Many Quebecers risk running out of money in retirement, according to the Financial Planning Institute. This is because life expectancy is often underestimated, notes the organization, which advocates better planning in advance.
“In the past, we often said that we were going to work 30, 35 or 40 years to have a retirement of 15 to 20 years, because life expectancy was lower,” explains Mélanie Beauvais, president of the board, in an interview. Board of Directors of the Financial Planning Institute. However, we are living longer and longer and many people have not taken this into account when planning their retirement, she notes. The risk of “outliving your savings” is very real.
In this 1er October, National Seniors Day, the Institute sounds the alarm: from now on, “retired life will be practically as long as active life [sur le marché du travail] “. Despite everything, “retirement age has not yet changed that much in people’s mentality,” says M.me Beauvais. The goal of retiring at 65 is still in the minds of many people.
A risky bet when we know that average life expectancy at birth has been growing almost constantly for decades. It was 72.9 years in 1977 and 82.5 years in 2023, men and women combined, reports the Institute of Statistics of Quebec. If a person reaches age 65, they have a 25 percent chance of still being alive at age 94 for a man and 96 for a woman, according to projection standards used by financial planners.
Condemned to work longer?
“We may need more savings,” explains the woman who is also a financial planner, but that does not mean that we will necessarily have to work longer. “We already have tools in place, we just have to use them well. » She refers in particular to the Quebec Pension Plan and the Old Age Security pension, the payments of which are indexed to inflation and can be increased by being deferred. “It’s a way of protecting yourself from the risk of longevity, of outliving your money. »
Part-time work can nevertheless supplement savings if necessary, adds Mme Beauvais. But the most important thing to mitigate the risk of depleting your savings, according to her, is planning: you must analyze your financial situation and your objectives and make a plan to achieve them.
It highlights the importance of support in developing a complete savings and disbursement plan. “People who don’t have a plan will sometimes deprive themselves to make sure they have enough money, whereas with a real financial plan […]sometimes we realize that we can afford to spend a little more. »
Ode to far-sighted young people
Another intangible reason to plan: “peace of mind”. Building a savings strategy will allow the saver to ensure that they can weather the economic crises that arise more peacefully, believes Mélanie Beauvais.
“The earlier you start, the easier it is to adjust,” she maintains. A message that should resonate with young people, since “the majority of children born today in developed countries, including Canada, will probably live to be 100 years old or more,” indicates the Institute in a press release.
So, how much money should we save for retirement? A million dollars, as the saying goes? Obviously, there is no one-size-fits-all answer. But “single parents have access to programs that others do not have access to. It may not be 1 million that she needs in retirement,” illustrates the planner. It’s up to everyone to do their homework.