Old “rule of thumb” retirement planning go-tos may need adapting: Shelestowsky

A great interview with Meridian’s Paul Shelestowsky in Wealth Professional shows that some of the old standard tenets of retirement planning may not translate as well here in the 21^st Century.

An example, Shelestowsky tells Wealth Professional, is the idea that saving $1 million in your retirement kitty is a target we should all be aiming for. But that figure may not be the right target for everyone, he explains in the story.

“StatsCan has reported that close to 40% of Canadians are still working between the ages of 65 and 69,” he states in the article. “Some Canadian adults have their 75-year-old parents living with them; sometimes that means they get help with the finances, but a lot of times they don’t. Similarly, you can’t just assume that your kids will move out when they’re 25 anymore.”

Another rule our parents told us was never to take debt into retirement.

But that’s increasingly difficult to do, Shelestowsky explains to Wealth Professional, in an era where it is common to continue mortgage payments in retirement, and where household debt has reached levels where Canadians are “owing $180 for every $100 they bring home.”

“How can you retire when you’re having troubles getting by with your regular income, and then have to live on 60% of that?” he asks in the magazine article. High levels of debt may explain the greater-than-ever reliance on home equity lines of credit, Shelestowsky tells the magazine.

Planning for retirement is still of critical importance, he says. “Failing to plan is planning to fail,” he notes in the article. Without some sort of savings, he warns, you could be living solely on Canada Pension Plan (CPP) and Old Age Security (OAS) payments, which he says works out to only about $1,700 to $1,800 a month, or $42,000 a year for a married couple.

“The government never meant for OAS and CPP to serve as people’s sole retirement income source,” he states in the article. “Back in the day, people could comfortably sock away an extra $200 a month when they’re 20 or 30 years old; now you could say debt is the new normal. And to have a defined-benefit pension plan you can count on in your old age … that’s almost unheard of nowadays. Companies are shifting toward defined-contribution plans, but even that’s not a staple perk anymore.”

Shelestowsky says a solution is to get the help of an advisor to figure out a pre- and post-retirement budget. For those in poor financial shape, the budget process can turn things around; for others, it is a much-needed source of retirement reassurance, he tells the magazine.

If you have a workplace pension plan or retirement savings arrangement, you have a leg up for retirement. But if you don’t, and aren’t sure how to invest on your own, be sure to check out the Saskatchewan Pension Plan. Through this open defined contribution plan, you can contribute up to $6,300 a year towards your retirement – your money will be grown by professional investors at a very low fee, and when the day comes when you are logging off for the last time and giving back your building pass, SPP can turn those savings into a lifetime income stream.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22