We are experiencing a silver Tsunami. The leading edge of the Boomers turned 65 six years ago. On average, 1,250 Canadians turn 65 years old every single day. Most Boomers were born between 1961 -1965. That’s why you feel everyone has been turning 50. And people are living longer, much longer.
With all of this happening, it’s small wonder that the media, politicians and the financial services business are all talking about retirement. That kind of focus may be good, because of what it means for savings habits and pressures on goods and services.
There are a lot of myths we have to be wary of if we want to ensure we have an adequate retirement income that lasts a lifetime.
What You Need to Know
Myth #1 – Retirement planning is just for older people
The definition of retirement is changing and even though it may seem like a long way off, use that to your advantage. Much like dieting and exercising, starting a plan and sticking to said plan are the hard parts.
Every little bit of savings helps and will make it easier, if you start early enough. Harness the power of compound interest where planning and saving a little now on a regular basis can let money work for you: 24 hours a day, seven days a week…for decades. Your money seems to grow slowly at first then starts to balloon as you get older, even if you put in the same amount of money.
Every year you delay means you’ll need to save more money and perhaps take on more investment risk in order to reach your goals.
Myth #2 – I’ll never be able to save enough for retirement.
It’s surprising, even shocking, that with all of the attention devoted to an aging society and the need to save for retirement, that so few people are inspired to get started. Many do have a doom and gloom attitude about retirement. Myths aren’t helping matters.
“I’ll never be able to save enough for retirement.” That may seem true when you’re young, starting a family, paying off those school debts and dealing with a mortgage. Instead, you figure your income will go up in the future and you’ll work on developing your money management skills and habits then.
Don’t fall into the trap of thinking it’ll be easier to save for retirement in just a few more years. After all, there are competing and expensive needs no matter how old you are.
First you pay off your college debt and the next thing you know, you’re helping your kids pay off theirs. Then there is the house, wedding expenses, home renovations, grandkids and the list goes on and on. One day you’ll stop and ask yourself, ‘Where did the time go?’
Every year you delay starting to save ultimately means you’ll need to save more in order to get on track for a retirement that’s getting closer and closer.
The best time to start saving for retirement is when you are young and just starting to work. But if things just didn’t work out that way for you, then consider starting now. Let the power of compound interest work for you as long as possible.
Myth #3 – I need $500K, $1M, $2M to retire
The fact is that your “number” can vary greatly depending on your personal situation and goals, how long you expect to live, whether you will be single or with a spouse/partner and when you will retire.
Consider asking an advisor who specializes in retirement planning, or better yet, retirement income planning to customize a plan for you.
Consider trying some of the tools available from trusted sites produced by large financial institutions. And don’t forget government benefits like the Canada or Quebec Pension Plan (CPP/QPP) and Old Age Security. If you want to maintain the same lifestyle before and after retirement, your number is tied to how much income you will need to provide the same consumption dollars. That’s the money you normally spend on your own lifestyle. Add some extras to that bucket list of yours for those early years of retirement when you will be most active and spend more money.
Myth #4 – I can deal with a shortfall in retirement savings by working longer or taking up some part time work.
Recent studies have found that almost half of retirees left the workforce earlier than planned. Downsizing, layoffs and negative working conditions were some of the reasons. People ages 55 plus have an average of more than 13 months on unemployment. That’s almost 5 months longer than younger people looking for jobs. (Source: Associated Press, AARP Public Policy Institute 2012)
The biggest reasons for leaving the workforce early were health related – either the worker’s or someone in the family. Working longer is not an option you can definitely count on because staying on the job or getting another job is not a given. Almost two thirds of retired Canadians had less than a year to plan and adjust for what could be 30-40 years of retirement. (Source: LIMRA Retirement Study, 2012; Retirement Myths and Realities Poll, 2013)
The Bottom Line
Be proactive when planning your retirement and remember: the earlier you start, the better! Healthy retirement planning will help ensure a more successful retirement. Contact your financial expert to get started today!