Retirement savings for Boomers
It’s never too late
Born between 1946 and 1964, Canadian Baby Boomers are often envied as a golden generation that took advantage of every opportunity a vigorous postwar economy offered. But Boomers are a diverse group. It’s true that some have amassed healthy nest eggs, but many others are just starting to think about retirement savings. For them, the window for getting their post-work financial house in order may be closing, but it’s not too late to make retirement savings a priority.
“The youngest Boomers are now in their early 50s,” says D’Arcy McDonald, vicepresident, personal savings and investing, TD. “They’re often in a unique place. They may be in their highest earning years and they’re on the heels of a 10-year bull market. On the other hand, the chances are high that they will be supporting an elderly parent or have a child return home following university. There are different demands on their resources than on any other generation, so they have big choices to make to help them retire ready.”
TD financial advisers across the country ask their clients what retirement could look like for them. Will they live in the city? Will they sell their current home and downsize? Will they continue to work? Will they travel? Will they need to continue to support children or other dependents?
Lifestyle choices such as continuing to work, beginning a second career, turning a hobby into a profession or downsizing their home can help boost income.
“My aunt turned her basement into a rental unit that gives her predictable monthly income,” says McDonald. “One of my friends drives for a car-service company a dozen hours a week to earn some extra spending money.”
He also notes that some people tend to spend the most money on leisure and travel right after they retire.
“However, that can be a delicate time for a retirement plan,” says McDonald. “You want to avoid spending too much money too early and disproportionately affecting the future of your investments.”
But there are plenty of things that people approaching retirement can do to make their future better. “We help them to make the most out of their prime earning years,” says McDonald. “Often it’s simple ideas that can make the most difference.”
For example, Boomers should set up a systematic way to invest. They should considering paying themselves first through saving, even at the risk of maintaining a modest degree of debt.
“There’s an idea that we need to pay down our debt first, but being entirely debtfree rarely happens for average Canadians,” McDonald says. “If they wait for that moment, they may never begin investing for retirement. We suggest they save for retirement while paying down debt. If they can save lump sums and bonuses, or make systematic savings in their higher-earning years, it’s desirable to pass that into retirement savings.”
An effective retirement plan would allow retirees to at least meet their essential needs, such as mortgage payments, rent, utilities, health care and groceries.
“If you can do that with savings and with income derived from those savings, CPP and OAS, you may be in a good spot,” says McDonald. “If you have ambitions beyond that, you may want to look at additional options.”
Investors might consider stock market-linked GICs. They might also look at mutual funds, which have become increasingly versatile in recent years, offering everything from conservative, low-risk products with generally predictable returns to aggressive funds with higher risk, but with the potential for higher growth.
Boomers would be wise to review and update their retirement plans regularly, even during retirement.
“Life and goals change,” says McDonald, “and you want to be sure your plan changes with it.”
Life and goals change, and you want to make sure your plan changes with it.