Clients will exhaust retirement savings early

Two out of ten Canadians over 50 (19%) have failed to track their retirement savings, says a new Investor Education Fund study.

What’s more, half of all respondents believe they’ll exhaust their retirement savings within the first 10 years of retirement.

Read: RRSP reality check

Specifically, the study finds 41% of homeowners had compiled less than $100,000, with only 21% saying they planned to allocate $250,000 or more.

Along with lacking saving skills, these respondents were also unwilling to capitalize on their home equity. When asked if they’d downsize, sell, rent or get a home equity line of credit, almost half (41%) rejected all options.

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Don’t rely on home equity in retirement

Help clients secure their retirements

“Canadians [not] saving enough for retirement is nothing new, but it’s unsettling to learn homeowners approaching retirement age are so unprepared; they’re a comparatively well-off group,” says IEF president Tom Hamza.

The IEF research addressed three main retirement issues: household wealth locked into property values, home-related debt during retirement, and home equity as a source of income during retirement.

Read: Today’s retirees wanna rock, but not in a chair

Additional findings include:

• One-quarter (24%) of Canadian households don’t have a withdrawal plan for retirement. They haven’t decided how much they can safely draw from their savings each every year, and this includes company pensions.
• One-quarter (24%) of homeowners expect to have debt on their principal residence after they retire, with a median debt of $71,000.
• Of this group, almost one-half (49%) expect to pay the debt from their retirement income, and one-quarter (27%) doesn’t know how they’ll cover the expense or pay it off.

Read: Retiring before your mortgage

“Retiring with debt puts extra strain on your income,” says Hamza. “If you go into retirement with inadequate savings in the first place, you may be on shaky ground.”

He adds the use of online tools and calculators provides “Canadians [with] a real understanding of whether their savings are enough, and [helps them] plan for what-if scenarios by estimating impacts on your investments.”

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