What you think you want to do and what you end up really doing for your retirement appears to be different.  Should those of us nearing retirement adjust our expectations to reflect a more realistic view of what will really happen?  It is somewhat in our human nature to dream a little without firmly determining how realistic those dreams are given the various realities that can impact how our future life unfolds.  Some interesting facts have jumped out from a recent poll including the general finding that retirement expectations held by Canadians (how you think you’ll spend your time) often turn out very different once reality sets in and you get to those retirement years.

Based upon the results of a 2011 poll sponsored by RBC and reported on in the December 14th addition of the Ottawa Citizen, retirement dreams of spending winters in the sunny south are just that, dreams.

The poll focused on the expectations of near retirees versus those already retired.  Some of the interesting results include:

• nearly 75% of Canadian over 50 think they’ll spend retirement days travelling but only 58% of those retired spend their time away from home
• 30% of those nearly retired or over 50 believe they will spend winters down south and summers in Canada – the snowbird lifestyle – but only 14% of those retired live the snowbird lifestyle
• 60% of women near retirement expect to do volunteer work once retired but 41% actually do
• 53% of men near retirement expect to do volunteer work once retired but 35% actually do

The poll was conducted on line by Ipsos Reid between February and March and surveyed 2,245 adults in the 50 and over age group with assets of at least $100K.

More poll details are available at the following link:

http://www.rbc.com/newsroom/pdf/1213-2011-snowbirds-poll.pdf

Given RBC sponsored this poll, financial planning is being pushed to assist the near retirement group to examine options.  The results of this poll and other polls described in Lifepast50 posts, point to the fact that flexibility is needed as you consider how you’ll spend your time.  Working through your retirement expectations and determining how you might get there along with your capability to achieve those expectations is a worthwhile endeavour.

I recently attended a workshop sponsored by the Bank of Montreal (BMO) and Nesbitt Burns entitled “Taking Charge Of Your Retirement”.  I must state upfront that I have a family member that works for BMO.

I want to present an honest overview of what I learned despite the family connection to the organization running the workshop.  I did find the workshop very useful and informative as it made me look at a number of retirement associated factors that I hadn’t fully considered.

The workshop was led by Dr. Amy D’Aprix.  She is the BMO Life Transition Consultant and her role for BMO is to help coach clients on retirement planning.  She clearly notes that she isn’t a banker but a gerontologist.

Ideally the workshop should be attended by you and your significant other…..allowing you to compare notes and see where differences may exist associated with your “retirement picture”.

The workshop began with a short introduction pertaining to Dr. D’Aprix and then workshop participants interactively worked through the various components guided by a “workshop companion” – a collection of forms identifying topics to be discussed.  The forms allowed you to take notes and to fill in your responses to the various topics and questions posed.

The first form presented a series of statements and participants noted whether these statements were true or false.  The statements covered various topics which were intended to get you thinking about other lifestyle factors instead of just financial data.  Some examples included: “For the first time in history, Canadian adults have more parents than children”, “11% of Canadians expect that some of their retirement income will come from from the lottery”.   By the way, both of these statements are true.

The workshop then gently slides into a presentation regarding your retirement picture containing 4 corners covering relationships, lifestyle, health and home.  These 4 corners are then “framed” with financial implications that give your retirement picture stability.  These frames are identified as Cash Flow, Investments, Tax Considerations, and Contingencies.  To see more details regarding this, head to the BMO website and find the “Take Charge of Your Retirement” web presentation.

After gaining an understanding of the “retirement picture” structure, the workshop heads into discussing your individual and particular preferences regarding the who, what, how and where factors (these are relationships, lifestyle, health and home respectively) – who will you spend time with when you retire, what do you picture yourself doing in retirement, where will you live in retirement, and how might your health impact your retirement. The interactive nature of the workshop allows you to gain a better understanding of these “4 corner” topics and compare your answers and feelings to what others identify.

Some of the key items I walked away with:

• think about your life and not just the money
• think of your wants, needs and desires as you look at retirement (your picture) and then set up or assess your plan (the frame) to help you meet your desires – examine your future based on the workshop directed questions intended to allow you to articulate your retirement expectations
• work with your significant other to see how things align (the next steps associated with alignment or lack of alignment are entirely up to each individual / couple)

Overall the workshop is an obvious shift by a bank away from a traditional number crunching approach to a more people and lifestyle oriented approach targeted at helping you visual your retirement future based upon lifestyle factors as well as the numbers.  The workshop also promotes retirement planning and, as expected but done in a soft sell way, contacting your BMO representative.  As I stated above, I was glad I attended and did learn something ….. Lane@lifepast50.ca

As a result of another survey, this time commissioned by the CIBC (Canadian Imperial Bank of Commerce) and conducted by Harris/Decima, reveals that 70% of Ontario residents plan to continue working in retirement.  This includes activities such as starting their own business, consulting, or taking on part time hours.  Overall the poll shows that people of all ages across Canada plan to continue some for of work in retirement.  This repeats findings uncovered from other surveys so we shouldn’t be surprise by these results.

More highlights of the Ontario residents retirement results include:

• 45% believe they will work part time
• 21% believe they will do occasional consulting
• 8% say they will start a new business
• 9% say they will continue working full time
• 1% plan to spend their retirement travelling

Similar results appeared nationally across all age groups and across regions:

• 80% aged 18 to 24 believe they will work in retirement
• 65% aged 25 to 34 believe they will work in retirement
• 69% aged 35 to 44 believe they will work in retirement
• 68% aged 45 to 54 believe they will work in retirement
• 73% aged 55 to 64 believe they will work in retirement
• Atlantic – 60% plan to continue working into retirement
• Quebec – 61% plan to continue working into retirement
• Ontario – 70% plan to continue working into retirement
• Manitoba / Saskatchewan – 73% plan to continue working into retirement
• Alberta – 78% plan to continue working into retirement
• British Columbia – 80% plan to continue working into retirement

One conclusion to draw from this is that many Canadians are making a conscious choice to keep working in some form or other.  As you combine this survey with other survey results noted in other lifepast50 posts and general data about our boomer lives, we are living longer, entering our senior years in relatively good health, and we understand the importance of keeping our minds engaged.

Given the survey was commissioned by a large Canadian bank, their obvious goal is to focus the bank’s service offerings towards retirement planning and related services, not only for the boomer part of the population but also for younger Canadians.  We all understand that some planning needs to be undertaken in order for individuals to fully comprehend what lies ahead as we age.

This survey was conducted in early September 2011 and involved 1116 working and 683 retired Canadians.

An article published in the Ottawa Citizen on Sept. 13th entitled “Low Savings Forcing Retirement Delays” indicates that Canadians are putting off retirement because they aren’t saving enough and the majority are living paycheque to paycheque.  These findings are based upon a recent survey by the Canadian Payroll Association, their 3rd annual survey on these topics.  They surveyed 2070 employed Canadians between July 6 and August 2, 2011.

These findings shouldn’t be a surprise, given other similar findings described in related past lifepast50 posts.  The results continue to show that a majority of Canadians are not adequately ensuring that they are in good financial shape for today and for their retirement in the future.  Combine this with today’s uncertainty of economic recovery and Canadian demographics, and the potential exists for many Canadians to be working longer into their senior years.

Some of the survey findings:

• 57% say they would be in financial trouble if their pay was delayed by just 1 week.  Most financial planners recommend that you have an emergency fund to cover 3 months of essential expenses.
• 40% expect to postpone their retirement due to lack of savings – not saving enough for retirement.
• 74% saved less than a quarter of the money they expect to need to retire with 71% of the respondents being over the age of 35.  The bulk of savings usually occurs between the ages of 35 and 54.
• 63% feel they will need to set aside more than $750,000 to retire comfortably.  The majority also indicated they need to do more to improve savings.
• 50% were putting away 5% or less of their net pay.  Financial planners generally recommend putting aside 10% of each paycheque.
• 22% had paying off credit card debt as their #1 priority.  Based upon recent data from TransUnion, Canadian are carrying an average non-mortgage debt of $25,603.

The survey indicated the recession and the slow recovery have impacted Canadian employees.  The survey indicated respondents have modest expectations regarding pay increases and economic improvements.

Here is a link to the Canadian Payroll Association website for survey results – Survey Results.

An article published in the Ottawa Citizen by J. Chevreau (from the Financial Post) on Thursday January 27^th, highlights some interesting aspects of RRSPs and RRIFs that I wasn’t fully aware of.  The article calls these the “dark side” of RRSPs.

We shouldn’t be surprised by the fact that tax is owed when RRSPs are deregistered and converted to RRIFs.  The details surrounding this probably aren’t as well known.  The RRIF forced withdrawals are phased in at 7.48% at age 72 and increase to 20% at age 94.

As markets recover after the recessions of the 1^st decade of the 21^st century, and as more boomers approach retirement, the taxes owed are being looked at more seriously.  That money will be taxed at one’s marginal rate.  Should you be fortunate to have a large RRSP and consequently large withdrawals as a result of a RRIF, your tax bill could be significant.  Your tax deferred gains which you may have enjoyed earlier now may come back to unexpectedly hit you.  Current RRSP rules may force you to take out more than you need to spend to enjoy a comfortable lifestyle.  In some cases, if one spouse dies, the surviving spouse then has the total RRIF value of both spouses to deal with – a larger tax liability.

Some will argue the benefits of growing money in a tax deferred plan over many years outweighs the disadvantages.  Additionally, those that re-invested taxes saved as a result of their RRSP contributions, have most likely benefited even more than the tax liability that remains once it is converted to a RRIF.

TSFAs may be a rescue option for some seniors with large RRIFs.  Putting $10,000 of RRIF income into a TSFA per senior couple could grow to $200,000 in 20 years and be completely tax free.  Of course you need to live long enough to realize this advantage.

Other strategies exist if you retire early (before age 65) including RRSP early withdrawal with tax paid at a lower marginal rate in advance of receiving other retirement benefits once you turn 65.  This might be a benefit if you can stay below the Old Age Security claw back level once you turn 65.  In other cases, putting stocks in non-registered plans may make sense since only 50% of capital gains is taxed.  A long term buy and hold investment plan means no tax is paid until you sell and take the profits.  If you had losses in other securities, those can offset taxes on gains.

This all points to the fact that the Canadian federal government needs to examine the RRIF withdrawal rules given rising life expectancies.  Combine that with today’s and recent year’s small investment returns and it may be time to get some action on this point.  As the new boomers turn 65, with waves to follow, it won’t be long before a serious segment of the Canadian population nears 71 when the RRIF rules kick in.  Some tax surprises may be forthcoming.

Another survey indicates Canadians fear being forced to work well into their golden years.  Given other recent surveys noted in LifePast50 posts, this shouldn’t be a surprise.  Many of these past surveys have indicated the same thing.  Survey summary results were published in many Canadian newspapers, including the Ottawa Citizen, on December 14, 2010.

This telephone survey was conducted between October 28th and 31st by Harris / Decima in Canada and Caravan in the US.  The survey was commissioned by Edward Jones involving more than 1000 Canadians and more than 1000 US adults.

Overall the poll highlights the importance of saving early.  Amongst the younger survey participants aged 25 to 34 in Canada, 40% said having to work longer was the #1 retirement concern.  This is up 12% since 2006 (presumably from another similar survey).  Similar results exist in the US where almost 25% share the same fear compared to 15% in 2006.

The article identifies a national advocacy group called CARP (www.carp.ca) which represents Canadians over age 50.  CARP says its members are overwhelmingly against extending the age of retirement and they recognize people they aren’t saving as they should.  CARP noted that it isn’t any good at 55 saying “oops, I better save for retirement”.

Other interesting survey points:

• 16% of Canadians fear having to rely on others for support in old age
• the biggest fear amongst young Canadians (the 18 to 24 age group) was having to cut back on their desired lifestyle
• for Canadians over 55 cutting back on their desired lifestyle topped the worry list
• young Americans, 25%, fear having to rely on others for support
• middle aged Americans and those over 55 were most concerned about health care

With the recent recession, it shouldn’t be a surprise that these fears have increased.  When the recovery fully takes hold, it will be interesting to see if these fears change.

A recent Survey by Investors Group, conducted by Harris / Decima from October 28th to November 9th, 2010, that surveyed 1014 Canadians between the ages of 45 and 64 produced more interesting results reflecting the retirement opinions of baby boomers.

59% of boomers who participated in the poll said the Beatles song, “When I’m 64”, doesn’t accurately portray their idea of retirement.  More than half said the part of the song about “doing the garden, digging the weeds” described something they would be doing in retirement and 73% cited reading and 67% cited watching television as other activities that they will undertake.

Some of the poll results include:

• 61% view retirement as “an exciting new stage of life”
• 59% have concerns about their finances
• 55% said they would not be able to afford their “dream retirement”
• 54% feel retirement will be comfortable
• 52% have worries about health
• 43% anticipate retirement to be fulfilling
• 42% expect retirement to be busy
• 36% said they would have started saving money for retirement earlier in life if they could do it over again
• 30% said they lacked enough money to pay for basic expenses

Here is what the survey said about what boomers are looking forward to in retirement:

• Lack of work pressures
• Opportunity to travel
• Additional time for recreation, hobbies and fitness
• Chance to become more involved in the community

I wonder how this matches up with your thoughts?

A recent survey, conducted by the Gandalf Group on 1500 Canadians, shows that almost 55% of people not yet retired expect to continue to do paid work after they retire.  The survey indicated that people expect to do paid work part time in their current or a different field, or fill time in a different field from the one they are in now after they retire.

The survey also found that:

• almost 1 in 5 people expect to retire after the age of 70
• the closer people are to retirement, the more they think they will have to keep working in some form
• 41% of respondents aged 18 to 34 said they think they’ll be able to stop work entirely when they retire
• 27% of respondents between age 50 and 64 expect a work free retirement
• Fears of deteriorating finances are almost at the top of the list amongst retirement worries given 75% of the respondents said they were very or somewhat concerned that they will be poor after they retire
• The fear of physical deterioration was the only bigger worry with 80% of respondents indicating this
• The vast majority of respondents are counting on their personal saving as well as CPP and OAS to fund their retirements
• Only a minority have any kind of company pension
• For those already retired, the biggest increase in spending was on travel while the biggest cut to spending was on personal clothing
• Expected retirement age is 70
• Only 33% of respondents expect to retire before age 65

Interpretation of the results by the research firm indicates that Canadians are recognizing the lack of planning that has occurred to fund their lifestyles.  This recognition, along with the recent economic troubles are leaving Canadians saying that they will need to work longer than expected.

Further interpretation indicates that on the public policy side, government is going to have to deal with underfunded pensions and people who are counting on social assistance for large portions of their income.  This will be an issue that will affect government for the next 30 to 40 years as the baby boomer generation ages.

The survey, from a marketer’s perspective, indicates that there is great potential in selling goods and services that relate to working live, to people over the usual age of retirement but who are still in the work force.  Things like work clothing, upscale cars and short vacations may be highly desirable for the working longer crowd.

The Gandalf Group is a research firm for advertising agency Bensimon Byrne.  Further information can be found at the following:

http://www.gandalfgroup.ca/downloads/2010/consumerology/Consumerology_Retirement_Oct2010.pdf

A Canadian based study was conducted by three University of Waterloo researchers, entitled “Basic Living Expenses for the Canadian Elderly”, to determine the basic living expenses required by Canadian seniors living in different circumstances in terms of age, gender, city of residence, household size, home ownership / renter, means of transportation, and health status.  It assesses the minimum level of income required in retirement and the adequacy of savings and income security programs.  Using Halifax, Montreal, Toronto, Calgary and Vancouver as base urban centres, the study looks at identifying what the elderly income threshold is for these urban areas for an single elderly individual and an elderly couple for 2001.

The paper’s conclusions suggest that individual circumstances, rather than age, are the primary drivers in determining the cost of basic expenses.  The thresholds resulting from the study provide a general impression of the necessary after tax income needed to cover basic needs.

A no frills retirement – couple rents rather than owns, owns no vehicles but uses public transit, low clothing expenditures, and has very little or no extra cash for minor indulgences (like cable, alcohol and entertainment) – would have an annual cost of between $20,200 to $27,400.  Some comfort is out there for those concerned about those annual cost numbers because the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) programs for low income seniors gets close to covering these basic needs – just barely or very close depending on the city you live in.  If you add the Canada Pension Plan (CPP) payouts, if you worked most of your life, you will get more – a bit less than $30,000.

I’m sure most would look at a no frills lifestyle and cringe but there will be income.  Most Canadians want better than the no frills version and expect the same or similar levels of comfort they enjoyed while working.

Another article that discusses the noted study presents some info regarding how much income to you need.  It assumes you receive about $30,000 from CPP and OAS as a base.  For a more active lifestyle than the no frills lifestyle described above, an extra $10,000 to $30,000 a year would be needed.  Some financial planning research suggests you need retirement savings of 25 times your annual retirement spend (excluding CPP and OAS) if you want to keep spending that much for the rest of your life.  Statistics Canada indicates that median spending by a couple over 65 is about $40,000 a year and average spending is about $51,000 per year.  At the $10,000 value that would mean a nest egg of $250,000.  A higher end lifestyle, at the $30,000 value, would mean a nest egg of $750,000.  If you want to be a big spender with an extra $100,000 a year of disposable income, your nest egg would have to be $2.5 million.

This all goes to show that you need to match wants to means – find a retirement lifestyle that fits your budget.  A more lavish lifestyle will be supported by an appropriately sized nest egg.  For many, going back to work part time can provide additional cash for extra lifestyle improvements.  Ideally finding part time work doing something you enjoy so you would love the work as well the extra money.

Refer to http://ideas.repec.org/p/mcm/sedapp/240.html to download a copy of the study.  Information from one of the authors can be found at http://www.naylornetwork.com/cia-nwl/articles/?aid=31031&projid=2080.

Refer to http://ca.finance.yahoo.com/retirement/article/moneysense/42/retirement-three-magic-numbers for an article about the study plus additional related data.

A recent article published  in the Ottawa Citizen (Saturday, May 1, 2010) by J. Chevreau (Wealthy Boomer) entitled “If you’re in debt, forget retirement” highlighted information worth considering as you look towards defining a retirement life you can afford.

The article highlights the results of 2 new surveys – one from Investors Group Inc. and the other from the Royal Bank of Canada.  These surveys indicated that Canadians intend to carry significant amounts of debt into retirements.  The 1st survey indicate 62% plan to carry debt such as a mortgage into their retirement.  The 2nd survey indicated 39% of Boomers 50+ entered retirement with some debt.

Previously the standard was to enter into retirement debt free but some now feel carrying debt in retirement is not necessarily bad.  A more relaxed attitude regarding debt seems to exist.  This may be due to a number of factors including delayed parenthood for the current boomer generation, family situations (divorce, remarriage, older children still living at home, etc.), and current low interest rates.  The article goes on to talk about deductable and non-deductible debt.  All appear to agree that getting rid of non-deductible debt is important point to stress when considering how ready you are for retirement.  Various views exist regarding deductible debt based upon the fact that this is more of an advantage to those in higher tax brackets.  There are numerous tax advantages.

Another item of note in the article was from an actuary (Malcolm Hamilton).  He is quoted in the article and states that retirees can get by on just 50% of their working incomes, assuming a paid-for home.  He also indicates that if you’re still in debt, you have no business retiring and it is almost always a symptom of poor planning.  Boomers with safe investments (like bonds, etc. which currently generate little or no return) and debt should consider clearing the debt.