COLUMN: The reality of retirement
We have all heard about the baby boomers–how they have been exerting influence, on every aspect of the economy as they moved though different stages of life.
Many Baby Boomers are now entering their retirement. According to the latest statistics, over 1,000 people in Canada are turning 65 every single day.
Delta of course is no exception, retirees form a large part of our community. We’re seeing traditional retirement being re-defined. It is no longer an event or a race to the finish line, but a healthier and more productive transition.
There are a number of serious challenges facing anyone entering retirement today, but the most common challenge I come across is how to make retirement income last.
Life expectancy and longevity has been steadily increasing. According to the department of Finance Canada; Retirement Insight & Research, the average number of years in retirement, has increased from 17 years in 1980 to 27 years in 2010.
That means we need to find a way to make our retirement income last 10 more years than many originally planned.
Interest rates—Baby Boomers have been dealt the short end of the stick over their lifetime with respect to interest rates. If you are over 60 you can probably relate to this.
While borrowing to buy houses in the 70’s and 80’s Baby Boomers had to pay incredibly high, double digit interest rates on their loans. Now they have savings, they are being paid record low single digits as a return on their savings.
Inflation—For those individuals currently holding all of their assets in cash, GICs, and term deposits because they don’t want to lose money, low current savings rates means inflation is eroding your purchasing power.
For example, if your savings rate is 1.5 per cent per year, minus inflation of 2.5 per cent per year. That adds up to a loss of 1 per cent purchasing power for that year.
The new retirement reality is there are many more years to enjoy for those who are prepared.
It is important to understand the challenges. Longevity, low interest rates, inflation, market volatility, housing (house rich, but savings poor).
Get proactive, review your plan and you will not be blind sided over time.
Keep an eye on the big picture to secure the future you deserve.
Ilana Schonwetter is a Mutual Fund investment specialist with Credential Asset Management Inc. at the Vancity Tsawwassen Community Branch.