A new survey from Manulife found that retirees with a formal retirement plan were 50 per cent less likely to be worried about running out of money as they age.Supplied
Many Canadians are looking forward to retiring so they can pursue passion projects, travel and spend time with family and friends. But how long should we plan for? Studies show people are living longer than ever and could have a 40-year retirement – spending as much time in retirement, or longer, than at work, according to a new report from Manulife. Not everyone is prepared for that possibility.
“Planning for longevity is not a luxury. For almost everybody, it’s a necessity. It’s essential,” says Marc-Antoine Morin, head of member engagement at Manulife.
The report, The 40-year retirement – balancing dreams and dollars, found that while the average life expectancy in Canada is 83, the number of people over age 100 has more than doubled in the last two decades. At the same time, 44 per cent of the retirees surveyed for the report said they retired earlier than expected, at an average age of 56. “We may live longer in retirement and that has some obvious implications in terms of life planning,” Mr. Morin says.
He points out that most people don’t expect to retire in their 50s. In fact, some don’t plan on retiring at all. Unfortunately, most early exits from the workforce result from health care needs, either personal or family caregiving responsibilities. According to Mr. Morin, that unpredictability is why early planning is critical because when you retire may not be up to you.
One survey respondent’s story illustrated that fact: “It was a forced retirement due to cancer,” they said. “[I was] caught off guard. It never occurred to me this could happen.” Other respondents said they had to retire to care for a loved one whose health was declining. In fact, only 15 per cent stopped working simply because they had saved enough money. Health and job loss were more likely to be the cause.
Of course, planning for tomorrow is difficult when even daily expenses are a challenge. Today’s workers are already worried about how they will be able to afford their current lifestyle as living costs increase. In the Manulife survey, 48 per cent of current workers said they felt their retirement savings were behind schedule; 43 per cent were worried about health care costs later in life and 42 per cent were nervous about rising costs for basic expenses in retirement.
Inflation was another big theme in the survey, Mr. Morin says. For example, 35 per cent of retirees surveyed said they were cutting spending on groceries, travel and hobbies to make their dollars stretch because they didn’t retire with as much money as they hoped.
One retiree stated in the survey: “I worry about the economy as I age. Will I be able to afford gas for my vehicle or my mortgage or even food?”
How a formal retirement plan can help
With a 40-year retirement potentially on the horizon, planning today can help workers feel more confident about their finances, Mr. Morin says.
“Retirees that have a formal plan are much less stressed and they’re more financially resilient,” he says. “They make better decisions and they feel better about it.”
Indeed, the survey found that retirees with a formal retirement plan were 50 per cent less likely to say they were worried about running out of money as they age.
“You need to consider doing the math and start thinking about [all the] components of retirement,” Mr. Morin says. That can be best done with the help of a financial professional, he adds, because they can help you determine the right savings, insurance and investment products to reach your retirement goals.
Mr. Morin adds that planning for retirement is not just about finances. Many retirees in the survey said they found themselves at a loss when they stopped working and had so much time on their hands.
One respondent shared their experience: “I had worked full-time for over 50 years, as well as going to school, raising a child alone, part-time jobs for evenings or weekends as required to provide for my child. The shock of having all that free time paralyzed me for a couple of months.”
Another respondent shared the challenges of illness and mobility issues in retirement: “Suddenly things that came to me so easily, like walking long distances, have become more difficult.”
The transition to retirement can be quite overwhelming, Mr. Morin says, especially when it’s sudden. That’s why it’s key to plan how you will spend your time in retirement and what supports you may need, even when it might seem years away.
“It’s about purpose, it’s about lifestyle, it’s the intersection of health, wealth and social,” he says. “Balancing those three things can help you strive for a successful retirement.”
Start early, be consistent
Many retirees in the survey had regrets about not planning for retirement earlier in their lives. One respondent said: “You can’t always bank on things going according to plan. If you can be ready financially to retire five years earlier, do it, so you can have a good cushion.”
The wisdom from the survey doesn’t just apply to older workers, Mr. Morin notes, but to younger people as well. As individuals enter the work force, they should look ahead to what they will need later in life. A financial professional can help people balance present needs and wants, such as home ownership and children’s education, with future needs, he adds.
“It’s building those saving muscles, which usually means starting early and being consistent about your savings.”
Whatever your stage of life, speaking to a financial professional can help reduce financial anxiety and help you reach your retirement goals, Mr. Morin says.
As one survey respondent put it: “Plan early. Invest wisely. Retirement comes faster than you think.”
Read the full report at manulifeim.ca/retire/financialresilience
Advertising feature produced by Globe Content Studio with Manulife. The Globe’s editorial department was not involved.