BMO Financial Group

BMO Financial Group

February 09, 2011 06:00 ET

When it Comes to Retirement Income Planning: Canadians Want to Have Their Cake and Eat it Too

- BMO report shows there is no perfect formula for retirement income planning

- 69 per cent of those planning to retire in five years prefer a guaranteed income stream each month in retirement, even if it means sacrificing potential growth of their capital

- Although majority prefer a guaranteed income stream in retirement, they also want flexibility to deal with unexpected emergencies

TORONTO, ONTARIO--(Marketwire - Feb. 9, 2011) - With the first wave of Canadian Boomers reaching age 65 this year and many entering retirement, the BMO Retirement Institute released a report today that shows that Canadians want the best of both worlds when it comes to retirement income planning – a guaranteed income stream and the flexibility to access funds whenever they choose.

The report, Retirement Income Planning: Can We Have Our Cake and Eat it Too?, identifies what Canadians believe are important elements of a retirement income plan (flexibility to deal with unexpected events, maintaining current lifestyle, guaranteed income, not outliving their money), and examines why it will be difficult, if not impossible, for most to attain all of these elements without making sacrifices.

As a result of recent market volatility in 2008, retirees and pre-retirees alike are looking for guarantees but are reluctant to make concessions:

  • Only 40 per cent of those planning to retire in five years are willing to give up control over some of their retirement savings in order to receive guaranteed income for life.
  • And 67 per cent of all respondents believe flexibility to deal with contingencies is more important than ensuring a predictable retirement income for life.

"There's no perfect formula for retirement income planning – every individual has different values and needs," said Tina Di Vito, Head, BMO Retirement Institute. "Future retirees should make an honest assessment of what they need and value most, as well as what they are prepared to give up. It's important to remain flexible and be prepared to make adjustments to your plan if needed." 

Other key findings:

  • The largest concern among survey respondents was having enough money to survive on a fixed income (39 per cent of retirees, 45 per cent of pre-retirees)
  • The biggest risk identified by respondents when planning for their retirement was unexpected costs (31 per cent for retirees, 27 per cent for pre-retirees), followed by outliving their retirement assets (18 per cent for retirees, 19 per cent for pre-retirees)
  • When asked about considerations important to them in retirement planning, 93 per cent of all survey respondents said that having enough money to maintain their current lifestyle was important

The study also reveals 32 per cent of pre-retirees and 42 per cent of retirees are not prepared to give up control of their capital in order to receive guaranteed income for life. 

Ms. Di Vito recommends that every Canadian who is within ten years of retirement should determine how much guaranteed retirement income they will be receiving and what their retirement expenses might be.

"An individual's income needs and goals will determine which retirement income strategy - or combination of strategies - is best for him or her," said Di Vito. "It is important to start thinking and planning early. Since the successful implementation of your strategy may involve taking action well before retirement, it is important to speak with a financial advisor to ensure you are on the right track."

The BMO Retirement Institute report was based on a survey conducted by Leger Marketing using its online panel LegerWeb between November 24 and December 1, 2010. The survey polled 1,127 Canadians who are 55 years and older (604 of which are retired and 523 of which are planning to retire in the next five years).

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $409 billion as at October 31, 2010, and more than 38,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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