Help make your retirement savings last.

As you transition from working into retirement, there needs to be less emphasis on building your retirement savings and more importance placed on ensuring your savings will meet your needs and take of you for the rest of your life.

Retirement’s Income Challenges

The demise of pension plans with guaranteed income

For many people in the workforce, guaranteed pension plans have been replaced with “defined contribution” plans. These plans do not guarantee retirement income but rely on the performance of the investments the employee chooses. If you have a defined contribution plan or no pension plan at all, you will need to find a way to help ensure you’ll have sustainable retirement income for life.

Canadians are living longer

Canadians are living longer than previous generations, so your investment savings have to last longer. The probability of one of a healthy couple living until age 90 is 63% ¹. You need to help ensure your retirement income will last for life.

¹Annuity 2000 Mortality Table, Society of Actuaries.

Increasing cost of living

The cost of living is another factor to consider. Overall, Canada’s Consumer Price Index is forecast to increase to 2.9% in 2011². If this rate were to remain constant, the price of a bag of groceries that costs $100 today will approach $180 in 20 years. Your investments will need to keep pace with inflation in retirement. If they don’t, your buying power will erode over time.

² The Conference Board of Canada: Canadian Winter Outlook 2010, “Inflation Back on the Radar,” Doris Chu.

Volatile markets early in retirement

A portfolio with strong early returns will provide sustainable income for an extended period of time. A portfolio experiencing poor market returns early in retirement – when income is also being withdrawn – can run out of money quickly. When close to or in retirement, your investments need to be resilient to volatile markets and poor early returns because there is less or no time to recover the losses.

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Accounting for your goals

In addition to traveling or taking up a new hobby in retirement, most people have specific goals beyond lifestyle aspirations – like accessibility to cash or the importance of leaving a legacy – that could affect the ability of their investments to provide sustainable income. And for some, the desire to jump in and out of the market, depending on market performance, can negatively affect finances long-term if you are out of the market when it begins to experience positive returns. Your retirement income plan will also need to take into account your goals and personal investment patterns.

The solution starts with Product Allocation

To better meet retirement’s income challenges, Manulife has brought a new perspective to Canadians: Product Allocation. Product Allocation involves placing retirement savings into 3 baskets of products in specific proportions, tapping into unique guarantees and features to help achieve sustainable retirement income no matter what risks you face or preferences you have.

The Retirement Sustainability Quotient (RSQ)

Using Manulife’s industry-first Product Allocation Tool, your advisor can measure your current retirement plan’s chance of success – a measure we call RSQ. The RSQ can range from 0% where there’s no chance of sustainability, to 100%, where the retirement income stream is likely sustainable for life. Your advisor can work with you to determine if your RSQ can be improved by moving your savings into products that address your risks and preferences.

A proper Product Allocation strategy – and not necessarily just the amount you’ve saved – can be the key to maximizing retirement income and helping to ensure it is sustainable for life.

For more information, contact your advisor or visit www.helpmysavingslast.ca

Commissions, trailing commissions, management fees and expenses all may be associated with investing. Please read the applicable information before investing. Investment performance is not guaranteed, values change frequently and past performance may not be repeated. This article is for information purposes only and is not intended to provide specific financial, investment, tax, legal, accounting or other advice and should not be relied upon in that regard.