Plan now to live longer
(NC)—It has been common to plan for a retirement that ends around the average Canadian life expectancy of 80 years. But Statistics Canada tells us that people are living longer. The fastest growing portion of the population is those 80 and over, and the trend is expected to continue.
Dave Ablett, a retirement planning expert at Investors Group, says the longer-life expectancy of Canadians is great news, but it also means that you should prudently plan for a retirement that could extend to your hundredth birthday, and perhaps beyond. This means more funding for a longer time.
“For example, a woman who retires at age 65, puts her retirement savings into investments held within a Registered Retirement Saving Plan (RRSP) that earns 6 per cent, and draws $3,000 through a Registered Retirement Income Fund each month (without indexing). Ignoring taxes, she would need to have $361,000 to last until age 80,” Ablett explains. “However, if she needed income to age 100, she would need $539,000 or $178,000 more at age 65.”
(The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future returns on investment.)
Since age 65 is no longer the automatic retirement age, early or phased-in retirement, and progressive retirement, are concepts rapidly gaining in popularity.
Ablett also explained that RRSP eligible investments are a valuable, tax-savings income-builder, but limits on the total amount you can contribute make it unlikely your RRSP alone can deliver the level of income you'll need for a long retirement. That means you'll have to augment your income through contributions to a tax-free savings account (TFSA) or through a portfolio of non-registered investments that do attract taxes—and they must be carefully selected to minimize your yearly tax bite while maximizing long-term returns, the Investors Group expert noted.
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Source: This column, written and published by Investors Group Financial Services Inc. (in Quebec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contacta financial advisor for specific advice about your circumstances. More information on this topic can be obtained from your Investors Group Consultant.
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