Planning to retire in your 60s? Start saving now, say today's retirees
- TD Retirement Realities Poll finds Canadian retirees wish they had started saving decades earlier than they did -
TORONTO, Jan. 8, 2013 /CNW/ - Canadian retirees have a wake-up call for the majority of working Canadians who expect to retire in their 60s: stop procrastinating and start saving for retirement now. According to findings from the TD Retirement Realities Poll, the top piece of advice retirees have for working Canadians is to save more money by creating a budget and sticking to it (52%). However, the poll also found that 15% of working Canadians only plan to save for retirement for less than five years before leaving the workforce. By comparison, more than two-thirds (69%) of retirees say, in hindsight, they should have saved for retirement for 25 years or more. Are working Canadians taking the proper steps needed to be financially ready to retire?
"If working Canadians don't make retirement savings a priority, day-to-day expenses and more immediate financial needs can pre-empt saving for the future. Don't get caught 30 years from now saying 'I wish I had started saving sooner'," says Kim Parlee, Vice President, TD Wealth Management. "When you start investing early, the impact of compound interest is more powerful in helping your savings grow."
Boosting retirement nest eggs? Canadians plan to work longer
The poll found that a significant number of working Canadians plan to work longer than current retirees did during their careers. About two-thirds of working Canadians expect to retire in their 60s (64%): 28% in their early 60s and 36% after 65. Sixteen percent think they will keep working into their seventies. This is later in life than current retirees, who said they left the full-time workforce in their late 50s (36%) or early 60s (25%), with only 3% working into their 70s.
"Working longer and focusing on setting money aside for retirement at the end of your career can help bolster your savings. However, you can get much more out of your investment dollars when you contribute to savings early in your earning years and continue to do so regularly throughout your working life," says Cynthia Caskey, Vice President, Portfolio Manager and Sales Manager, TD Waterhouse Private Investment Advice.
Caskey says the benefit of starting young is easy to see using the following model: a 25 year old who starts saving for retirement by investing $100 per month ($1,200 per year) will have a nest egg of close to $200,000 at age 65*. By contrast, if someone decides to start focusing on retirement savings at age 55, for only the last ten years of his or her career, he or she must invest approximately $1,215 per month ($14,580 per year) each year to match that same nest egg number for retirement*.
Top advice from retirees for today's working Canadians:
1. Save more by creating and sticking to a budget (52%)
2. Contribute the maximum amount to your RRSP each year (44%)
- 3. Pay off all debts before retiring (43%)
Looking back: retirees caution to start saving sooner
The poll revealed that the majority (60%) of working Canadians do not plan to save for their retirement as long as today's retirees recommend, with 15% saying they will spend less than five years saving for retirement: 9% said they will save for less than five years and 6% said they won't actively save for retirement at all. In contrast, when retirees were asked how long they think they should have saved for their retirement, more than two-thirds (69%) said they should have saved for their retirement for more than 25 years.
Pay it off, or at least pay it down
Thirty-nine percent of working Canadians expect to retire with some debt, despite retirees' advice that they should try to tackle it before leaving the workforce.
"Retiring debt-free is great advice, but the reality is that paying off all debt is challenging, especially because it's important to balance those payments with current expenses and investing for the future," adds Caskey. "An advisor can help you map out a plan that is aligned with your personal situation, including a strategy for debt repayment and investments that can increase the tax-efficiency of your portfolio. He or she can also suggest opportunities for retirement savings in addition to RRSPs, such as Tax-Free Savings Accounts (TFSAs) and mutual funds, to provide potential for savings growth while considering your risk tolerance."
SOURCE: TD Waterhouse Group, Inc.