Whether it’s trying to save money while taking care of other financial responsibilities or just determining how much money you will need, Canadians are having a difficult time preparing themselves financially for their retirement.
A couple of recent bank polls are continuing to indicate that Canadians are struggling with financing their retirement.
For example, Canadians between the ages of 18 and 54 are concerned that their ability to save for retirement will be impaired both by saving for their children’s education and by taking care of their aging parents.
“While Canadians may see their parents’ retirement experience as a model for what to expect, the reality is that their retirement may not be the same, particularly if they are part of the sandwich generation with both aging parents and school-age children” said Amalia Costa, head of retirement strategies with RBC.
“Canadians know that juggling competing financial priorities creates enormous strain on both time and money. The growing demands on time and money can make meeting retirement goals a challenge.”
According to RBC, 46 per cent of retired Canadians and only 23 per cent of Canadians who are not yet retired have determined the amount of money they will need for a comfortable retirement.
As well, those who are not yet retired have significantly reduced their retirement savings goal by more than $200,000, to an average of $564,000 in 2012 from $778,000 in 2011.
How much you will need in retirement depends on a number of factors, such as longevity, health, inflation and whether or not you intend to continue to work, and there is no set figure as to how much of your income while you were working you will need in retirement.
One of the big ravages of income for people on fixed incomes in retirement is inflation.
About a third of Canadians are concerned that inflation could have an impact on their retirement income. Retirees and near retirees need to take appropriate measures to manage inflation and maintain a sustainable level of income in the midst of unforeseeable circumstances.
“When looking at your percentage of pre-retirement income needed in retirement, some say 75 per cent, some say 85 per cent and some say 110 per cent,” said Jason Round, head of financial planning support for RBC Financial Planning.
“We say everyone is different. While it’s important to have a retirement savings goals, there isn’t one number that’s right for everyone. Your goals and dreams for retirement deserve a plan that’s personalized to you and takes into account other relevant factors.”
Costa has some advice to help Canadians save for tomorrow while living for today.
Look for hidden sources of funds. If you have debt, take advantage of lower interest rates to reduce borrowing costs and free up some monthly cash flow. This can be achieved by consolidating higher interest on credit card balances into a loan or home equity line of credit with a lower interest rate.
Get into the good savings habit of paying yourself first by setting up an automatic contribution plan to coincide with your payroll deposit. The funds will come off the top and are often not missed.
And start thinking about your retirement income plan. If you’re within a few years of retirement, switch your focus to establishing your retirement income plan. Translate your vision for the lifestyle you want in your retirement into financial requirements and work with an adviser to learn about your new sources of retirement income and how these will fund your new lifestyle.
“Planning for retirement is so much more than just a magic number and this is where financial advice can ensure all aspects of retirement are explored to ensure you have the retirement you want,” said Round.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.