Can you live comfortably to 100?
The average life expectancy for Canadians continues to inch upward, which is always welcome news. But that longevity comes with a cost, placing more pressure on building that retirement nest egg. While previous generations might have saved for a retirement of 10 to 15 years, today’s 65-year-olds might be looking at much longer retirement horizons.
“On average, men are now living to age 80 and women to 84,” says Jeff Bartja, vice president, asset management at Scotiabank. In fact, at least seven per cent of couples where both spouses are currently aged 65 can expect one spouse to reach 100 years of age, according to statistics provided by Canadian actuarial firm Eckler Ltd.
“My own grandmother passed away two months short of her 103rd birthday,” Bartja says. “There aren’t many of us who have planned for a 38-year retirement time horizon.”
Retirement plans need to change to match new life expectancies
If recent trends continue, a greater number of us will be passing the century mark. Those aged 100 years and older were the fastest- growing demographic in the country between 2011 and 2016, expanding by more than 41 per cent, according to the 2016 Canadian census.
The growing length of retirement is changing the way financial advisors help clients look at their retirement plans.
“Our financing needs in retirement change as we get older,” says Bartja. “For example, if you are a person who is newly retired you are more likely to want to spend some of your money to support an active lifestyle and other pursuits, such as travel. In the later stages of retirement, you need to consider financing assisted living. You might also plan to leave a legacy to your grandchildren.”
A personalized roadmap can help you build and manage your nest egg through all retirement stages
The need to save for retirement hasn’t changed, he says. Whether you’re 20, 40 or 60, the best strategy continues to be regular contributions to your retirement plan. But how you invest those contributions can make a world of difference to the eventual outcome.
Conventional wisdom used to suggest that people reaching retirement age should quickly scale down their long-term investments. That strategy might have been a holdover from a time when people could only expect to live a few years following retirement.
“Just because you’ ve turned 65, there’s no reason to place all your investments in short- term vehicles,” says Bartja. “It doesn’t mean, for example, that you abandon equities. Nobody wants to guess how long they’ll live, but it’s essential to accumulate and manage your assets in such a way that you’re unlikely to outlive your retirement plan.”
In fact, given the probable time horizon of retirement, people need to maintain an asset mix that not only preserves but also grows their assets, at least initially.
“Those early retirement years are critical,” says Bartja. “You should formulate a financial plan where the amount your nest egg is growing is greater than the amount you’re spending. Our Scotiabank advisors can help you to balance all your needs and develop a plan that is designed for your full retirement journey – from building your savings through withdrawing regular income. They can create a tailormade plan that makes sense for you and respects your tolerance for risk.”
Proactive retirement planning can help you pursue your passions
Bartja notes that Scotia- bank advisors are seeing more and more clients who aren’t shutting the door on continuing to work in retirement. They’re employed either full- or part-time, converting a hobby into a business or offering their experience and energy to the community in some other way.
“They are pursuing interests that they’re passionate about,” says Bartja. “I certainly don’t want my wife to have to put up with me lounging around the house in retirement. I’m passionate about mentorship and teaching and would love to be in a position where I can share my expertise and experience with younger people. I’m also very active in personal training and can see myself involved in that.”
As Canada’s definition of retirement continues to evolve, retirement planning will need to keep up.
“Whatever your retirement style, Scotiabank advisors can help you build a plan designed to support it,” says Bartja.