Many Canadians fear outliving savings, poll finds

(January 14, 2004) A significant number of Canadians are worried they will run out of money during their retirement, according to a poll conducted for Investors Group. Not only that, but many have no idea how they want to spend their time during retirement, making it impossible to plan.

“How can you achieve what you can’t picture?” asks Debbie Ammeter, vice-president of advanced financial planning for Investors Group. “A successful, happy retirement means doing what you want to do — and deciding what that is puts you on the path to getting there.”

The poll showed 62% of non-retired respondents had some level of concern about possibly outliving their savings, with 30% saying they were “very” or “extremely” concerned. When it comes to planning for their retirement, 29% said they had no idea whatsoever how they wanted to spend their time.

Ammeter says retirement planning requires goals, however modest they might be, so the investor can budget for those plans. Once they know how much it will cost to pursue these retirement dreams, they can look at the state of their finances right now and starts planning on how to fill in any gaps there might be.

“If that sounds daunting, I think it should point out that a financial planner can be really helpful in steering you through that process,” she says. “I think the most important thing is that you have help available through financial planners and they’ll do an asset allocation review for you. They’ll do projections of how much you should be setting aside each year, they can identify what your tax savings are and how much those monies will grow on a tax-deferred basis in an RSP. They can pull in all the relevant factors for you.”

Ammeter says most people start thinking about their retirement dreams around middle age, or later.

“At 50 and beyond, it’s still not too late. They have time at that point to look at what their desired retirement age is, you can look at options for making up any shortfall and you can put a plan in place,” she says. “If you see that they’re going to need to be saving a lot of money to get there, you can look at other options. Do they want to delay retirement at all?”

For younger investors, however, they might need a little more prodding. The distant time horizon may be their friend when it comes to compounding the returns on their investments, but they are likely to have competing financial concerns — a new car, buying a house, starting a family.

“What you would want to do is point out the value of starting early and just how much of an advantage they’re going to get if they start retirement savings early,” she says. “Even if they don’t have as much idea of what they want to do, they know they will be retiring at some point and at least they know they should start a regular savings plan.”

The poll found that in hindsight, many people who had already retired would have taken a different approach to retirement planning. It may sound trite to say you can learn from your elders, but when it comes to retirement lifestyle, they are the most accurate source.

“One thing an advisor can point out is that when asked what they would do differently, 45% of people who are retired said they would have started earlier,” she says. “I think that’s a lesson we can take from people who’ve been there and they’re saying ‘I wish I’d saved more’ and ‘I wish I’d sought professional advice earlier’.”

Forty-eight per cent of retirees said they would have saved more for their retirement and 31% would have sought professional advice sooner.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com