Short on Savings: Will You Be Working Into Retirement?

A new CIBC poll of Canadians aged 50 to 59 shows that while retirement is just around the corner for many, they have come up short on their savings goals and plan to supplement their income by working in retirement.

"The retirement landscape is shifting as baby boomers reach traditional retirement age with a smaller nest egg than they expected to have," says Christina Kramer, Executive Vice President of Retail Distribution and Channel Strategy for CIBC. "Many Canadians are now planning to draw on multiple sources of income including employment to fund their retirement, and that makes getting advice about how to manage your income, savings, and investments even more important."

Boomers missing their savings goals

Many boomers in the survey felt they had come up short of what they expected to have saved by this stage in their life, with 45 per cent having saved less than $100,000.

The good news for boomers is that their late 50s and early 60s can be good years for building savings, particularly if cash flow improves as debts, such as a mortgage, are paid off. Those who plan to continue working in retirement may be able to leave their savings untouched for a number of years, using the income from their employment to replace what they would normally draw from their retirement savings.

"Even though you may have fallen short of where you had planned to be in terms of your savings, the years just before retirement can be some of the best years to further your savings and put money away for the future," adds Ms. Kramer. "Take advantage of the opportunity to add whatever you can to your savings even if your planned retirement from full-time work is only a few years away."

Part-time work tops the list of options for those planning to work in retirement

The poll shows that Canadians in their 50s don't plan to keep working at their current job when they retire, but are looking to find a balance between staying active, earning income, and having time for themselves.

While 53 per cent of Canadians in their 50s plan to work in retirement, within this group part-time work was by far the most popular option. While the income earned from working in retirement can add to savings plans, only one-third said they would work just for the money. Two-thirds see working as a way to stay socially active, or they find work enjoyable and want to stay involved in the workforce in some capacity.

Financial advice becoming more important

With lower savings balances and an expectation of working longer, planning for retirement income can become more complex. Poll results showed that Canadians in their 50s who had met with an advisor sometime in the last year were somewhat more positive about their overall finances than those who did not seek out advice.

Ms. Kramer notes that there are many considerations for those choosing to work in retirement, including how much they'll be able to earn from their work, how long they'll be able to defer drawing on their savings, and any tax implications based on their income level in retirement. "Understanding how all of these elements of your retirement plan fit together can go a long way towards making you feel more confident about your finances as you approach retirement."

Tips for retirement planning

  • Meet with an advisor- he or she can help to bring clarity to how these various elements of your retirement plan fit together.
  • Keep building savings. Once you have paid off your mortgage or other debt obligations, cash flow will improve significantly.
  • Understand your tax situation. Working in retirement may have an effect on government benefits or other payments you may be expecting to receive. An advisor can help you understand how to optimize your situation.
  • Prepare for the unexpected. Relying on additional income from work in retirement does carry risks, particularly if an unexpected health concern limits your ability to work. Always plan ahead and consider how you would manage your finances if you could not work as long as you planned to.

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