Chances are
“you might live longer than you think.” This was the longevity message of a Wall Street Journal article earlier this year.1 Indeed, we are living longer and healthier lives — half of those born today are expected to live to the centenarian age of 100.2 And, though the average Canadian’s life expectancy is around 82, if you reach the age of 75, you’re likely to live until age 87. Our life expectancy increases as we get older.
Notably, this points to the importance of wealth planning to ensure that our funds have similar longevity. This is challenged by the ongoing trends of declining workplace pensions, the growing costs of dependents, the potential high costs of health care later in life and ambiguous government support — though actions like the CPP reforms, with more changes set to begin in 2024, are expected to make a marked difference to future retirees, especially those who haven’t been able to make wealth planning a priority.
The good news? Retirees today appear to be doing a pretty good job. A study from Statistics Canada suggests that recent retirees have experienced greater income growth and maintained more of this income in retirement than ever before. Their conclusion: The
“golden years of retirement have become more golden.”
As wealth advisors, preparing our clients financially for the future — including an extended one — remains a key focus. Whatever your plans for the golden years, the ability to make choices for the activities you wish to pursue is important. You may choose to continue working, but wouldn’t it be nice to do so on your own terms, not by financial need. Or you may wish retirement to resemble an extended vacation. The common thread should be to have the financial wherewithal to allow you to decide.
The $1.7 Million Head Start
According to many Canadians, this is the amount of savings we feel is needed to retire.5 Consider that a 20-year-old investing $125 per week for 25 years, at a rate of return of 6 percent, would have around $378,000 by the age of 45. But, leaving this amount to compound at the same rate would yield $1.7 million by age 70. This is our way of pointing out that even a modest investment program can result in significant outcomes over time. Just imagine the head start a young person would have in retirement with an “extra” nest egg of $1.7 million. A bit of discipline, consistent savings and an investing program that relies on relatively modest contributions each year could steadily progress towards this goal over time.
For those of us further down the road, the principles remain the same: having a sound plan, contributing consistently and having the determination to follow through. The tactics may occasionally need to change to meet the prevailing market conditions, or we may need to fine-tune your plan, but don’t overlook the importance of a commitment to your plan. It has been built to return dividends down the road. And even if you are living through retirement, it is a good reminder that the road ahead may still be a long one.
As we enter the final months of the year, autumn, the season of change, is a reminder that time changes all things — perhaps even our financial obligations or goals. If a review is in order, or if there are investing actions you need to take before year end, please get in touch.
The information contained herein has been provided for information purposes only. Graphs, charts and other numbers are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information has been provided by J. Hirasawa & Associates and is drawn from sources believed to be reliable.
The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. This does not constitute a recommendation or solicitation to buy or sell securities of any kind. Market conditions may change which may impact the information contained in this document. Wellington-Altus Private Wealth Inc. (WAPW) and the authors do not guarantee the accuracy or completeness of the information contained herein, nor does WAPW, nor the authors, assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
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