Retirement Myths

The leading edge of the Boomers turned 65 six years ago. On average, 1,250 Canadians turn 65 years old every single day. Most Boomers were born between 1961 -1965. That’s why you feel everyone has been turning 50. And people are living longer, much longer.

With all of this happening, retirement planning is a common topic - what does it mean for savings habits and pressures on goods and services? There are a lot of myths we have to be wary of if we want to ensure we have an adequate retirement income that lasts a lifetime. 

The definition of retirement is changing and even though it may seem like a long way off, use that to your advantage. Much like dieting and exercising, starting a plan and sticking to said plan are the hard parts. 

Every little bit of savings helps and will make it easier, if you start early enough. Harness the power of compound interest where planning and saving a little now on a regular basis can let money work for you: 24 hours a day, seven days a week…for decades. Your money seems to grow slowly at first then starts to balloon as you get older, even if you put in the same amount of money. 

Every year you delay means you'll need to save more money and perhaps take on more investment risk in order to reach your goals.

Even with all of the attention devoted to an aging society and the need to save for retirement, few people are inspired to get started. Many may think “I’ll never be able to save enough for retirement.” That may seem true when you’re young, starting a family, paying off those school debts and dealing with a mortgage. You may figure instead that your income will go up in the future and you’ll work on developing your money management skills and habits then. 

Don't fall into the trap of thinking it'll be easier to save for retirement in just a few more years. After all, there are competing and expensive needs no matter how old you are. Every year you delay starting to save ultimately means you'll need to save more in order to get on track for a retirement that’s getting closer and closer.

The best time to start saving for retirement is when you are young and just starting to work. But if you haven’t done that, then consider starting now. Let the power of compound interest work for you as long as possible.

The fact is that your “number” can vary greatly depending on your personal situation and goals, how long you expect to live, whether you will be single or with a spouse/partner and when you will retire. 

The simple way to discover the amount of retirement income you and your family will require is called the Financial Independence Number (FIN). To determine this, you would need your basic cost of living and you draw down rate. 

A Financial Planner can work with you to include projected amounts for government pensions and benefits when calculating your FIN and building your individualized plan.

Conventional thinking and approaches often work on keeping your assets intact. That only works for those whose investments generate plenty of cash flow. For many people, using the capital is the way to provide lifetime income. 



While saving is the goal during your working years, plan on an orderly spending of what you have saved during retirement. Work with a retirement income planner on ensuring that you have enough capital to provide you with the cash flow you need no matter what happens; no matter how long you live. 

A growing number of analysts and researchers on retirement income and spending patterns have found that most people would be fine if they target 50% of their pre-retirement earnings. Statistics Canada has many years of supporting data on this.

Your actual replacement income goal will depend on your lifestyle factors such as marital status and consumption dollars. For many Canadians in retirement, their consumption dollars would exclude mortgages, child rearing costs and saving for retirement – things you wouldn’t necessarily be spending money on during retirement. 

Working with an advisor trained in the unique field of retirement income planning can prove greatly beneficial in order to work out what you need and what you want to do throughout the various phases of your retirement.

Working Canadians pay taxes to the government, who directs funds to certain areas of need. The reality of growing needs and rising costs means that there isn’t enough public money to go around. Our rapidly aging society is backing governments into a corner forcing our leaders to make tough decisions on health care. Absolute costs are going up and services are being cut back. It is wise to be prepared to channel more income into paying for uncovered services or you could end up eating into your long-term savings to take care of yourself and your aging family. 



If you are sandwiched between child care and elder care, you could be in a situation where you need to make sacrifices of energy, time out of the workforce and that too can take a hit to the retirement savings plans of caregivers. If you’ve started saving early enough, every little bit would help make these situations less financially stressful.

Recent studies have found that almost half of retirees left the workforce earlier than planned. Downsizing, layoffs and negative working conditions were some of the reasons. The biggest reasons, though, for leaving the workforce early were health related - either the worker’s or someone in the family. 

People ages 55 plus have an average of more than 13 months on unemployment. That’s almost 5 months longer than younger people looking for jobs. (Source: Associated Press, AARP Public Policy Institute 2012)

Working longer is not an option you can definitely count on because staying on the job or getting another job is not a given. Almost two thirds of retired Canadians had less than a year to plan and adjust for what could be 30-40 years of retirement. 

(Source: LIMRA Retirement Study, 2012; Retirement Myths and Realities Poll, 2013)