Boomers Revise their "Retire-By" Date

Not long ago, the future offered the baby-boom generation an exciting array of choices. Many dreamed about retiring on their own terms, creating a sustainable and meaningful time of life, and the decision to work longer often had more to do with self-fulfilment than financial preservation. Now, amidst severe market turbulence, the landscape has changed Boomers, especially those five years before, or even five years into retirement, are finding themselves having to revisit their options. Working longer may become a necessity for some pre- retirees. Even some retired Canadians are seriously considering returning to work. In addition to protecting their nest eggs from volatile market conditions, many worry about not having sufficient income from their RRSPs, CPP/QPP and OAS to afford daily living expenses. Added to the list of concerns are rising healthcare costs, outstanding debt, and the risk of outliving one's savings.

When the first cohort of Boomers (born between 1946 and 1964) recently reached retirement age, they wasted no time altering perceptions about this much-anticipated stage of life. According to the 2006 BMO Retirement Trends Study, Canadian Boomers planned to work in some capacity after traditional retirement citing "staying mentally active" as the main reason, wanting to "keep in touch with people" was next and to "earn money" was ranked third. Today the top three reasons have been reversed, according to the January 2009 BMO Working Longer Omnibus survey, 89% of pre- retirees and 84% of retirees who participated cited the main reason they would consider returning to work within the next year would be "to earn money", with "staying mentally active" and "keeping in touch with people" identified as their second and third choices, a distinct shift from just three years ago

Over the years, trends show that returning to work after retirement has become more commonplace. For instance, in 2005, a Statistics Canada survey found that of the 7.4 million Canadians aged 55 and over, 63.7% had retired but more than one in ten had returned to work for pay following their first retirement. However, of this group, less than half cited financial considerations as their motive for un- retiring

For many Boomers today with their nest eggs shrinking and the ongoing economic uncertainty- the choice to possibly work longer may be replaced by necessity. Undercurrent market conditions, many recognize that choosing to make withdrawals from accumulated savings would result in crystallizing considerable losses. Forced to come to terms with a new economic landscape, many are starting to believe that setting their retirement clocks back a few years maybe their best option to rebuild their savings.

By delaying retirement, Boomers are essentially buying time. Their objectives are clear: to keep reserves intact, secure a steady income stream, and "sit it out" in the hopes of recouping some of their losses when the markets recover

Five reasons why Canadian might consider working longer.

1. Decline in confidence: How much is enough?

2. Insufficient savings and inadequate planning

3. Longevity and fear of outliving capital

4. Corporate pension and healthcare concerns

5. Higher earning potential

The latest economic setback will affect each Boomer differently, depending on their individual savings and circumstances. But for the most part, Canadians will have to return to the basics and fully understand their options, before they are able to retire on their own terms.

To achieve peace of mind and a more positive retirement outlook, it is vital that Boomers know where they stand both financially and professionally. Now is the time to review portfolio and savings strategies and face up to those difficult questions, such as "What are my needs versus what are my wants?", "How much do I need to earn and save?" and "How much longer will I need to work?" Boomers are advised to consult with their employers, accountants, tax specialists and financial advisors to get the full picture. Finally, it is important to keep things in perspective. Changes in the financial landscape may result in a change in values from consumption to savings not only for the Boomers but for other generations as well. When and if retirement must be put on hold, life doesn't have to be, making it more important than ever to have a documented retirement plan and to review it regularly.

To discuss your personal circumstances in further detail, please call me directly at 604.535.4306 or email me at Christine.Fortin@nbpcd.com.