Why there’s no magic retirement-planning number anymore

Fewer people are punching out permanently at age 65

Why there’s no magic retirement-planning number anymore
Retirement planning is becoming more challenging than ever. People are living longer, investment yields are dropping — and 65 isn’t the career endpoint it used to be.

Recently, Franklin Templeton held a summit on retirement innovation in Toronto. Citing Franklin Templeton’s Head of Institutional Defined Contribution Drew Carrington, Financial Independence Hub founder Jonathan Chevreau said in the Financial Post that the number of people over 65 who are still working full-time has been rising steadily since the US financial crisis.

Among those still holding a job after 65, 20% have reported doing so because of financial vulnerability; the rest said they made a personal choice or, as Carrington quipped, “their spouse wants them out of the house.” The idea of one-time retirement might also be on its way out, as 40% of full-time and part-time workers over 65 said they’d already retired twice.

“[M]ost of us shouldn’t go abruptly from a 100 per cent work mode to 100 per cent play at precisely age 65,” Chevreau said. “A more gradual “glide path” makes sense between 65 and 75 in my view … If nothing else, this reduces the risk of outliving your money.”

Aside from rising life expectancies and anaemic yields, the continuing shift from defined-benefit (DB) to defined-contribution (DC) plans is also a concern. According to Carrington, DC assets exceeded DB assets back in 2001; today in Canada, DB plans are dwarfed by DC plans.

Panel discussions at the Franklin Templeton conference revealed pensioner concerns over insolvent plans, as in the case of Sears Canada. One administrator also reported unions being resistant to moves from DB to target-benefit plans, though moving from DC plans to target-benefit plans is acceptable.

“[T]he move to DC means retirees or their advisors have to pay much more attention to financial markets and investing,” Chevreau said.

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