New research from Desjardins Financial Security shows that Canadians are starting to take retirement planning seriously, but there’s a downside: They tend to delay saving until their mid-thirties.
In a survey of 1,666 adults, Desjardins found that the “ideal age” for retirement is, on average, 60. However, 35% of workers and semi-retirees said they didn’t start saving seriously for retirement until they were in their 40s. The study shows that the average age to start saving seriously for retirement is 35.
With actuarial projections suggesting life expectancy is closer to 90, these late entrants are giving themselves only 20 years to fund a theoretical retirement that could last as long as 30 years. Perhaps less realistic was the finding that 34% of respondents over the age of 40 wanted to retire between the ages of 40 and 55.
Although 69% of respondents recognize the importance of consulting a financial advisor before retirement, only 40% of them currently work with one.
Only 9% of surveyed workers aged 40 and over expect to have saved enough to retire at the age of 56-65, yet 60% of workers aged 40 and over believe they are setting their ideal retirement age realistically.
“Canadians need to realize that retirement is not a 20- or 30-year vacation,” says Monique Tremblay, senior vice president of savings and segregated funds at Desjardins Financial Security. “People need to change their behavior and start planning for retirement as soon as possible – earlier than the average age of 35.”
On the other hand, some respondents started planning for retirement before they were 30 – 37% of couples with children and 36% of those with savings and investments of more than $100,000 started earlier.
However, it turned out that other people delayed starting saving until they were 50 years old. The study found that 28% of people making between $20,000 and $30,000 understandably started working late, as did 33% of pre-retirees and 20% of those working part-time.
This appears to have had a direct impact on their savings levels, as 25% of those with investments between $10,000 and $25,000 also did not start working until age 50.
“These Canadians still, on average, want to retire along with their peers at age 60,” Tremblay says. “It is understandable that the scope of planning and saving must be adapted to the needs and financial possibilities, but a plan is better than no plan at all.”
Financial considerations may be even more important for future retirement, as many respondents plan to stay active to avoid boredom and isolation. Social activities usually cost more than swinging on the porch.
Eighty-two percent of respondents recognize the importance of planning for their social lives after retirement, but only 55% have started planning. Almost half said it was important to seek advice on dealing with the emotional effects of retirement – such as feelings of isolation caused by losing contact with colleagues. So far, only 23% have actually sought this type of advice.
Although many people started saving late and risk not achieving their ideal retirement, only 22% believe it is important to seek advice about working in retirement. And less than half of them (9%) actually sought such advice.
The study showed that seniors are taking more care of their eggs than in the past. Among people who are now fully retired, 81% are paying close attention to their savings, compared with 72% in a 2003 Desjardins survey.
The study was conducted by SOM. The sampling plan provides proportional estimates with a maximum margin of error of plus or minus 2.6%, 19 times out of 20. The data has been statistically weighted to accurately reflect the composition of Canadians by region, gender and age based on information from the 2001 census.
Submitted by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(11/09/06)
