TORONTO, Sept. 14 2006 – With everyone else heading back to school, it may be time for boomers to crack open their books for some serious retirement planning.
A recent poll for Manulife Investments suggests older Canadian boomers are not as mathematically savvy as they need to be – especially when it comes to their income after they retire.
“We’ve found aging boomers accept they’ll need to adjust their lifestyle when they retire. Unlike their retired counterparts, most working boomers – 56 per cent – appear far more open to return to work if their finances dictate the need,” explains Bob Tillmann, VP Marketing and Business Development, Manulife Investments. “Yet, at the same time, boomers are quite uncertain about how much retirement income and cash flow they’ll have and need.”
The poll(1) by Maritz Research and commissioned by Manulife Investments of 900+ Canadians, aged 50 – 70, reveals that 63 per cent of those not yet retired expect cash flow may or will be tighter – with half of these Canadians admitting that they do not know how much they will have to curb spending. Among those already retired, 47 per cent report their cash flow is indeed tighter.
“Their uncertainty around financial preparedness in this study is very consistent with previous research,” Tillmann further explains.
“In a similar study(2) among Canadians aged 47 – 64, an overwhelming number of aging boomers – 85 per cent – said they felt only somewhat financially prepared, were not at all prepared, or simply didn’t know.”
Making the retirement grade
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Older Canadian Boomers who: Percentage
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Have a plan to generate retirement income 68% (C+)
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Consolidated retirement savings 54% (D)
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Are very confident retirement saving will be enough 36% (F)
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Feel able to lead lifestyle they're accustomed
to in retirement 31% (F)
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Expect some continued retiree healthcare
benefits from existing employer 24% (F)
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The New Retirement Math
Brushing up on your math skills is critical to successful retirement, according to York University Professor Moshe Milevsky, author of a new book The Calculus of Retirement Income.
“Aging Canadians must familiarize themselves with a number of math concepts,” he says. “We tend to underestimate our longevity and most of us believe we’ll need around 15 years of retirement income(2). Once you’re in your 70s, life expectancy is greater than 80, not less,” says Milevsky. “Moreover, Canadians must better understand in numerical terms how randomness can amount to unexpected things that negatively affect the value of retirement income.”
Milevsky is studying impact of the Retirement Risk Zone – the critical time period just before and after retirement – to quantify its impact on an investor’s nest egg. During this key time window, a downturn in the markets – even if temporary – can leave retirees with less money than they need.
“Canadians must be aware of and more proactively plan for this – together with their financial advisors they definitely need to do the math,” he says. His new research findings on the “retirement risk zone” and its impact in Canada are expected to be released during the next month.
The “A” List
The Manulife Investments survey highlighted three factors that top boomers’ wish lists as they prepare for retirement. These include: emergency access to savings; steady, predictable income; and preserving their nest egg.
Tillmann explains that topping their list of key retirement concerns are: losing money on investments, unexpected healthcare costs and high inflation. “Accommodating all these factors, coupled with boomers’ desire to also grow their asset base in retirement definitely puts a tall order on us in terms of product innovation,” he says. “We believe boomers need products to navigate retirement transition, particularly the retirement risk zone, that will put them in a better position to secure and grow their retirement income going forward.”
About Manulife Financial
Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$370 billion (US$332 billion) as at June 30, 2006.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.
(1) Manulife Investments Research Poll conducted by Maritz Research in July 2006 among 902 Canadians aged 50-70. Margin of error +/-3.3%, 19 times out of 20.
(2) The Aging Baby Boomer Canada 2006 – Strategic Guidance Consulting Inc. Online survey conducted in November 2005 with a national representative sample of 1,000 Canadians aged 47-64 who currently work full time. Margin of error +/- 3.1%, 19 times out of 20.
