January 25, 2021

Are we “living a lie” when it comes to retirement planning?

An insightful article from Espresso Communications suggests that many of us are nervously whistling as we shuffle past the graveyard of “retirement planning.”

First of all, many of us are still on the job past retirement age, the article begins. “The number of retirement-age Americans in the workforce has doubled since 1985,” Espresso tells us.

Another notion we cling to is that we can work as long as we want. But, the article warns, “37 per cent of retirees stopped working before they planned. The decision to stop work is often involuntary, and it can be precipitated by poor health or late-in-career layoffs,” the authors tell us.

Many of us think we won’t have to work at all once we punch out for the last time. “Retirement isn’t what it used to be,” the article points out. “Full pensions aren’t common and you can expect to live longer than ever.” So, work may be inescapable, the article notes.

On the retirement savings front, many of us think we won’t need to start until later in life. “Investments grow over time, which is why it’s important to start saving early,” the  article advises. Citing research from Vanguard, “a dollar you invest at 20 could be worth almost four times a dollar invested at age 55.”

Another argument is that many of us just can’t afford to save. You need to get into the habit, the article notes, even “if you can put aside only a small portion of your paycheque, or even a few dollars a day.”

And those savings need to be invested and not just stashed in a savings account, the authors say. Otherwise, “inflation is going to eat away at those savings the longer they sit there,” Espresso’s team states.

Some of us figure an inheritance will solve our savings problems. “Well,” the article warns, “your parents may not see it that way. As baby boomers pay out for expensive end-of-life care… Gen Xers and millennials may be surprised at how little is coming their way.”

The article says the economic crisis of 2008-9 shows the folly of thinking you can “live off the equity of your home” instead of saving.

Even if you have a retirement plan at work, the article notes, it may not provide you with sufficient income. And retiring early means you’ll get less per month from your workplace retirement plan and government retirement benefit plans.

There’s a lot of ground covered in this article, and more than one key message. One that blares out clearly is the need to have a realistic plan of attack – getting yourself ready to live on less income by clearing up your debts and paying off the mortgage, for instance. The other is that you have to be ready for changes – the way things are ticking along today with your income, your health, your earning power, your savings – can all change with an employment, wellness, or market volatility.

The notion of investing for your future, rather than saving for it, is an important message. If you’re a member of the Saskatchewan Pension Plan, you can rest assured that SPP’s investment professionals are working hard to sweat the details on your behalf. That’s why the SPP has, since its founding 35 years ago, been able to deliver impressive average annual returns of over eight per cent, despite the crash of 1987, the tech wreck of the early 2000s, the Global Financial Crisis of 2008-9 and even today’s terrifying pandemic. Check them out today!

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Written by Martin Biefer

Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.

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