We’re living longer: can your retirement plan keep up?

April 9, 2015 · Print This Article

Canadians are failing to factor longer life expectancies into their retirement plans. According to an article written by Investment Executive, at the Annual National Conference for The Canadian Institute of Financial Planners (CIFPs) in June of 2014, Michael Banham, vice president of wealth distribution at Sun Life Global Investments, explained that “the average life expectancy for a Canadian woman at age 65 has risen to 87 from 84 in 1979; and for a man, it has risen to 84 from 80 over the same period. Canadians are living longer and healthier lives,” Banham states.
However, Canadians do not appear to be prepared for this reality.

Planning your Retirement

Planning is critical, because the prospect of living longer presents a variety of additional risks that clients must consider as they approach retirement. This includes the most obvious risk: the possibility of running out of money before they die. Washing machines break. Roofs leak. Cars need a new set of wheels. Illness arises. If someone retires at 65 and lives for another 20 years, at least one of these expensive events will pop up.

“People don’t appreciate that these things are going to happen,” Banham said. “It’s our job to make sure that they do, and it’s our job to work together to address them.” Ideally, the average Canadian wants to have their debts paid off before they retire. Paying more than the minimum of what you owe on your credit each month, asking your lender for a lower interest rate and lowering your credit use are just a few ways to ensure you’re debt free before you retire.

Leaving your job

Transitioning from working life to retirement takes careful financial planning and decision-making. Researching your income options and setting up a plan so you have an income from the first day you retire is important. Take advantage of online tools such as The Canadian Retirement Income Calculator to estimate how much monthly income you’ll receive from your savings, government benefits and any pensions. Consulting a financial planner is the best way to ensure that you have enough for your retirement; they’ll act like a coach that keeps you on track with your financial goals.

Look for New Ideas

An option making recent headlines for retirees is reverse mortgages. If you are a retired Canadian looking to live comfortably, and not stress by overspending your pension within the first few years, a reverse mortgage is something you should consider. If you’re a homeowner older than 55, you can get up to 50% of your home’s equity through a reverse mortgage. You are not required to make any payments and don’t have to make any payments until the home is sold. Essentially, the mortgage is paid off from the proceeds of the home’s sale.

Planning for a longer life may seem stressful, however with the right tools and professionals helping you along the way, you can sleep peacefully knowing your retirement will be the greatest years of your life.

A quick call to Horizon Equity to speak to one of the CHIP Home Income plan specialists about reverse mortgages is easy, and they’re there to help you make an assessment on your home as well as answer any questions you have.