“Chances are you will be the happiest you have been since you were a teenager.” According to a recent article in the popular press, this is what many can anticipate in retirement.1 If you’re in retirement, perhaps you concur. If it is still a ways away, we may look forward to this retirement bliss. And, it isn’t money that appears to be driving this contentment. Once financial obligations are covered, additional income doesn’t have a significant impact on life satisfaction: family and social connections, alongside good health, are most important.
Yet, the article points out that there is a counterbalance: baby boomers will enjoy historically long life spans. For some, this may pose challenges when saving for retirement.
What are some of the other costly surprises that were encountered in retirement? When retirees were posed this question, one of the more common unanticipated expenses was home upkeep. One recounted, “I had to put a new roof on my house...$4,000, and that was just a plain roof...just plain!” Another unexpected expenditure? Dental costs. Others were confronted with the unanticipated financial needs of adult children who experienced job loss, divorce or health issues. For some, it seems, tapping the bank of mom and dad may never subside.2
Not surprisingly, many retirees cited the high cost of long-term care. As we work with clients, we build these costs into financial plans because major lifestyle changes are sometimes needed to help cover these costs if they haven’t been adequately planned for. Another unanticipated financial shock is divorce: the number of divorced Canadians over age 65 grew by nearly 80 percent from 2010 to 2020.3
The good news is that we may overestimate how much we think we need in retirement: recent surveys suggest that many believe we need $1.7 million in savings.4 Yet, a U.S. study suggests that retirees generally exhibit very slow decumulation of assets. In fact, after two decades of retirement, retirees with half a million or more just before retirement had drawn down less than 12 percent of funds. One-third of all retirees had actually increased their assets over the first two decades of retirement.5
The latest Canadian data supports this finding: our spending peaks well before retirement and falls as we get older. When we are younger, we may assume our spending habits continue, but in most cases, they decrease.6
One of our roles is to help you prepare for retirement and beyond, factoring these and other considerations into your wealth plan. Whatever your plans, having financial wherewithal is key. This is why we stress the importance of giving your wealth plan the attention it deserves. Contribute steadily, stay invested and have confidence that your assets are working hard to support your future. By having a wealth plan in place, you have a retirement advantage that many Canadians don’t have. Continue to look forward — an exciting time awaits.
1. www.theglobeandmail.com/investing/personal-finance/retirement/article-happy-health-retirement- canada/; 2. www.theglobeandmail.com/globe-investor/retirement/ask-a-retiree-for-good-retirement-advice/ article29557330/;3.www.theglobeandmail.com/investing/personal-finance/retirement/article-getting-divorced- in-retirement-heres-how-to-protect-your-assets/; 4. www.advisor.ca/retirement/retirement-news/canadians- now-expect-to-need-1-7m-in-order-to-retire-survey/; 5. www.aspeninstitute.org/wp-content/uploads/2019/04/ ebri_ib_447_assetpreservation-3apr18.pdf; 6. “Total current consumption” by individual; www150.statcan.gc.ca/ t1/tbl1/en/cv.action?pid=1110022701