Retirement: Will you be prepared?

Many, many Canadians face an inadequate financial future and less than their dream re- tirement.

Evidence suggests that you fíre better off working with a financial planner than going it alone to maneuver complex tax strategies, understand complex investment products, determining your optimum asset allocation, choosing individual securities and the other factors that determine success or failure.

More than three quarters of retired Canadians who have used the services of a financial planner for at least a decade believe that they have ample retirement savings, according to a study by the Vancouver-based Credential Financial Inc. and Insights West.

Their report, Canadians on Retirement, determined that of retired Canadians who have worked with a financial planner, 77 per cent are happy with their retirement savings and lifestyle. Roughly two-thirds of those who have used a planner say that their retirement is “everything they thought it would be.”

Those are good numbers. I’d suggest that people who don’t seek advice are not as well prepared.

“Discussions with a financial planner play a big role in making Canadian retirees feel more secure in their retirement,” says Mario Canseco of Insights West. “Canadian retirees who (use) a financial planner are more likely to have enough money and a lower debt burden than those who do not.”

However, the report concludes that 30 per cent of working Canadians still aren’t saving enough for retirement.

That’s a significant number of people who will either have to make up for lost ground late in their working lives (this usually doesn’t happen), or they’ll endure a less-than-desirable retirement income and lifestyle (this is the more likely outcome).

“This lack of preparation may stem from a belief that working Canadians believe they have longer to plan for retirement than they actually do,” the report says. “Sixty-two per cent of Canadian retirees say they retired earlier than expected.”

With possible deterioration of health and an uncertain job market, it’s dangerous to bank on being able to work right up to age 65. A physical injury or a job loss can crush your retirement dreams if you’re several years from being able to retire but that decision is forced on you.

Eighteen per cent of Canadian retirees are working in their retirement years - not because they want to work but because they need the income. Thirty per cent of retirees have more debt than they expected to have. Those are scary numbers.

Eventually everyone retires whether they’re ready or not. Perhaps the most shocking number of all is that half of Canadians aged 55 to 64 without an employer pension plan have less than $3,000 in retirement savings!

That’s one of the most staggering numbers in a recent report from the Broadbent Institute on the state of retirement readiness of Canadians.

“This new data on retirement savings and gaps in support makes one thing perfectly clear,” says Rick Smith, the institute’s executive director. “We have a retirement income crisis on our hands that requires urgent government action now.”

So, people aren’t saving enough and it instantly becomes the government’s problem? What about admitting that our government system is strong and most Canadians just aren’t saving enough of their own money?

The study found that 47 per cent of Canadians aged 55 to 64 have no employer pension plan. They’re on their own.

Those who earn $50,000 to $100,000 a year have average savings of $21,000. Among those who earn $25,000 to $50,000 with no employer pension, the average savings is a paltry $250.

Fewer than one in five people over age 55 who don’t have an employer pension have enough to live in retirement for five years or more, the study found.

These savings are “wholly inadequate,” concludes the Broadbent report. Indeed! The advice to save at least 10 per cent of income for decades has clearly fallen on deaf ears with many people.

The study also says that social support for retirees has become less generous. Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) have fallen behind over the decades, and now give seniors just 60 per cent of median income, down from 76 per cent in 1984.

The message here is that you need to be saving on your own and not depend on government support. It’s your future; make it a good one.

Syndicated columnist Wayne Rothe is a certified financial planner and branch manager based in Spruce Grove, Alta. Opinions are his own.