BMO says Boomers Working Longer to Bolster Retirement Savings Need to Be
Better Informed
TORONTO, April 15, 2009 - According to a new research study from the BMO
Retirement Institute, there is a strong sentiment among Canadian Boomers that
setting retirement clocks back a few years may be the best option to secure a
steady income stream. And while the research indicates people are accepting of
this notion, many may be making this decision without having all the necessary
information.
The study reveals:
• 31% of Canadians who plan to retire in the next 5 years are considering
delaying their retirement date
• Retirees are also thinking about returning to work. For those that are
considering it, 41 per cent definitely intend to return to paid work within the
next year.
• More than two-thirds of respondents were accepting or happy about
delaying retirement
• However, almost half of pre-retirees say they do not know how much they
will receive from their personal savings and investments
“Money is the main reason people are working longer or returning to work.
Staying mentally active is of secondary importance, but money is by far the top
concern. However, many retirees and pre-retirees are making moves to bolster
retirement savings by working longer without a clear understanding of their
retirement income gap; the difference between how much is needed and how
much is available from various sources including personal savings, employer and
government benefits,” said Tina Di Vito, Director, Retirement Strategies, BMO
Financial Group. Di Vito also heads up the BMO Retirement Institute, a think tank
set up by the Bank to provide leading perspectives around retirement issues.
How Much, How Long and in What Capacity?
The study indicates that:
• Over 30 per cent say they do not know how much they will receive from
the Canada Pension Plan (CPP)/ Quebec Pension Plan (QPP)
• In addition, 42 per cent of pre-retirees and 59 per cent of retirees say they
have not spoken with their financial advisor about the potential impact that delaying retirement or working longer will have on their financial/retirement plan.
“How Boomers choose to go about remaining or re-entering the workforce will
shape their retirement lifestyle and a financial advisor can provide a realistic
perspective on how such decisions impact income in retirement,” said Di Vito.
“It is vital for Boomers to know where they stand financially and understand the
impact working longer will have on their savings so that they can determine how
long they need to continue to work, and in what capacity, to achieve their
personal retirement goals. In some cases, Boomers may discover they need to
work fewer years than anticipated to realistically meet their retirement goals.”
Making an Informed Decision
The BMO Retirement Institute has also just released a report Boomers Revise
their “Retire-By” Date as Financial Landscape Changes. This report details
various factors that should be considered so people can make an educated
assessment about working longer, including:
• Plan and Save - More burden of funding retirement has shifted to
individuals and away from government and employers. So a combination
of government and company pensions, personal savings, home equity and
insurance products are necessary.
• Healthcare - Many future retirees have not set aside enough funds to deal
with rising healthcare costs. It may be prudent to stay working to ensure
continued healthcare benefits and look for companies that have a
comprehensive benefits package.
• Inflation - Living longer puts pressure to save more and comes with other
financial risks. Even a relatively low inflation rate of 3% can significantly
reduce purchasing power over a 20-30 year period.
• Withdrawals - withdrawing money during a period of declining markets can
greatly reduce how long retirement savings will last. Instead, reducing
withdrawals during the first few years of retirement, as a result of working
longer, can significantly extend the duration of savings.
BMO Financial Group offers a simple online calculator to help pre-retirees and
retirees get a clear understanding of how key variables such as current age, life
expectancy and style of investing can impact one’s retirement savings. For more
information please visit: www.bmo.com/RetirementCalculators
About The BMO Retirement Institute
The BMO Retirement Institute, launched in April 2008, provides insight and
financial strategies for those either planning for or in their retirement years. The
Institute was launched to help pre-retirees simplify the complex dynamic between
personal finances, personal relationships and retirement lifestyles.
(www.bmo.com/RetirementInstitute)About the BMO Retirement Institute Study
A Harris/Decima online poll was conducted for the BMO Retirement Institute
between Feb. 26 and March 4, 2009 and is based on a sample size of 1,006
randomly selected retirees 55 years of age or older who indicated they “definitely
or probably will return to work” and pre-retirees who are planning to retire in the
next five years.
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