Have you ever looked up the word ‘retirement’ in the dictionary? I have. It means to become a recluse and disappear. Yikes! It certainly does not meet my expectations for retirement and likely isn’t how you intend to spend your retirement one day.

I believe this dated view of retirement is changing. I would argue in today’s environment the word ‘retirement’ is being redefined by people looking to jump into this next stage of life, fully engaged and excited about a new chapter. But will we have the resources we need to live the life we want in retirement?

Let me explain.

Canadians are living longer, healthier and more productive lives. According to Statistics Canada in 2019, a 70 year old woman on average can expect to live an additional 16.9 years, while for a man of the same age an additional 13.2 years is a reasonable projection. The playing field levels out at age 75 where both sexes can expect on average to live another 11.9 years. With the average age of retirement in Canada being around 64 years, the reality is, many Canadians will live a third of their life in retirement.

These numbers are encouraging, but there can be risks associated with longevity. The number one question I get asked as a Certified Financial Planner is, “How do I know if I have enough money saved to see me through my retirement?” This is a great question and not an easy one to answer. Ultimately, funding your retirement is hyper individualized, driven in part by your lifestyle expectations.

There is no single magic savings target that applies to everyone’s retirement. One person may want to have a very expensive lifestyle with high fixed costs, so they will need to have saved more. While another person may prefer to live more modestly with little desire for discretionary spending, so they will need to save less. That’s why anticipating what your desired lifestyle will be is an important consideration when planning your retirement.

So, the question remains, “how do I know if I have enough saved for retirement?” The answer is to make sure you have a crystal-clear understanding of your financial numbers, where your money will be coming from in retirement, and the costs associated with your desired lifestyle. The amount you may need to save outside of your pension via savings vehicles such as Tax Free Savings Accounts (TFSAs) or basic savings accounts will be determined by you.

Here are some important considerations if you’re thinking about retirement: 

• As a HOOPP member, you have taken an important step towards ensuring a secure retirement by being part of a strong pension plan. If you haven’t done so already, now is the time to gain a better understanding of what your pension will look like in retirement. Be sure to review your annual statements to see what your pension payments will look like. The information in your statement can also help you with planning for retirement. 
• Gain an understanding of the government plans and financial supports you may be entitled to as you move into retirement such as Canada Pension Plan (CPP) and Old Age Security (OAS).
• Become clear on how much you have saved in other vehicles such as RRSPs, TFSAs, and non-registered money.
• Equally important, is being razor sharp on what it is you are spending your money on. You need to know and plan for your fixed costs that are non-negotiable such as a mortgage or outstanding debt payments, and look at your discretionary spending such as entertainment, travel or dining.
• As well, often overlooked and yet critically important is to plan for healthcare costs as you age. Healthcare costs can escalate even if you have insurance, as you may be required to pay deductibles. You may also find that some items such as elective surgery are not covered at all, depending on your plan.
• Another consideration, especially right now, is understanding the role inflation may play in your planning. If inflation continues to creep higher it could erode your purchasing power over time.  However, if you have a pension plan, like HOOPP, your pension can benefit from cost of living adjustments (COLA), when applied.

Today we are faced with an unpredictable and volatile financial landscape that may be leaving many of us to question if we will have enough money to jump into retirement. I encourage you to take your time to plan, budget and assess what you want out of the next third of your life. 

By the way, if you are thinking “I have years to plan for retirement," that may be true. However, retirement will happen one day, so the sooner you start planning your retirement the better.

You have worked hard to enjoy retirement. Having a plan can help ensure you get to live the next third of your life on your terms.