The Baby Boomer wave continues to take us globally by storm with every generation experiencing the effects of its age-related trends. The latest Baby Boomer wave sees those born between 1947 and 1962 facing the crest of retirement. In fact, 25 per cent of Baby Boomers will be age 65 or older by 2030. In the U.S., those over age 85 represent the fastest growing demographic.
We're living longer.
We're living longer than any generation before us. Around 1900, if you were age 65, you might expect to live another 13 years. Fast forward to the year 2000, and if you were age 65, you could add an average of 20 years to your life span, a 7 year increase in 100 years.
So why are we living longer? Advancements in technology, medical practices and procedures, medical resources available online as well as people choosing healthier lifestyles means our average life expectancy continues to increase. So much so that the statistics about centenarians is astounding. As per Statistics Canada, the growth in our centenarian population -- those who reach age 100 -- is larger than the growth in our population as a whole.
Post age 65, Canadians are told they might expect to live at least 25 to 30 years and that they should be saving for a retirement with that type of long range trajectory. The challenge is that you just don't know how long you'll live. It is as if you've been asked to swing a golf club and hit the ball onto a green but you can't see the pin and you have no idea how far away the hole is. What club should you pull from your bag? A driver or a 9 iron? What is the safest play?
This is a 'saving for retirement' challenge. While you don't know how far in the distance you will have, you can anticipate, based on family history and current census and longevity stats, how long you might have.
Preparation and Education
Whether in Canada or the U.S., research and surveys remind us that we're not saving enough. In fact, the average 50 year old American has just over $50,000 in retirement savings. Closing the savings gap is key, but how can employers help?
Education and preparation are some of the best ways to empower and inform employees who haven't given much thought to their financial future beyond retirement. Here are a few tips to explore:
1) Picture yourself in the future. A good way to do this is to have employees actually envision their retirement and what they will do in their post-working years. What kind of funds do they think they will need to access annually? The more real the retirement scenario becomes, the more a person thinks about retirement needs in more practical terms.
2) Use online free calculators. Many financial institutions and financial advisors offer free online withdrawal calculators. These calculators help you determine how much you'll need to save and how long before your investment income runs out. I've included a some websites with free investment withdrawal calculators for your reference: (Note, I'm not endorsing any of these sites)
3) Estimate how long you might live. Make it real for people to consider this question in terms of their savings plans or lack thereof. There is a free online resource from Hargreaves Landsdown, a British firm that offers a longevity calculator. It is a simplified approach, but possibly effective nonetheless It asks only for your gender, year of birth, and expected retirement age before calculating your "guestimated" life span post retirement.
While these three ideas simply focus on the concept of longevity, the topic is more involved and warrants a deeper dive. We'd like to expand on this topic and its related issues with you. We invite you to contact us. As always, we're here to help so you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.