As boomers enter retirement years, prospects of high returns on savings fade
Julian Beltrame, Winnipeg Free Press
OTTAWA - As the leading edge of the baby boom approaches retirement they are confronting a big challenge — there has seldom been a worse time to live off savings.
More than 60 per cent of Canadians have no company-based pension plan and with interest rates at rock bottom, the payoff on safe government bonds may not be enough to even keep up with inflation.
That means it may take $1 million in investments to generate the same retirement income today as $500,000 would have generated five years ago, analysts say.
Canadians instinctively know they are headed for choppy waters. Independent polls reveal a common theme of growing anxiety, with more Canadians expecting to delay retirement, believing they will need to lower their standard of living and a majority fearing they will one day run out of money.
Susan Eng of CARP, the advocacy group for Canadian seniors, says the problem is that boomers have simply not saved enough, and many that did saw their nest egg devastated in the 2008-09 economic storm.
On top of that, the post-recession landscape of high risk, volatile markets, and low-yield investment expectations is not a good time to do catch-up.
"We get calls when things go bad," said Eng. And there's plenty of examples of things going bad, she added.
These include seniors with unreasonable expectations of the lifestyle they can expect in retirement, trusting their finances to unqualified advisers, or retirees hit by bills they had not expected, such as the high cost of chronic care or residential care.
"A full 25 per cent of people in the middle income group, not the poor but those in the $50,000 to $80,000 income group, will have a dramatic drop in their standard of living on retirement," she says.
That's why experts say it's never too early to start saving for the post-work years. But there are also some steps Canadians can take to help themselves today if they are five or 10 years away from calling it quits, they add.
As simplistic as it sounds, the first course of action should be to sit down with a trusted adviser and make a detailed plan of needs and means. Experts say many, if not most, people still don't take this elementary step until it is too late.