Are Canadians Afraid of Outliving Their Money?

Zoomer | February 4th, 2011

By Charlotte Bumstead
A study recently released by the Bank of America explains affluent American women fear they will outlive their money. The survey found a vast majority of baby boomer participants believe this is partly due to the idea their retirement will be more active and prosperous than that of their parents’. Of the 1,000 Americans polled, all had at least $250,000 tucked away in investable assets. Yet, 70 per cent of the respondents expect to continue working later in life, at least part time, to fund their expected lifestyle. Zoomer speaks with financial consultant Sue Laurin about the Canadian perspective of this issue and how we might be sharing such concern.

CB: Do you find Canadians express the same fear—as the affluent participants in the Bank of America study—of outliving their money after retirement?

SL: As interest rates stay low and the markets are volatile, more and more people are worried about their retirement. Because they`ve seen the volatility and low returns in the past 10 years, especially in the international market, they are worried. They know they can`t live on one or two per cent. So there is fear out there, for sure. We always tell people they have to live within their means, whatever their means are. People these days have gotten used to living with fairly good wages, and if their investments don`t grow to keep up with the wage that their used to, then they have difficulty. So I would say not necessarily just the affluent, but everybody is worried about what their money is going to be in the future.

CB: The report showed 70 per cent of women were worried about having enough money to last their lifetime, compared to 57 per cent of men. Do you notice a similar pattern with Canadian women and men?

SL: Well, statistically speaking, women outlive men. So, of course, they are faced with living longer with the money that is left. If you look at any of the retirement homes, there are far fewer men [residing there] than women. So generally speaking, yes, I think women would be more concerned.

CB: The survey also revealed the majority of respondents did not understand the impact of investing conservatively. Two-thirds believed that being conservative helped to shield them from losses. How do they get passed this wariness of investing in the markets? What needs to change?

SL: Unfortunately they won’t get passed that until they’ve seen good returns in the market. Once they’ve seen good returns, then they’ll be keen and eager to get in, and of course that will be the wrong time. They just have to understand, again, to live within their means; and of course, save within their means, too. If you save a little, then you’ll have a little to spend when you get older. If you save a lot, you should have more to spend when you get older. People generally don’t get over things until they’ve seen success; until they’ve seen the markets improve and make money.

CB: Do you think Canadians, too, expect to continue working—at least part time?

SL: Yes, I wouldn’t be surprised—depending on the kind of pension you have. There are facets of our society that have really good pensions and those people, if they can live within their means, can retire on those pensions. But, not everybody has such a good pension and those people are going to have to work part time. And you know, it’s not unhealthy to work part time. It keeps you social, it keeps you in touch and it keeps your mind active. It’s not harmful; it’s a matter of relieving the stress. So I suggest to people who want to retire, maybe just make a change. Then, depending on their cash flow, they can do volunteer work or they can get a part-time job—to keep them in the know and to keep them active.