A generation ago, it wasn’t uncommon to spend your entire career with the same company, building a pension that when paired with your Canada Pension Plan and maybe some RRSPs, would provide for a comfortable, well-earned retirement.
Today, we’ll often work with multiple companies over the course of our career – a shift accelerated by factors like the pandemic. Others might take the self-employment route for a while – couples navigating the high cost of childcare, for example. Pension funds might be shifted to other investments or there may be less money available for retirement savings during these mid-career years, especially for those affected by the high cost of housing.
The result is that 28 per cent of Canadian Gen Xers have no savings set aside for retirement and 57 per cent have doubts they’ll save enough to retire comfortably.
The solution? It begins with planning, says Mike Pratt, a Wealth Advisor with Envision Financial Credit Union in the Fraser Valley. And the good news is that while earlier is better, it’s never too late to start.
Step 1: Start the conversation with your partner
What kind of retirement do you want? While some aim to completely quit work and travel, many choose to reap the financial and social benefits of semi-retirement first. Fine-tuning your goals makes it easier to determine the best way to reach them.
“Have that honest conversation with each other, review your goals and really understand what it is you’re trying to accomplish, long term,” Pratt says.
That includes goals you may have for your family, such as helping children purchase a home in a difficult housing market – decisions that could have implications later on, especially as we need our retirement savings to do more for longer.
“We’re not only seeing greater wealth transfer, but it’s happening earlier than it ever has. I see members who want to pass on their investable assets to their children but when we run the numbers, it’s too early, especially since people are living longer now.”
Step 2: Sit down with your financial planner
A financial planner can look at all the pieces of your financial puzzle – savings, investments, pensions, debts, goals – and help you chart a course forward.
That may mean putting more into savings, or more aggressively paying down debt. No single answer is right for everyone, but having someone who can see all the pieces, and understand how they fit together, is essential.
Whether you aim to reduce debt or boost savings – or simply have a better grasp on your spending habits before retirement, it’s never a bad idea to look at your spending. Netflix’s standard subscription might be just $16.49 per month, but add all the other streaming services and suddenly you’re topping $100.
“It can really chip away at your ability to start that savings plan,” Pratt says. “People will say, ‘I don’t have money to put away.’ But they haven’t even really paid attention to where their money’s going.”
The takeaway: Don’t wait. “The more time we have to work with people, the better off they’re going to be when we’re trying to meet all of their goals,” Pratt says, urging the balance between rational decision-making and emotional response, which, admittedly, can be difficult to navigate.
“This whole process is supposed to be so rational, yet we’re human and we’re emotional,” he reflects. “But the more rational and the more comfortable a family is with their value-based system, those are the people I typically see being more successful in their retirement years because they really pride themselves on understanding where their money goes and how to use it effectively.”