Research suggests that even working a few hours a week will help prevent retirement savings running dry
Most people would say that running out of money would be a top concern about their retirement years.
But a new report suggests that those who work at least part time after the age of 65 are at significantly less risk of facing retirement disaster than those who stop before that milestone.
Many Canadians have decided to retire early post-pandemic but too many do so without ensuring that their finances will be able to withstand challenges such as the rising cost of living, healthcare costs, and the positive (but costly) fact that we are typically living longer.
The new study from Allspring Global Investments, the independent firm that was previously the asset management unit of Wells Fargo, found that each year of early retirement before 65 significantly increases the chance of running out of money in retirement.
However, working just 10 hours a week significantly decreases the risk.
Last year, a study by Edward Jones Canada found that 60% of respondents are planning to work beyond 65 with retirement giving way to a period of reinvention.
Moving away from DB
With more employees having defined contribution pension plans rather than a traditional focus on defined benefit plans, there could be a sizeable chunk of people who find that their dream of early retirement belies the reality.
In Allspring’s research, women are far less likely to feel confident that their retirement savings will last (69% vs. 87% of men).
The study also revealed that 53% of near-retirees plan to use an advisor to maximize retirement income sources, but 39% of near-retirees have not yet used an advisor; and that 71% of near-retirees are interested in learning how to minimize investment-related taxes.