Rethinking Retirement: Study from Desjardins Financial

How the Boomer generation is changing the face of retirement in Canada

TORONTO, ON November 6, 2007 – According to a national study published today by Desjardins Financial Security, the current habits, lifestyles and attitudes among baby boomers have put the traditional �all play and no work� retirement mentality on the verge of extinction. One-tenth of today�s retirees continue to work, and over half (54%) of workers aged 40 and older are planning a gradual retirement.

The study, which surveyed Canadians from across the country, revealed the effects of starting work and family life later than previous generations.

Canadians hoping to retire are coming to terms with the fact that �early� retirement is not in the cards exactly in the way they had originally anticipated. When asked about their ideal retirement age, university-educated workers are more likely to envision working past age 65�at least five years longer than the �ideal� retirement age of other actively employed respondents.

�We know that beginning a family later in life is four times as frequent today as a generation earlier. We�re now supporting dependent children into our fifties and sixties, making our �ideal� retirement age somewhat of a moving target,� says Monique Tremblay, Senior Vice President, Savings and Segregated Funds, at Desjardins Financial Security. “The effect of this stress on financial resources is aggravated by the minimal budgeting and financial planning during working life.�

Mitigating the risks crucial to retirement planning

Tremblay goes on to say that the Desjardins survey shows that this �magical thinking� among Canadian workers may result in unpleasant surprises in terms of risk management at the time of retirement.

�Canadians say they are willing to save for the future, but 66 per cent of respondents have not even considered how they will use those retirement dollars. If you don�t factor inflation into your future, you could be in for sticker shock when it comes to food, housing and other basic necessities� she adds.

Health is another significant risk factor. More than three quarters of existing Canadian retirees say they are in good, very good or excellent health. While that may be true today, about half are significantly concerned that they may need extended care at home or long term care in a facility as they age. 43% of retirees worry that they may not have the savings to pay these expenses, which can be quite significant in some cases.�

And yet, the Desjardins survey also finds that Canadians continue to take a �do-it-yourself� approach to savings and financial planning, not arming themselves with all the information and knowledgeable assistance they need to ensure a financially predictable retirement.

Michael Aziz, Regional Vice President of Sales Investment Products at Desjardins Financial Security, says �Canadians must take a leadership role in planning for their own future by equipping themselves with the tools and access to expertise they need to accomplish this. People need clear information about how much they will need to cover anticipated expenses, and what income they can expect to draw from their investments.�

It�s not just about saving

Over 80% of survey respondents anticipate entering their golden years �in the red�. Further, they appear complacent about it! Aziz adds, �The role of real estate in asset, debt and retirement financing remains quite vague in their mind.”

According to the study results, only 38 per cent of aspiring and current retirees are concerned about outliving their savings.

Unexpected factors�health problems, increasing life expectancy, and market downturns�can erode savings over the long term.

�The responses to the questions we asked about life expectancy indicate that this notion and how to use it in a financial plan remains a mystery to most respondents�, said Tremblay. �It is certainly difficult to budget and envision scenarios when there�s no clear idea of the time horizon over which you need to allocate your financial resources�.

�There�s always tomorrow�

Tremblay adds, �With life expectancies on the rise, we could quite likely spend more years in retirement than we did working. We need to develop �saving behaviours� that ensure we won�t have to stay at work or return to work purely due to financial necessity. We can�t predict the future, but a good financial plan means we will be able to adjust more quickly as events unfold.�

When asked what they would do if they outlived their savings, Canadians had two equally stated answers: cut expenses significantly, or reduce what they would leave as inheritance. When asked how they would alleviate retirement financial woes, 20 per cent would consider government, associations and charities. Some say they would turn to their families, and even friends, for support.

Aziz says, �Most people you know take a lot of time and care planning their African safari�the cost of airfare, accommodations, entertainment, itinerary�and they buy travel insurance to make sure they�re not stranded or sick or penniless with no recourse. When it comes to planning for the rest of our lives, we must pay as much, if not more attention. Seeking assistance does not mean relinquishing decision-making. It means making decisions in a well-informed and optimal way, knowing all the options available.�

Tremblay concludes, �Knowing what risks we face as we enter this phase in our lives is essential to mitigate those risks. Solutions are available to plan according to our lifestyle and the protection we need. This new reality means rethinking retirement. Planning starts today, and small steps will take you a long way.�

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About the Survey

SOM Surveys, Opinion Polls and Marketing conducted the survey on behalf of Desjardins Financial Security between July 24 and August 31, 2007. In total, 1,505 interviews were conducted with a representative sample of Canadian adults. The sampling plan provides proportional estimates with a maximum margin of error of plus or minus 2.6% at a 95% confidence level (19 times out of 20). The data was statistically weighted to accurately reflect the composition of Canadians by region, gender and age based on Statistics Canada’s 2001 Census information.

About Desjardins Financial Security

Desjardins Financial Security, a subsidiary of Desjardins Group, the largest integrated cooperative financial group in Canada, specializes in group and individual life and health insurance, and savings products and services. Every day, over 5 million Canadians rely on Desjardins Financial Security to ensure their financial security. With a staff of over 3,700 employees, Desjardins Financial Security manages and administers close to $22 billion in assets from offices in major cities across the country, including Vancouver, Calgary, Winnipeg, Toronto, Ottawa, Montreal, Quebec, Levis, Halifax and St. John’s.