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Humourist Stephen Leacock didn't see anything fun about retirement. "Have nothing to do with it," he advised young fellows of his day. "Have you ever been out for a late autumn walk in the closing part of the afternoon, and suddenly looked up to realize that the leaves have practically all gone? And the sun has set and the day gone before you knew it, and with that a cold wind blows across the landscape? That's retirement." Leacock, of course, was forced to leave his cushy academic career at McGill University, in Montreal, in 1936. He might have argued in favour of keeping compulsory retirement if he was around today, managing floating exchange rates for a living or serving as a director of a public company. After all, in the age of globalization and activist investors, work can feel dark and dreary — inspiring dreams of the day you can skip your cellphone across cottage lakes.
But carefree retirement isn't a given — it's a goal, one taken too lightly by too many Canadians (rich and poor, alike). People are living longer, while starting careers later, thanks to expensive education that doesn't guarantee wealth. Meanwhile, savings rates are low, the Canada Pension Plan is under siege from retiring boomers and an aging population, and corporations are ditching defined benefit plans. Canadians are seriously worried. Indeed, according to an Investors Group survey, only 31% of Canadians approaching retirement expect to be ready financially, while 4% report they'll be emotionally equipped. But don't be scared; get prepared. To keep you off your local park bench (not counting naps or quality time feeding pigeons), Canadian Business polled the professionals to come up with a modern guide to planning life after work. Let's call it: Living Well in Autumn, to honour Leacock, who died of throat cancer in 1944, after just eight years of hated retirement.
Don't wait to plan your retirement
The average Canadian man lives to 78, and the average woman to 81. And today's 65-year-old couple has a one-in-two chance of at least one person reaching 92 years of age. But most people wait until age 50 to get serious about saving for retirement — leaving 15 years to accumulate enough assets to fund at least 15 years of retirement. So, if you haven't given any thought to retirement by 45, get cracking, says Marc Cevey, chief executive officer at HSBC Investments (Canada) Ltd. The 20 years between 45 and 65 are known as the "accumulating phase." The earlier you start, the more you'll have to fund what could be nearly half your life.
Don't listen to Trooper
It's nice to get out of the rat race, but plan to have enough cheese to provide for a long time, not just a good time. Avoid the urge to dump all your funds into ultra-conservative financial instruments such as GICs. According to Walter Updegrave, author of We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World, a good rule of thumb is a 40/60 mix of diversified stocks (including dividend-paying shares) and bonds (public and private). Updegrave also says to keep future needs and inflation in mind when managing your annual withdrawal rate after retirement.
Do maximize your savings program now
The average income desired in retirement is $3,500 per month, according to a 2005 survey of 5,325 people 45 and older by BMO Financial Group. That means you'd need at least $1 million in today's dollars to pay for 25 years of retirement if you left work now (and more if you're still a few years away, to account for inflation). While financial planners tend to look at retirement from an annual-income or lump-sum point of view, the majority of pre-retirees see it from a monthly perspective, which makes the total amount needed look a little less scary. Oddly enough, Canadians have $367.3 billion in unused RRSP contributions, according to the most recent Statistics Canada data available, indicating many haven't thought about retirement enough.
Do diversify your retirement income sources
Canadians draw (or expect to draw) pensions from many different income sources, including government pensions (89%), sheltered investments such as RRSPs and RRIFs (78%), and employer pensions (72%), according to the BMO survey. Cevey says pensions should account for no more than 50% of your expected retirement income, with the rest coming from ongoing investments. Roughly half of Canadians expect to get money from non-sheltered investments, and nearly a third will at least partly rely on continued employment.
Don't give all your money to junior
Shifting wealth from one generation to the next results in a loss of net worth 70% of the time, according to a Leadership Family Institute study of more than 3,000 families in the U.S. and Canada. The most successful at keeping the family money alive are those people who sink their legacies into philanthropy. Why? Families who manage a private foundation are more likely to share common values and enjoy robust consensus on decisions, key to keeping the family wealth intact. But for those who absolutely must keep it all in the family …
Honey, I tested the kids
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