Rising health care costs is perhaps the biggest threat to retirees.
If you’ve been following the news headlines lately, you’d think we’re smack-dab in the middle of a retirement crisis. The facts don’t lie: only a third of us today have a workplace pension plan. For the rest of us, we’re left to fund our own retirement.
While the low interest rate environment may be beneficial for borrowers, it’s not for savers. We need to put even more money aside for our golden years. The problem is we’re not saving enough – only 24 per cent of Canadians contributed to an RRSP in 2011, according to Statistics Canada. Ever if you’re one of the few who regularly contributes to your RRSP, there are still risks you can face in your retirement.
1. Retiring Earlier Than Planned
While many Canadian used to aspire for “Freedom 55,” these days the 1980’s mantra is more like a pipedream. In a recent article by Jim Poolman, he reveals there’s a growing gap between truth and reality. A recent 2014 survey found only a third (33 percent) of workers expect to retire at 65, with 10 percent saying they don’t plan to retire at all. However, over half (52 percent) of retirees left the workforce at least six years earlier, retiring at an average of 58. While some retirees chose to continue working because they enjoy their jobs, others were forced out or laid off. At 58, you don’t even qualify for early CPP, that’s why it’s so important to save towards retirement.
2. Living Longer than Expected
With each passing year, we’re living longer than before. Babies born in 2012 have an average life expectancy of 80 for boys and 84 for girls, according to the World Health Statistics 2014. While some of us pass away sooner, others will live a lot longer. For example, my grandfather passed away at 62, while my great aunt just celebrated her 102nd birthday – that’s a 40 year age difference. That’s why it’s so important to be financially prepared for anything.
“When saving, plan for a long life and include retirement products that offer guaranteed savings throughout retirement– like fixed indexed annuities, which offer a guaranteed stream of lifetime income,” recommends Poolman.
3. Health Care Costs
While employees are covered by a group health benefits plan during our working years, health care benefits usually end the day we retire. In fact, many of us underestimate the cost of health care in our golden years. While some of us will be lucky enough to live out our retirement in the comfort of our homes, others will need costly long-term care services. “An overwhelming 70 percent of people over age 65 can expect to use some form of long-term care during their lives, and these services are generally costly and not typically covered,” writes Poolman.
What is the biggest threat to your retirement? How have you protected yourself?
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.