Can living longer cause you a pain – in the pocketbook?

We all hope to enjoy our golden retirement years with the blessing of good health.

But could this blessing – a long life – actually be a problem in disguise?

New research from the World Economic Forum, covered recently by the Montreal Gazette, suggests the living longer creates the risk of outliving your retirement money.

“Today, one of the most taxing challenges that is often left out of the conversation is the impact of the change in average lifespan,” the Gazette reports. “According to Statistics Canada, today, the average Canadian will live until age 82, with the number of centenarians — those reaching the age of 100 — continuing to grow,” the newspaper notes.

And those of us who are born more recently will see ever greater longevity in life, the article continues, noting that research from the Lancet suggests a girl born in 2030 will live to 87, a boy to 84. That’s up sharply even compared with life expectancy data from 2010, the Gazette reports.

OK, so we are all living longer. So what’s the downside to that?

“The World Economic Forum suggests that today, Canadians will outlive their retirement savings by more than 10 years,” the article warns. The article recommends that people work with financial advisers to develop a plan to help insure against this risk.

What would such a plan contain?

The article notes that in the UK, many retirement programs available through work offer “automatic adjustments,” such as an automatic increase in savings contributions when there’s a raise or change to a better-paying role. Other tactics include looking at investments that offer lower fees, since high fees can eat away at the value of your savings.

Some organizations offer “lifestyle and investment modelling tools” to help individuals choose a savings strategy that aligns with how they see their latter years unfolding.

But the article concludes that while such measures are a good start, more work needs to be done in this growing area.

“It’s clear that there is no simple solution to retirement savings,” the article states. “However, one thing we know for certain is that driving change requires increased demand. To manage finances successfully, individuals should understand the decumulation options available to them, how their money is being distributed, and what happens to their savings when they retire.”

This is very sensible advice, since most of us focus on saving as much as we can for retirement, but then have no plan in place to turn the savings into an income stream. Imagine if you got paid once a year – how would you handle your bills, your rent, and so on? You’d have to make that money last until the next year. That, in a nutshell, is what “decumulation” refers to – taking a chunk of money out of a retirement savings vehicle and then living on it.

There’s another option available to ensure you don’t run out of money. You can use some or all of your savings to purchase an annuity. The annuity will provide you with a monthly payment for the rest of your life. This makes planning easier, and you can’t run out of your savings. This option is available through the Saskatchewan Pension Plan, and the annuities they offer come in various different forms. Check it out today.

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

A look at the best of the Internet, from an SPP point of view

When it comes to retirement saving, how much is “enough?”

There’s no question about it – saving for retirement is a moving target. We are frequently told to save more for retirement, but it’s not often anyone lets us in on the secret of how much “enough” is, retirement-wise.

A new poll by Ipsos, conducted for RBC and reported on in the Montreal Gazette, gives us some specific answers to this age-old question.

On average for Canada, the article says, the savings target is $787,000. The article says Ontarians feel they need $872,000. In BC, respondents think retirement savings should top $1.05 million, the highest total in the country. In Quebec, which has the lowest average, the target is $427,000 to “have a comfortable financial future,” the article reports.

Save with SPP reminds those reading these daunting numbers that all working Canadians will get Canada Pension Plan or Quebec Pension Plan benefits, plus other government benefits like Old Age Security and, if applicable, the Guaranteed Income Supplement. So those will account for a significant chunk of that total savings amount, even though you don’t get these benefits as a lump sum, but as a lifetime payment.

However, those without a pension plan at work will have to do some saving to get to these average totals. The survey asked people how confident they were about reaching the finish line on savings. On average, just 16 per cent said they were confident. An alarming 32 per cent of Ontarians (least confident) and 39 per cent of Quebecers said they “will never build up enough of a nest egg,” the article says. The article says the lack of a financial plan may be part of the problem here.

“The survey… found 53 per cent of respondents from Quebec had no financial plan. Only Atlantic Canada had a higher rate of respondents with no plan, at 54 per cent. Of the 47 per cent of respondents who have a financial plan, 34 per cent said that plan is in their head,” the article notes.

“Across the country, 54 per cent of respondents said they have a financial plan,” the Gazette reports.

If there’s a takeaway here, it is that if you can – despite the rising cost of household debt and other life costs that get in the way – you need to plan to put a little away for retirement. If you start small you can increase your commitment later when the bills calm down.

A little effort today will pay off handsomely in the future, when your savings will turn into retirement income, and you’ll theoretically have paid off debts, raised your kids, and downsized so that you can enjoy your extra time. Don’t be intimidated by the multi-hundred-thousand dollar-targets – a little bit here and there will get the job done. And if you’re looking for an excellent home for your hard-earned savings dollars, look no further than the Saskatchewan Pension Plan.

Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. After a 35-year career as a reporter, editor and pension communicator, Martin is enjoying life as a freelance writer. He’s a mediocre golfer, hopeful darts player and beginner line dancer who enjoys classic rock and sports, especially football. He and his wife Laura live with their Sheltie, Duncan, and their cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22