Tag Archives: nest egg

Postponing retirement a new reality?

Postponing retirement a new reality?

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Postponing retirement a new reality?

With so much uncertainty these days, postponing retirement has become a new reality for many older workers. According to the CD Howe Institute, this underlines the need to reform the rules around retirement saving in tax-deferred programs.

Ottawa should raise the age at which workers must stop contributing to tax-deferred saving vehicles and start receiving income from them to age 75 from the current 71, says Joseph Nunes of CD Howe, an independent not-for-profit research institute.

Photo: bigstockphoto.com
Photo: bigstockphoto.com

Working longer is one of the levers that savers in defined-contribution plans have to build up their nest eggs to the desired level. Nunes quantifies the relationship between saving more during a shorter work career versus saving less and working longer. He finds that starting with a salary of $50,000 and a baseline savings rate of 10 per cent of salary, saving an additional 1.5 per cent at age 30 is equivalent to postponing retirement by one year. Comparatively, at a starting salary of $100,000, a one-year postponement of retirement equates to only a one per cent increase in the career-long rate of savings.

“This means that, given the COVID-19-related slump in the market, older workers may need to spend extra years on the workforce, or settle for a lower level of retirement income,” says Nunes.

Workers whose pensions are provided through the traditional defined-benefit retirement system are fully, or at least partially, protected from the unpredictable costs of pensions, since those costs are borne largely by the employers that fund their pension promises. In contrast, workers who rely on the defined-contribution pension system must, for the most part, bear responsibility for these unpredictable pension costs, the report notes.

The report offers a number of recommendations to help workers rebuild their nest eggs:

  • In order to allow workers saving in a defined-contribution arrangement (most of the private sector) to accumulate sufficient savings to allow for retirement before age 65, Ottawa should raise the allowable contribution limits in the defined-contribution system to reflect the fact that retirement at age 60 requires a significant rate of savings during a much shorter working lifetime.
  • Recognizing that working past age 70 will become more common in the future, Ottawa should also raise the age at which workers must stop contributing to tax-deferred saving vehicles and start receiving income from them to age 75 from the current 71.
  • In support of longer work lives, the federal government, with cooperation from the provinces and territories, should amend OAS and the CPP to allow for the deferral of income from these programs to age 75, with appropriate rates of increase in the benefit rates.

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How do you protect your retirement nest egg from illness?

How to protect your retirement nest egg in case of illness?

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How to protect your retirement nest egg in case of illness?

As healthcare improves, most Canadians expect to live way past their 80s but if they do, the chance of developing age-related conditions and requiring long-term care increases.

Long-term care is a threat to your retirement nest egg. It costs $100 to $175 a day, or $35,000 to $65,000 each year, to meet the long-term care needs of one senior. It wouldn’t take long before such a bill depletes your retirement nest egg.

If you are counting on government programs, the situation is worse. Presently, the government meets only a small fraction – 18 per cent – of long-term care costs. On the other hand, family members pay up to 75 percent. Worse still, experts predict a crisis in funding the ballooning public long-term care bill.

So, how can you protect your retirement nest egg from illness?

One solution is using private insurance or long-term care insurance.

Assessing your need

You may be pondering, “Do I need an additional insurance plan?” That’s fine and normal. But, if you can afford the premiums, we would rather you ask yourself these questions:

  • How much are you saving for your retirement?
  • How well can your nest egg take an extra annual hit of $35,000 to $65,000 when you are in your 80s?
  • Will you rely on family for support?

How does it work?

Long-term care insurance kicks in when you are unable to perform two of the six aids to daily living: Bathing, dressing, transferring, toileting, continence and feeding.

There are two ways long-term care plans work. You can opt for a regular monthly or weekly income from the insurer and use it at your discretion. Alternatively, the insurer can pay your long-term care bills. Either way, long-term care insurance is generally much cheaper than making out of pocket payments.

The good part is, premiums are usually significantly lower for younger applicants. Also, the payments from the insurer are not subject to taxation. But the best part is, you’ll have peace of mind knowing that your retirement nest egg can be protected from the financial effects of illness and you won’t be a burden to your family.

Planning for your retirement?

We have put together a webinar, Learn How to Retire Happy. Its completely free and you can listen in when you have the time. In this retirement training, you will:

  1. Learn the number one technique you need to master your money
  2. Obtain proven strategies used by financially successful individuals
  3. Learn best practices on how to plan now and chill later

Click here to listen to this free retirement training and get awesome tools and resources as well. You can also get advice from our financial coach with no obligation or commitment.

We truly care to help you understand your options so you can make an informed decision based on what is best for you and your loved one.

If you currently don’t have any type of life insurance, please feel free to get an online quote in seconds, so you can have a better idea of what this may cost you. Its cheaper than what you probably think. Plus, you can get a chance to win in our end of the year giveaway! To Learn more about Attingo, visit attingo.ca or call 1.877.302.5425.


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