The challenge of a longer retirement
Can you picture living until you're 90 years old? It could happen: statistics show that this is becoming a greater possibility than ever. But as average life expectancy rises, retirement often also gets extended, following the same trend. In this context, putting aside enough capital for that period is a big challenge. Consequently, 83% of Canadians believe that people should begin planning their retirement in their 20s or 30s1.
It's a fact that life expectancy in Canada is growing from year to year. This phenomenon can largely be explained by major medical advances. As a result: Today, we're looking at a retirement that can last 30, even 40 years. So how do you plan your financial resources to make sure you'll be comfortable for the whole time?
First, watch out for the life expectancy trap. If you underestimate it, you may deplete your capital before the end of your retirement. So you have to be vigilant and remember that life expectancy is constantly increasing, which means that the predictions made since you were born have already changed. For example, a woman now aged 65 had a life expectancy of 82 years in 1966. Today, her life expectancy is about 87 years! Furthermore, it should be noted that in a couple where both partners are aged 65 years, at least one of them has a 50% chance of living to age 90. Life expectancy is certainly not to be taken lightly.
Your retirement plan should therefore take this fact into account, along with your plans and the lifestyle you want during that period. This means making a lot of projections, and properly evaluating each dimension increases your chance of success. Of course, experts can help you correctly determine the resources you will need to meet your goals.
Even while waiting for retirement, you need to think about striking a balance between spending and saving. Your objectives take effort, but pay attention to your quality of life. You have to plan for the future, but must also be able to enjoy life right now. Good planning will let you reach the standard of living you want, and enjoy some flexibility while waiting for retirement.
Is planning for your retirement a challenge? Talk to an advisor. He can help you assess your needs, and find the right mix of spending and saving leading up to your retirement.
1Survey conducted by Saine Marketing for National Bank with 1, 602 Canadians respondents from November 15 to 30, 2011.