The recent federal budget, presented by a debt-laden government with an aging population, sends a message – individuals young and older must take responsibility for their retirement savings.

Canada’s retirement system consists of three pillars: Old Age Security (OAS), Canada Pension Plan (CPP), and voluntary tax assisted savings, such as RRSPs, TFSAs and the recently proposed Pooled Registered Pension Plans (PRPPs). Changes were made to the CPP recently and to the OAS program in this budget. It’s in the area of voluntary, tax-assisted savings where we as individuals can act. Getting a Financial Plan will tell you if you’re on track, and if not, what action is required to fill the gaps.

Here are two budget summaries:
Federal Budget 2012, Special Report, “How the budget affects you”, Jamie Golombek (pdf)
Peter Drake, Fidelity Vice-President, Retirement and Economic Research provides his perspectives on this year’s budgets and how they may affect markets and investors. 2012 Federal Budget Summary (pdf)

Some Compelling Statistics:
* 9 out of 10 women will be responsible for their own finances – they will never marry, will marry & divorce, or their spouse will predecease them. (Deborah Owens – A Purse of Your Own)
* 70% of new businesses are started by women & 85% of all brand purchases are made by women. (MsCareerGirl.com )
* The average age a woman is widowed is 56. (Census Canada )
* Widows account for 45% of all women aged 65+. (Statistics Canada )
* More than 75% of long-term care home beds are occupied by women. (Canadian Women’s Health Network )

In my role working with women, one of my goals is to empower my clients to achieve their financial goals in part by making informed decisions/choices.
• Women face several realities that have financial repercussions: divorce, widowhood, longer lives, lower earnings, more conservative investors.
• Know what’s going on with your finances – make the effort to learn.
• Establish a relationship with a trusted advisor and work with that person to advance your financial knowledge and to move forward on your financial goals.
• Get a Financial Plan to assess if your goals for saving, debt reduction, and risk mitigation are on track.
• Few think they will ever face critical illness, disability or chronic illness, premature death, or long-term care. Protect against these risks.

From Investment Executive By Jade Hemeon

A growing number of Canadians are crossing the threshold into retirement, signalling the end of their saving days and the beginning of living off pension income and retirement nest eggs. The challenge faced by aging baby boomers and their financial advisors is to create a reliable, life-long income stream and preserve capital in the face of zigzagging financial markets, unpredictable health and increasing longevity.

“Clients have had years of experience accumulating assets but are not so used to de-accumulating,” says Bev Moir, senior investment advisor with ScotiaMcLeod Inc. in Toronto.

“It’s a different focus than asset building. There’s a shift in mindset to preservation of assets and income creation, but they still need some growth to preserve the purchasing power of their savings,” says Moir. “Because there is no longer a regular paycheque, savings must last a lifetime, and there’s uncertainty as to how long that lifetime will be.”

There’s no ideal investment that offers both complete security, growth potential and a high level of return. Most advisors are finding an effective approach is to spread client assets among a variety of securities that includes both equities and fixed-income, with some focus on growth and some on interest and dividends.

The gap between retirement and end of life is growing, and many clients want products that will ensure they never run out of money.

It’s an attainable goal, with three smart strategies
When I was younger, the notion of having financial freedom at age 55 sounded fantastic. With the passage of time, however, I’ve come to realize it was only an idea. It never did become one of my concrete financial goals, with associated plans and action strategies. In my work preparing clients for their retirement, I’ve learned firsthand that Freedom 55 is a figment of many people’s imaginations. Now our retirement can last up to a third of our lives. That’s a long time to support one’s lifestyle on accumulated savings, especially when so many cannot count on attractive pensions that previous generations relied upon. Not only were specific saving strategies not implemented early enough, but life experiences and associated expenses interfered with our plans, and the extreme market volatility we’ve experienced over the past several years has also taken its toll on our nest eggs.

Here are three strategies for preparing for your retirement, whether your goal is Freedom 55 or Freedom 75.

What is your vision?
The first: Spend the necessary time developing your vision of your retirement years. What will you do? Where will you live? Will you retire fully at age 60 or work part-time to age 70? We’re fortunate to be living longer, healthier lives than previous generations, with many options to choose from.

Your vision should anticipate negative realities too. What will your older years look like if you become disabled or challenged by chronic medical conditions? Will you or your spouse have costly medications or assisted living expenses? What will happen to you as your mobility and mental capacity diminish?

Other considerations include your wishes and desire to leave an estate and possibly an enduring legacy. Who and what are important to you and how do you want to pass along your estate assets? The answers to these questions and considerations are all part of your vision for your life plan.

The financial reality
Armed with this information, the next step is to get a financial plan that puts dollars and cents around your vision. This is the point where you clarify if your retirement savings, and sources of retirement income, are sufficient to support your desired lifestyle, and if they’re capable of lasting over your anticipated lifespan.

The financial plan will show the effect of various scenarios such as modelling the drawdown of assets to meet retirement expenses, and selling real estate to meet advanced-age expenses. If a shortfall is anticipated, the financial planning process can model the impact of various trade-offs such as foregoing an expensive annual holiday in favour of less frequent trips or delaying retirement by a few years.

Get professional help
Lastly, work with a trusted and experienced financial advisor to assist you in confirming your retirement readiness and to partner with you in making the transition from full employment to retirement. After years of accumulating savings, I’ve learned there are many questions about the most efficient and effective way to move to the next life stage of living off those savings.

The “best” retirement outcome from a financial perspective is where one’s savings are withdrawn and consumed at a sustainable rate; there is sufficient retirement income to fund one’s desired lifestyle; and the savings last over your entire lifespan. Working with professionals will go a long way toward keeping you on track with these components.

Is Freedom 55 passé? I believe one can make Freedom 55 an attainable goal. If you follow the strategies outlined above and start early enough, Freedom 55 can come to fruition.

Bev Moir, MHSA, FCSI, senior wealth advisor, ScotiaMcLeod, can be reached at bev_moir@scotiamcleod.com or bevmoir.com. This article is for information purposes only. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. (“SCI”), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Written for Lifestyler Magazine, December 2011, insert in Globe and Mail

The Globe and Mail, Monday, November 28, 2011

Mid-life brings a new set of financial planning realities: we may be less flexible, but we know ourselves better. We’ve usually accumulated some assets, but we may no longer have the time or energy to bounce back if things go off course.

Working with a financial advisor can help ensure things stay on track. “A lot of people think they can do it on their own, but the transition to retirement is a very important time,” says Bev Moir, a wealth advisor with Scotia- McLeod.

At this stage of life, she says, people often have some experience accumulating money, so they may feel more confident about managing it on their own. “But they don’t have experience drawing those assets down. Mistakes made at this point in life can be extremely costly.”

Advisors can help those approaching retirement find the answers to the two fundamental questions that will largely determine the comfort and security of their last decades, says Dave Ablett, director, Tax and Retirement Planning, Investors Group. How much will they need each year in retirement to live on? How long can they expect their investment assets to last?

Knowing the answers to these questions before retirement provides an opportunity to address any shortfall, says Mr. Ablett. “There’s still time to increase their level of savings. They may have to delay retirement for a year or two, or downsize their home. Only by knowing what you need can you determine whether you need to take these kinds of actions.”

Determining the cost of retirement starts with articulating your desired lifestyle, says Ms. Moir. “Does your retirement involve spending some time alone, with friends or a significant other? What do you want to accomplish? It’s important to have a plan.”

A financial advisor can then help define the costs associated with that lifestyle, as well as any unexpected events that may occur, such as illness requiring long-term care. “One of my clients developed Alzheimer’s in her early 60s and eventually had to be cared for in an institution. She and her husband had saved well, but neither of them anticipated that they would be funding two households,” Ms. Moir says.

The financial planning process can also help address challenges created by the low interest rates and stock market volatility of the last 10 years, protecting capital while making income available.

“One strategy is ‘laddering’ bonds or preferred shares to mature each year, so that even when the market is down in value, money is available to meet income needs. It’s not dependent on timing volatility in the marketplace,” says Ms. Moir.

In the absence of a financial plan, a common mistake is to be excessively income-oriented. “People think they’re going to need money for their retirement, so they invest too much in bonds or GICs,” she cautions. “They forget their retirement could last 30 years. It’s important to have some potential for growth in the portfolio, but it is possible to choose less volatile options, such as dividend stocks.”

Being clear on the fixed and variable expenses associated with retirement also helps investors understand their investment return requirements, says Mr. Ablett. “If you have a handle on what you need in retirement, you can ensure you have enough guaranteed income to pay for all of those fixed expenses.”

If there is a shortfall, assets can be converted into a guaranteed payment stream such as an annuity. “You can then use your other savings to finance the non-essential expenses you have, such as entertainment, travel, charitable donations and gifts,” he says.

Steve Geist, president of CIBC Asset Management, says, “We are all going to retire at some point, but an advisor can design a customized retirement plan, tailored to your comfort level.”

Working with the right financial advisor – one with whom there is a personality fit and a level of confidence – is particularly valuable when markets are uncertain, he says.

“No one likes a bad day in the markets, but a trusted advisor can help protect investors from potential damage created by short-term emotional swings. There is a lot of data that shows that the discipline that comes from working with an advisor is worth its weight in gold,” Mr. Geist adds. “Research shows that whatever measure you apply, Canadians who have advisors are vastly better off in managing towards long-term investing goals.”

Shaun Paul Brockley asked Scotiabank Retirement expert Bev Moir if he should use his RRSP to pay off his credit card debt before getting a mortgage. Watch Bev’s response, and post your own retirement planning questions here on our Wall. One more day to get Bev’s response to your question ….
Bev Moir Answers Questions about Retirement on Facebook

Ryan Gregory asked Scotiabank Retirement Expert Bev Moir if he started saving now at the age of 20, would he have enough to retire at age 40, taking into account that he’d receive CPP and OAS starting at age 65. Watch Bev’s response, and remember to post your retirement questions here on our Wall. Bev will be answering more questions next week.
Bev Moir Answers Questions about Retirement on Facebook

Scotiabank Retirement Expert Bev Moir answered Bob Strickland’s question about whether or not he should start a retirement plan at age 61. Watch Bev’s response, and post your own retirement planning questions. Bev will be answering your questions all week in our video series.

Bev Moir Answers Questions about Retirement on Facebook

Bev participated in Scotiabank’s ‘Let’s Talk Retirement’ panel with Valerie Pringle, Moses Znaimer and Richard Florida broadcast live on Facebook on February 1, 2011. Watch the video of the Let’s Talk Retirement, Live Facebook Discussion, Tuesday, February 1, 2011, 12 Noon EST.

This is part of Scotiabank’s cross Canada tour ‘Let the Saving Begin’.

Let the Savings Begin

Scotiabank: We’re on the final leg of our tour with Valerie Pringle, with a LIVE digital event on Tuesday Feb 1 at 12 noon EST. Please join us on Facebook, where our expert panelists will discuss topics such as ‘What are Canadians investing for?’ and ‘Who plays the biggest role when it comes to ensuring the financial security of Canadians?’. Join us and ask your questions too.

Join Valerie Pringle, Moses Znaimer, Richard Florida and Bev Moir for a LIVE FACEBOOK DISCUSSION on RETIREMENT IN CANADA.

Ask questions. Get answers. Don’t miss it. We’ll talk about the barriers, successes, questions and advice that you and other Canadians have on retirement.

PLEASE NOTE: EVENT BEGINS PROMPTLY AT 12 noon EST

Let’s Talk Retirement, Live Facebook Discussion, Tuesday, February 1, 2011, 12 Noon EST.