they are reasonable.
What kind of questions do we need to ask ourselves when planning for retirement?
It’s not enough to put your retirement plans in writing. The numbers are important: you need to specify your ideal retirement age, calculate the cost of your current lifestyle (a good indicator of what’s to come), take stock of your current investments and estimate the private and government benefits that you expect to receive at retirement.
What are some common retirement planning mistakes that people make?
Number one: not thinking about it. Number two: not thinking about it early enough!
Of course, when you’re in your twenties and thirties, you have other priorities, like your house and children. You think, incorrectly, that you have enough expenses now and that you’ll invest in your retirement later.
Lastly, another mistake is to think that you can simply save without a plan. If you don’t have any goals, the chances of success are slim…
What specific strategies do financial planners propose?
Financial planners establish customized strategies that take into account clients’ priorities, lifestyles and personalities.
A thirty-something at the beginning of his career will have a pile of expenses, but plenty of time ahead of him. He won’t have the same investment strategy as a conservative woman in her fifties who wants to start making withdrawals over the coming decade.
How often should people update their retirement strategies?
For young people, every five years or with each major life event (birth of a child, marriage or divorce, an inheritance or new job, etc.). If you’re close to retirement, you could use a yearly review.
Smart savings tips for every age
In your 20s: Save regularly, according to your budget. An investment as small as $25 per month can make a difference at the beginning, and will get you in the habit of saving.
In your 30s: Don’t stop saving for retirement, even if this is the time in your life when you’re the most in debt and there’s the biggest strain on your income.
In your 40s: Keep up your savings habit by increasing your contribution according to your financial situation and a well-balanced budget that will leave room for savings and discretionary spending. Because if you make an effort all year long before contributing to your RRSPs, you can buy yourself a reward with part of the tax return you might get.
In your 50s: Make the most of your contributions, and even double them if you notice that you’re not meeting your retirement goals.
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The opinions in this article are those of the person interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For any advice concerning your or your business’ finances, please consult your financial advisor or another professional as necessary (accountant, tax expert, lawyer, etc.).
Edited on 22 December 2016