With the start of a new year, my thoughts always turn to goal setting and long-term planning. This year, I find myself thinking about retirement more than ever have before. Maybe it’s because my family just came back from a lovely two weeks in Florida during a record-breaking heat wave. (Let’s face it, Canada is awesome, but the long winters can be a little tough to take!) We rented a terrific little two bedroom bungalow, with a pool surrounded by lush greenery, through VRBO.com. The property manager, a great guy named Jim, regaled us with stories of his condo finds (“I bought it for $30,000 and it’s now worth $80,000!”), all seemingly being rented by Canadian retirees who come down for 2-3 months at a time.
But are we ready?
I’m certainly not! Most of us imagine our retirement as a time filled with vacations, getaways to the cottage, and spending more time on hobbies and interests. However, more than 65% of Canadians now worry that they will not have enough money to retire.
Factors which might impact how much you need to save include the following:
1. Life Expectancy is Increasing
Health care technology has been improved in recent years. As a result, people are more aware of their health conditions, taking better care of themselves and thus, seniors are living longer.
According to the World Health Organization, Canadian men have an average life expectancy of 80 and women an average of 84. In 1990, the average life expectancy for males was 74 and females 81. Much of this increase in high-income countries such as Canada is linked to fewer people dying before age 60 from heart disease and stroke.
Knowing this, we now have to save more for our retirement than ever before. Yet four in ten Canadians, while an additional 40% expect to still be in debt after the age of 65.
2. The Rise in Cost of Long Term Care
According to benefitscanada.com, Baby Boomers currently account for 33% of the population and 14% of Canadians are over the age of 65. Based on today’s demographics and trends, by the year 2036, 25% of the population will be over the age of 65. And according to Statistics Canada, in 2036, one in ten Canadians will require long-term care by the age of 55, three in ten Canadians by the age of 65 and five in ten by the age of 75.
More seniors will require long-term care in the next couple decades, and with that, the cost of long-term care will also be on a steady climb. Based on inflation for health care services reported by Statistics Canada, the inflation rate of long-term care costs per year since 2010 is an average of 3% per annum.
3. Adult Children Continue to Live at Home
Do you expect to have your 20-29 year olds still living at home. According to the 2011 Census Report, 42.3% of over 4 million young adults between the ages of 20-29 either never left the parental home or they returned home after living elsewhere. More and more young adults are still living with their parents as a source of emotional or financial support. Some of the reasons include cultural preferences, cost of housing, aspirations for higher education or the struggles of unemployment. What this means is that you continue to support your kids even after they’ve graduated, and you need to take this cost into account.
So what can you do?
These and many other factors can help you determine how much you need to save in order to live a comfortable retirement life. Make sure you work with a good financial planner to determine the cost of your lifestyle during the retirement, and to come up with a good game plan for saving enough to support that lifestyle.
Don’t forget about using your home to finance your retirement.
It is also important to understand your options when it comes to financial security. For many of us, our home is our biggest asset. That said, you need to have a plan in place before you retire to make sure you can make the most of it. Check out my post on the three best ways for some ideas to consider.
So let me know. Do you expect to be ready for retirement? What are you doing to get ready?