By Joel Wittnebel/Active Senior’s Digest
A new study has found that the vast majority of Canadians would not be financially prepared for the future if they were forced into early retirement due to job loss or illness.
The research done by Investors Group shows that two out of five retirees, or roughly 40 per cent of the working population between the ages of 45 and 64, would not be able to cover their costs of living beyond five years if they were forced to retire tomorrow.
Sixteen per cent would not be able to afford even one year.
Tim Cottee, vice president of retiree planning with Investors Group, says unexpected retirement can be a hard adjustment for people to make.
“Instead of it being a transition of your choice, but a transition that just happens to you either suddenly or over a very short period of time, you’ve got a whole other level of potential emotional struggle,” he says.
One of the biggest causes of early retirement is poor health, and Cottee says people often underestimate the impact poor health can have on their working life.
“The reality is, the choice to continue working sometimes isn’t a choice,” he says.
Recent research shows that approximately two thirds of pre-mature retirements are related to poor health personally or that of a family member.
Cottee says that people need to be prepared for the worst. Visiting a financial planner and investigating possible insurance policies are both recommended courses of action.
For Cottee, a financial planner is a valuable resource for helping you examine your future finances and plan for the worst case scenarios with unbiased eyes.
“They are really there to help you plan adequately and ask, ‘Well, what if, what if, what if,’ and then if that event happens, to be able to say here are some of the choices that you have to make now,” he says. “(They) allow you to make informed choices at a time when, sometimes, we’re not capable of making the best choices because it’s our life.”
The problem could be exacerbated in younger generations, such as those now in their 40s and 50s who may not have the same pension plans the older generations were afforded.
“The reality is, their personal savings and personal saving discipline is what is going to make them capable financially of leading the type of retirement lifestyle they want to,” Cottee says.
