SprottWealth Insights

Planning Your Retirement

Increasing vigor, life expectancies and expectations are forcing all Canadian investors to review their retirement plans. According to Canada’s Office of the Chief Actuary, the average Canadian born in 1951 who retired at 65, only had to fund four years of retirement. The funding requirement rose to 12 years by 1990 and 17 years by 2013. The result is clear; Canadians need to either invest smarter or work longer in order to make sure they don’t outlive their retirement funds. Here are a few reasons why:

Greater expectations

Boomers expect more from their golden years than their parents did. Today’s retirees expect to remain active, travel, eat well and live the good life. As if that were not enough, many want to retire long before they turn 65; thus further increasing their need for bigger nest eggs.

A younger generation returning home

Increasing numbers of retirees are being asked to financially support their children and grandchildren. According to Statistics Canada, more than 40% of young adults between the age of 20 and 29 are living in their parental home. That is significantly higher than was seen in previous decades. Rising house prices and rents make housing prohibitively expensive – particularly for youth carrying large university debts.

Worse, the growing precariousness of youth employment, which is constantly threatened by outsourcing or automization, brings increased risk of children and grandchildren returning to the parental home even later in life. This trend is being exacerbated by the fact that older Canadians are hanging on to “protected” jobs in government, unions and academia, leaving fewer opportunities open for today’s youth.

Unhealthy retirements: critical need for long-term care   

While Canadians are enjoying longer retirements, not all that time is spent in good health. That means a good retirement plan needs to take into account the costs associated with extended stays in long-term care facilities and other possible medical expenses.

Investment Returns

Another challenge facing coming retirees is that investment returns aren’t what they used to be. Real bond yields have been hovering near zero. The price earnings ratios at major equities indexes are also near historic highs. This suggests that new thinking on investing methodology is needed.

To make sure you’re financially prepared to retire, it is important to meet with your SprottWealth Investment Advisor well in advance, to discuss your expectations for your retirement as well as financial obligations or considerations you may not have previously taken into account. If you start early, save smartly, and make informed investment decisions now, you can sail into retirement with nothing to worry about.