Financial implications of living longer
It's a fact that Canadians are living longer today than ever before and while this is great because we'll have more time to spend with loved ones—it's a bit alarming from a finance and savings perspective.
Data suggests that retirement years have stretched from 13 to 20 years—or a 54% increase. This means that a proportionate increase in savings is required to ensure your savings can fund the retirement lifestyle you had in mind.
How can we fund this longer retirement? “The easy answer is either through an increase in contributions, or higher returns on your investments,” says Bob Gorman, Chief Portfolio Strategist for TD Waterhouse.
“However, in reality that can be difficult: people have a natural tendency as they age to make lower-risk investments, which can reduce the chances of higher returns.”
Getting an early start on retirement savings and making regular contributions is probably the best way to ensure you have savings in place when it's time to stop working. Bob Gorman offers tips to get started—or to help maximize your
current retirement investments:
Make sure you have a plan.
Know what your goals are and determine what financial steps are needed to get there. An experienced financial advisor can help you build a custom plan suited for your personal situation, as well as help you manage it.
Monthly contributions can help you reach your total annual contribution goal. Investigate taking advantage of payroll deductions for an RSP if offered by your employer. If short of funds, consider a loan for your RSP contributions.
The tax deferred compound growth on your investments could potentially outweigh the interest costs.
Evaluate your investment portfolio regularly.
Analyze your asset allocation and assess if it’s appropriate for your required return, time horizon and risk tolerance, as well as if you’re on track to meet your goals.
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