Some Canadians are working past the age of 65 by choice. They enjoy their jobs and they recognize the benefits of remaining active and engaged. Increasingly though, Canadians who expect to keep working will do so for economic reasons. According to the 2013 Sun Life Canadian Unretirement™ Index only 27% of Canadians ages 30 to 66 expect to be retired at 66 (compared to 51 per cent in 2008). The top three reasons all relate to finances:

  • 25% say they plan to continue working to earn enough money to pay basic living expenses.
  • 21% say they plan to continue working to earn enough money to live well.
  • 16% believe that government pension benefits won’t be enough to live on.

These concerns are reinforced with the current economic environment. Historically low interest rates are generating low rates of return for investors, giving Canadians yet another income obstacle to overcome. Canadians are concerned and need advice on how best to navigate through this retirement planning maze.

Money for Life™

At Sun Life Financial, we have a framework for retirement planning called Money for Life that helps advisors start conversations with clients to help them select the right mix of life, health and wealth products to build a comprehensive retirement plan. It encompasses understanding and managing key risks that retirees face today:

  • Longevity risk – clients could have 30+ years of retirement to fund – and with that the potential for running out of money.
  • Inflation risk – higher costs of living could mean clients will pay more for all the things they need or want to do in retirement.
  • Health risk – it’s a matter of when, not if, a health event will occur. Clients’ changing health could dramatically affect their wealth and quality of life in retirement.
  • Mortality risk – the untimely death of a spouse or partner could reduce the amount of money available to cover clients’ needs in retirement.
  • Market risk – Low or negative returns, especially early in retirement, can have a significant impact on retirement plans.

Once clients understand the risks they’ll face, an advisor can help them plan for each of their needs that will change as they go through retirement:

  1. Basic needs

    Basic needs represent the essentials that clients cannot live without – items such as food, housing and transportation.

    To cover basic needs for life, we suggest clients create an income floor. To do this, you need to help clients estimate how much their basic needs will cost, and then look at their guaranteed sources of income like the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Old Age Security (OAS) and if applicable, a defined benefit pension plan.

    Often, the client’s guaranteed sources of income fall short of the amount they’ll need to cover their basic living needs. Guaranteed sources of income, like life annuities, provide a regular cheque in retirement to cover the essentials.

  2. Health needs

    Clients need to understand they will inevitably deal with health costs. As we move through retirement, health events and health expenditures increase.

    Insurance protection through personal health, critical illness and long term care insurance is a priority if clients are able to qualify for this protection. If insurance isn’t an option, we encourage clients to ensure their plan has set additional money aside for their health care needs.

  3. Lifestyle needs

    Lifestyle expenses, such as travel and entertainment, can change throughout retirement, but most clients don’t want to scale back on these activities because of financial restrictions. Helping clients calculate a sustainable spending rate from their retirement and investment savings to set their expectations around their lifestyle spending will help ensure that their nest egg will last.

    Mutual funds can be a key component in a retirement portfolio. By augmenting mutual fund investments with insurance income solutions like payout annuities and a plan for health needs, clients will have more confidence in lifestyle spending.

  4. Legacy

    Talk to clients about what kind of legacy they want to leave for their family and/or any charities, and the method by which they want to facilitate that transfer of assets. This can include planning for the financial obligations of funeral arrangements, saving and transferring inheritances, or paying off debt.

    What’s the bottom line?

    Today’s retirement planning landscape is more than just living off a nest egg. Savings will help, but using the Money for Life framework for retirement planning—considering the key retirement risks and incorporating income and protection solutions—will help Canadians retire with confidence. This can lead to you gaining more business with boomers and in turn support the growth of your business.

    You might also like…

    Rocco Taglioni, Senior Vice-President, Head of Distribution, Individual Insurance and Wealth, is responsible for the overall leadership of Sun Life Financial’s distribution organizations across its Retail business in Canada. His role encompasses the leadership of the distribution company, as President Sun Life Financial Distributors Inc., as well as the Insurance and Wealth wholesaling sales organizations. Through the various leadership teams he oversees the development, direction, and execution of the Distribution strategies centered on wealth management, protection, retirement, and estate and financial planning.

    Since joining Sun Life in 2004, Rocco has held various executive leadership roles, including Vice-President Business Development, Group Benefits; Head of Individual Wealth Management; Senior-Vice-President, Client Solutions; and most recently Senior Vice-President, Distribution and Marketing, Individual Insurance and Wealth. Throughout his tenure at Sun Life, Rocco has led various business strategies centered on building, transforming, and evolving organizations and teams to drive higher levels of performance and success.

    Rocco has 36 years of experience in strategic leadership in the insurance and investment industries. He has served on and is a member of a number of boards. Rocco is currently President and Chair, Sun Life Financial Distributors (Canada) Inc. and is a member of the Sun Life Financial Investment Services (Canada) Inc. board. He is a member of various industry associations, including Advocis, GAMA Canada, the Canadian Pension and Benefits Institute, and the Association of Canadian Pension Management.

    Rocco holds a Bachelor of Arts in Economics from York University.