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By Paul Delean
Montreal Gazette
Monday, March 29, 2004
The Province
Tuesday, April 6, 2004
Victoria Times Colonist
Tuesday, April 6, 2004
With Canadians starting and ending their careers later, having children at an older age and living longer, preparation is key to retiring with financial security
For too many Canadians, retirement is a journey that begins with inadequate preparation and an improvised budget.
They arrive at the appointed age clutching a mixed bag of assets but no guiding plan.
Adrian Mastracci, investment counsel at Vancouver’s
‘fee-only’ KCM Wealth Management, says, "Retirement
is like building a house - you need a blueprint first.
A lot of people really don't have a good handle on what they want and need for retirement.”
"In general, people put it off way too late," says financial planner Jean-Pierre Duguay of Groupe Financier Everest in St. Lambert. "They haven't really looked at income sources or expenses.
"To plan efficiently, you've got to have at least a five-year window. If you plan to retire at 65, you have to start positioning yourself at 60. I try to structure investments in such a way that they'll have a guaranteed income stream the day they retire."
He's got retirees of all ages on his client list, but like others in the financial-services field, he has noticed a definite trend toward pushing back that particular phase of life.
Recent stock-market setbacks and low fixed-income returns, combined with such factors as longer life expectancy, scarcer company pension plans and changing public attitudes toward retirement are inciting more Canadians to stay in the workforce longer, though they'll still work fewer years, on average, than their parents.
"I tell clients in their 40s that, unless you're a government employee with a very good pension fund, you can probably forget about Freedom 55. It will be for very few people," said financial planner Hélène Gagné of PWL Capital Inc. in Westmount. Because people are living longer, they have to accumulate more savings, Gagné said.
In a recent Investors Group survey of retirees, almost half said they should have started earlier and saved more.
Other demographic trends also are affecting retirement options.
"People are starting to work later in life, in some cases after getting a couple of degrees. They're having children later. They won't be retiring at 55 if they've got kids just entering CEGEP," Gagné noted.
Adrian Mastracci, a financial adviser at KCM Wealth Management in Vancouver, said today's financial realities have caused a lot of Canadians to "move back the goalposts" on retirement by at least a couple of years.
It's something they have to study seriously and comprehensively because the decisions taken often aren't reversible, he said.
"This is like building a house - you need a blueprint first. A lot of people really don't have a good handle on what they want and need for retirement. Will you need $75,000 a year to live the way you want? If so, what kind of assets will you need to support that?
"Do you have a pension plan and how secure is it? If you need $1 million and have $200,000, you've got a long way to go.
"If you need a 20-per-cent rate of return, you can't do it with fixed-income (products)," Mastracci said.
"The longer you put off saving, the more aggressive the investments you'll need to reach the goal, with the associated risks to capital.
"So the earlier you start, the easier it is to get there. People in their 40s should already be doing some number-crunching."
Making projections and staying on track is a lot easier today because of the resources available, notes Louis Ascah, professor of economics at the Université de Sherbrooke.
"Ten years ago, there were hardly any good books on retirement planning, let alone computer models. The educational resources available today are much greater."
Duguay said by the time people reach retirement age, they should have their portfolios invested in a way that lets them sleep nights.
"My goal is to give them the best peace of mind possible. You don't want people in retirement having to worry on a daily basis about their investments. It makes a big difference when you're living off investments. That can cause anxiety."
For most retirees, the best stress-reliever is having a significant percentage of assets in safe, fixed-income products, but not everything.
Gagné said Canadians approaching retirement tend to be very conservative or "not conservative at all" in their investment choices. The best approach lies somewhere between the two extremes, she said.
"Some people take for granted they need to be 100-per-cent fixed-income at retirement, which is not the case. They have a lot of options, including passive-management, real index products like ETFs (exchange-traded funds). An effective asset allocation can add a lot to a portfolio."
And don't assume, just because you're retired, that everything's set in stone.
"It's not uncommon today for people to live 20 or 30 years after retirement," Gagné said.
"On the investment side, you have to plan for that."
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