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How the
Boomers May Shape Your Retirement Plans
The
first wave of Canada's baby boom generation turned 60 in 2006. As this
group ages, their huge numbers and economic clout are redefining
traditional ideas of retirement.
One
of the main lessons to take away from these shifting demographics is that
your own retirement may be different than you imagined. Preparing now for
whatever it may bring will put you in a better position to pursue your
goals.
Here's
a look at some of the trends at work, and tips on how you can prepare for
your own "new-and-improved" retirement.
Living
longer, in better health
We
are definitely getting older as a society. The number of Canadians aged
55-64 now totals 3.7 million. Over the past five years, the population
grew by 5%, while the 55-64 group bulked up by 25%. And there are now more
than 1 million Canadians over 80 — a 25% jump from 2001_
On
the positive side, medical advances and better knowledge of health issues
mean that more of our retirement will be spent in better physical shape.
This
means that you may need your retirement savings to last for a longer
period of time.
Solid
economic fundamentals
Canada's
economy is set to slow in 2008, largely because of weaker U.S. demand for
our goods. However, the domestic side of the Canadian economy has been
performing quite well. Inflation
is low, consumers are spending, and the housing market is still doing
well. In addition, our fiscal position is strong, with federal and
provincial surpluses and positive trade balances.
This
is in contrast to the U.S., which is running trade and fiscal deficits.
The "twin deficits," as they are called, make investors nervous
about holding U.S. dollars.
An
attachment to work
A
recent Statistics Canada study showed that 2.1 million Canadians aged
55-64 were either employed or looking for work in 2006 — more than
double the total in 1976. This trend is expected to continue, for many
reasons.
-
The
mandatory retirement age has been virtually eliminated.
-
The
financial rewards.
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A
commitment to staying busy and productive.
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Rising
levels of education, particularly among women. Jobs that require a
high level of education tend to be less physically demanding, making
it easier to continue to working.
Prepare
now for the future
Making
sure your own retirement plans are in tune with these emerging trends is a
key to achieving your goals. Here are some ideas to help you get going.
Get
a plan. There are a number of online financial projection calculators
that can help you determine where you stand today and what you'll need to
save to live the life you want.
Try
to be realistic in terms of how much you'll need — world travel is going
to cost you more than staying home and tending the garden — and modest
in your return expectations. Use the MyVault Net
Worth Calculator in the My Tools section to help you track your
financial progress over time. Be sure to come back quarterly or yearly to
ensure you are meeting your financial goals.
Build
your savings. Once you've crunched the numbers, do whatever you can
to boost your long-term savings. For most of us, the best place to save is
a registered Retirement Savings Plan (RSP). An RSP provides you with
tax-deferred growth, and your contributions are tax-deductible.
Indeed,
the role of an RSP in providing income to last throughout our longer lives
— especially in an environment of rising health care costs — cannot be
overstated. A recent McKinsey & Co. study found that more than 40% of
retirees underestimated their retirement spending needs.
Pay
less tax. Speak with your tax advisor or accountant about how to
reduce the taxes you pay. If you have a home-based business, take
advantage of all your allowable deductions.
If
you are investing outside your RSP, remember that dividends and capital
gains receive more favourable tax treatment.
For
more ways to reduce taxes, read A
bigger tax refund is yours for the asking.
Reduce
discretionary expenses. There are a number of ways to cut back on
your spending without changing your quality of life.
For
instance, can you substitute outdoor physical activities for your health
club membership and gain the same benefit? Taking public transit to work a
few days a week will not only save on gas and parking — it will help the
environment and give you a chance to catch up on your reading.
Speak
to your financial advisor about the best way for you to prepare for
whatever tomorrow may bring.
[Source:
Scotiabank My Vault]
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