On the weekend past we held the first ever Freedom Fifty U Workshop and one of our financial speakers, Frederick Montilla, got me thinking about just how little Canadian’s have in savings for retirement.
DID YOU KNOW – On average it’s something like – 92% of all Canadian’s save less than 1% for their retirement.
(If you are American it’s likely similar.)
Now we all know that ain’t going to cut it! So we need to begin looking for alternatives A.S.A.P.and like Debbie Ammeter from Investors Group stated in the first YSF film “Your Second Fifty ~ Rising Above the Fears of Aging”, MAYBE you just might need to keep working for a while. And from my standpoint why not – working is a good thing!
In any case we can explore alternatives some future week – but for now if your are Canadian you’ll likely want to continue reading.
Canada’s RRIF withdrawal rules forces seniors to outlive their savings, C.D. Howe study finds
By Jason Heath
The federal government may have inadvertently been doling out some bad retirement planning advice in recent years.
By age 71 at the latest, Canadians must begin withdrawals from their tax deferred retirement accounts that start at 7.38% of their account value and steadily rise each year thereafter. This includes registered retirement income funds, life income funds and locked-in retirement income funds.
Many seniors use this withdrawal rate as their budget, assuming it is a sustainable rate that will slowly liquidate their retirement savings and provide them with a lifetime income.
But a new study from the C.D. Howe Institute suggests that those rates may have worked in 1992 when they were originally established, but not likely anymore.
Many seniors who set their monthly budget based on these rates will simply run out of money, the C.D. Howe said in a report released Wednesday.
In a report called “Outliving Our Savings,” the authors assert that based on increased life expectancies and lower investment returns, the withdrawal rates established in 1992 need to be decreased. And no doubt we’re in a different environment today than we were then.
The average 71-year old lives about 2.75 years longer now than in 1992. And the average yield on long-term Government of Canada bonds has fallen from 8.5% to 3.1%.
According to the C.D. Howe report, in 1992 “a 71-year-old man who withdrew the annual mandatory minimum from his RRIF could expect to deplete 25% of his initial balance’s real value upon reaching his life expectancy. Now, he can expect to live to see his initial balance drop about 70%, and faces a 1-in-7 chance of seeing its real value drop more than 90%.”
Similar stats apply to women…
To read the rest of this article please click the link below:
Posted by YSF STAFF