If you think that you’re worried about retirement, you’re not alone. It’s not uncommon for find yourself at the tail end of your professional career and still discover that you don’t have enough in the bank to take care of retirement expenses.
Many Canadians simply aren’t prepared, and don’t know how to go about it. If you find that retirement is in your near future, there are still several practical things you can do to get started today. Before you do, read up on these retirement facts to help you prepare:
1. Boomers have less than $100k saved for retirement
Recent polls state that 45% of Canadian baby boomers have less than $100,000 saved away in retirement funds. Despite the fact that Canadians who are in their 50’s have the intention of retiring by 63 years old, more than half of them say that they intend to continue working during their retirement years in part time jobs (source: http://www.newswire.ca/news-releases/cibc-poll-short-on-savings-canadas-50-somethings-plan-to-retire-at-age-63—and-keep-working-510596721.html)
2. The Canadian Retirement Nest Egg is Much smaller than ideal
A staggering 61% of Canadian baby boomers have much less than what they intended to have by the time they retire. This poses a problem for them as it means that they will not have a nest egg to rely on. Despite this, the 50’s and 60’s can still be a good time to build savings as long as debts including mortgages are paid off in full. Provided that savings are left untouched for several years, income from employment can suffice in building a retirement nest egg later on in life.
3. 41% of boomers choose to stay in the labour force even after retirement
Canadian baby boomers who have no retirement savings may be forced to work even if they no longer want to, because without a savings account they simply can’t afford to not have a job. However, the good news is that 41% of baby boomers still choose to stay in the labor force because a good number of them still want to. Many Canadian employers find that having baby boomers in their team is extremely valuable because of the information and knowledge they have that the younger employees cannot match. However, when employing baby boomers, companies will need to consider flexible working hours and even telecommuting options (source: http://business.financialpost.com/executive/the-baby-boomer-paradox-how-delaying-retirement-and-working-longer-might-hurt-productivity).
4. Social Security should not be the cornerstone of your retirement plans
Baby boomers shouldn’t be relying on Social Security, because this alone will decrease their motivation to save on their own. Monthly Social Security checks won’t be enough to help retirees cover their bills, especially if there are debts and mortgages to be paid, more so if they have no insurance and get sick. Social Security is only meant to cover around 40% of pre-retirement income and that is insufficient for most retirees to live on.
5. LIFE EXPECTANCY IS INCREASING YEAR OVER YEAR
It’s estimated that one in every four 65-year old will live past the age of 90. This means that you should consider saving for more than 20 years. These days seniors are living longer, which means that there are more things that need to be spent on. This is the reason why a significant population of baby boomers are afraid that they will outlive their savings.
6. Expenses going down in retirement is a myth
Canadian baby boomers need to keep in mind that most retired households end up spending more money in retirement, as opposed to the misconception that they will spend less during their golden years. Almost half of retirees end up spending more money when they stop working, and this has been a consistent trend no matter what income class you come from. This is another reason why it is extremely important to build your nest egg and save for unforeseen expenses, most especially inflation.
7. Cost of health care is rising
The cost of health care continues to rise. Canadians can end up spending $5,391 annually on their own medical costs if they don’t have private coverage. These numbers will continue to rise; as seen in previous years. Between 2004 and 2014, the cost of health care rose as much as 54%, while shelter rose 41%, food 16%, and clothing, 33%. Inflation is rising at a significantly faster rate. If a retiree is disabled, there are also additional expenses to be covered; a home may need to be modified to accommodate wheelchairs and scooters to assist with mobility; these medical equipment can cost anywhere from $1,000 up. If a retiree is severely disabled, they may require the assistance of a personal caretaker or nurse, which can cost anywhere from $16 to $76 per hour.
8. Retirement does not mean mortgage free
A significant portion of retirees still have to pay mortgage, even when they are 65 and above. One of the biggest mistakes that people think is that by the time they retire they will no longer have to worry about mortgage. The hard truth is that many seniors are starting their retirement years worrying about how to pay off their mortgage debt.
9. Canadian seniors are increasingly living below the poverty line
A surprising number of Canadian seniors are still living below the poverty line. Research shows that 28% of senior women and 24% of senior men are still living in poverty. Income data also reveals that the median income for single seniors who don’t have employer pension income is under $20,000. This is because these seniors basically have no savings to rely on at all. (http://ipolitics.ca/2016/02/17/were-facing-a-wave-of-seniors-living-in-poverty-and-were-not-ready/)
10. Its not all bad though
To end with some happy news, Canadian retirees are known to be among the happiest in the world. But if you find yourself lacking in savings, right now is the best time to start. The earlier you begin to start saving for retirement, the higher your chances are of ending up as a happy retiree. If you don’t know where to start, talk to friends and family and even seek out professional help if needed. Financial advisors can provide you with a great deal of valuable and practical information on building your nest egg today.
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