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Research And Discussion On Retirement Planning for Canadian Baby Boomers Turning 65 Beginning 2011

Starting January 2011 the first of Canada’s boomers will start to turn 65, approximately 344,000 of them.

According to a Harris/Decima poll (on behalf on Investors Group) which was conducted online within Canada between October 28 and November 9, 2010 among 2,031 adults (aged 18 and over), 61% of respondents say they look forward to retirement as an exciting new stage in life [Press Release]. As these boomers are gearing up to enjoy more than 20 years of retirement living, results from the poll revealed that more than half (55%) don’t think they can afford their dream retirement lifestyle. Furthermore, one in three (30%) respondents don’t think they’ll even have enough money to pay for their basic retirement living expenses.

We were fortunate enough to get the opportunity to ask Debbie Ammeter of Investors Group about this pivotal demographic shift and get her thoughts on the importance of retirement.


Debbie Ammeter is Vice-President, Advanced Financial Planning Support at Investors Group

Debbie Ammeter is Vice-President, Advanced Financial Planning Support at Investors Group

Biography: Debbie Ammeter is Vice-President, Advanced Financial Planning Support at Investors Group, and has more than twenty-five years of experience in the financial services industry, focused on law, taxation, trusts and estate planning. Debbie is a lawyer who holds the Certified Financial Planner certification.

Q: The Investors Group poll revealed that 59 per cent of respondents expressed concerns about finances - in what ways specifically can a financial advisor help alleviate these concerns if someone is already nearing retirement?

A: As the first generation of boomers reach the traditional retirement age of 65, it’s not surprising that this group is feeling some anxiety and concern about financial matters. Economic conditions and market activity in the last couple of years haven’t helped. But part of the concern may stem from individuals not having an accurate picture of their finances or what their retirement income will be.

The most important thing they can do is to get a financial and retirement plan in place. The good news is that 66 per cent of boomers have already taken the first step by having a clear vision of what they want their retirement to be. A financial advisor can help people through the process of clarifying their vision to match their finances with confidence and knowledge about how much retirement income they will need and have. Working with a professional who prepares projections which show your retirement resources versus your retirement needs and who provides a plan of action to bridge any gap between resources and needs is a great way to alleviate anxiety and concern about finances.

Q: When it comes to retirement planning, what advice would you give to those who’ve seen their equity portfolios dwindle with the Dot Com Bubble in 2000 and then again with the Sub-Prime Crisis in 2008?

A:  With specific reference to recent market conditions, it’s important to note that the TSX fully recovered from the 2000 Dot Com decline – and then some - reaching an all time high on June 18th of 2008. And the TSX has risen more than 70 per cent since the bottom of the Sub-Prime decline in March of 2009.

Equity investing is a key factor in achieving the growth necessary for Canadian investors to reach their long term goals. A personal financial plan, focused on the individual’s objectives, needs and personal risk tolerance, is important is helping weather the difficult times.

Retirement security doesn’t depend on one single factor, like stock market ups and downs. The best way to mitigate potential threats is to consider all relevant factors, including taxes, a balanced portfolio and other strategies to withstand market fluctuations, when building a retirement savings strategy.

Q: In Canada, a number of recent studies and surveys have revealed that household debt as a percentage of GDP has been on a sharp uptrend since 2000. What advice would you give someone who is contemplating between saving for retirement and paying off their debt?

A. The truth is that Canadians are balancing their lifestyles today against their plans for the future. The challenge is finding the right comfort level in this balancing act.

One way to approach it is to think of three buckets, representing yesterday, today and tomorrow. Yesterday’s bucket is for the past commitments. It holds everything from mortgages to cellphone payments and credit-card debt.

Today’s bucket contains daily expenses for that pay period. It includes items such as gas, food and entertainment. Finally, ‘Tomorrow’s bucket’ holds an individual’s plans, whether that’s a family vacation in six months or a plan to retire in 30 years.

When people have those three budgets, they understand, if they make that big purchase today, where they are taking that money from and where that costs them. While this may be a good conceptual way to look at the tradeoff between retirement and debt, I would also encourage individuals to consult a financial planner who can prepare customized projections to help you see how the tradeoff will work for you in dollar terms.

Q: What are the 5 most important considerations when drawing up a retirement plan?

A. There’s no one-size fits all when building a retirement plan. It has to be customized to meet an individual’s needs and take into consideration the point in time they are in their financial life. A retirement strategy for someone who is 10 years away from retiring will be different than someone with 30 or more years left to save.

Having said that here are some essential guidelines to keep in mind when preparing a retirement plan.

  1. Set clear goals.
  2. Figure out how much money you’ll need when you retire. Make that your target.
  3. Compare your choices for savings inside your plan. Not all savings products work the same. Not all give you the same benefits.
  4. Set realistic goals and take steps to achieve them and track progress every year.
  5. Review your plan regularly and adjust it when and if needed.

Q. What are the 5 most important considerations when drawing up an estate plan?

A. The most essential element of estate planning is — do it now! Most of us tend to avoid thinking about this topic and it’s easy for people to put off the task of preparing indefinitely. The foundation of any estate plan is a will because it designates how your estate – money, property, insurance proceeds and other investments – should be distributed. Other important elements to consider include a living will, a power of attorney and an executor. You should see a lawyer to have your will prepared.

An estate plan becomes even more essential if you own a business are divorced or part of a blended family, live in a common-law relationship, have disabled dependants, or are responsible for the care of elderly relatives. Estate plans should be revised following any major life event such as a marriage or divorce, birth of a child or grandchild, death of a spouse, heir or executor, property purchase or sale, change of residence (to a different province or country), or the onset of a serious illness or liability.

Q: For those who are not very financially literate, what advice would you give them (or how would you convince them) to begin thinking about or even planning for retirement?

A. Start saving for retirement as early as possible. According to our survey, 36 per cent of already retired boomers say that if they had to do it over they’d start saving earlier. That’s powerful advice from a generation which is collectively experiencing an important milestone.

Ideally, people should start saving in their 20s, when they first leave school and begin earning paychecks. That’s because the sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year.

For those who are unsure about money matters, financial planning professionals are there to help them get the comfort level and knowledge they need to take control of their own financial resources.

Thank You, Ms. Ammeter!

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