45 and up? It’s not too late to kick retirement plans into high gear
I’ve left it too late. I don’t have enough money. I can’t afford to retire anyway. As vice- president, asset management at Scotiabank, Jeff Bartja has heard it all from Canadians who believe they’ve permanently dropped the ball on saving for retirement. But he offers a message of encouragement: while starting early is always better, 45 (or older) is not too late to begin formulating a solid retirement plan.
Canadians who wait until later in life to begin retirement planning have plenty of company. A 2016 study conducted for the Ontario Securities Commission found that 48 per cent of people surveyed began planning for retirement at age 40 or older.
At any age, the one piece of homework that people need to complete before formulating a retirement plan is to imagine what retirement looks like to them.
“People in their mid- 50s and older have a pretty good idea of what retirement is going to look like,” says Bartja. “People in their 40s will probably have to work a little harder at creating that vision. But you may have parents going into retirement and you can look at the financial resources they’ve needed to retire, from living expenses to leisure to assisted care. Working with a financial advisor, you can bring those experiences to the table and develop the financial literacy you’ll need to see what sort of retirement you’re aiming for.”
In general, people should look to replace 70 per cent of their working income in retirement, but this depends on a number of factors, such as your age, health, family and financial obligations. The good news for middleaged Canadians is that, once they develop a vision for retirement, they’re often in a good place to begin building a secure retirement future. They typically have higher incomes, lower debt and fewer encumbrances that will hold them back from getting to retirement in good shape.
“They’ve got some life experience and they have the discipline to make conscious decisions about how they allocate their income,” says Bartja. “They know that we tend to increase our spending as income rises. By living within the means they’re already accustomed to, they can use raises, bonuses or even inheritances to fortify that nest egg for retirement.”
But reaching retirement is only half the battle. The other half is making sure that the plan they’ve carefully put together takes them all the way through retirement. It’s not only about accumulating assets, but also withdrawing them in a way that makes sense.
“The Scotia Aria Retirement Program is unique in that it is designed for the full retirement journey – from building your savings through withdrawing regular income,” says Bartja. “It recognizes three distinct stages of retirement and helps to tailor a purpose-built investment portfolio that’s aligned to an investor’s indi- vidual needs and stage in life.
For example, Scotia Aria Build Portfolios help younger Canadians seek out a growth- focused strategy by employing a diversified mix of equity and fixed income investments. Managing the ups and downs of the markets becomes increasingly i mportant as retirement approaches. Scotia Aria Defend Portfolios are designed to grow their retirement savings with less volatility than the broader market. Scotia Aria Pay Portfolios are designed to generate regular income and a modest level of growth during retirement through a diversified mix of investments.
“It’s also important to review your financial plan every year,” says Bartja. “Your retirement goals may change and so can your circumstances. An annual tune- up helps you to optimize that plan.”
Do financial professionals seek out financial advisors to review their retirement plans?
“Do doctors see doctors?” asks Bartja. “I met my wife at an event for professional financial advisors. We’re both experts in the field, but we always engage a third- party advisor whenever we have that conversation about retirement.”
He notes that the hardest part of retirement planning is often the period of uncertainty before that plan is formulated.
“We lose sleep about the things we don’t know,” Bartja says. “You can come into a meeting with a Scotiabank advisor thinking you’re too late to initiate a retirement plan, and you leave with a sense of relief. You’ve got a road map that tells you where you’re going and the options to get you there.”
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