Baby boomers who are approaching retirement may be surprised at the realities they will face regarding the timing of their retirement and how they will actually spend their retirement, according to a study conducted for Royal Bank of Canada (RBC).
The 2015 RBC Retirement Myths and Realities poll surveyed pre-retirement baby boomers and retired boomers to see if the expectations of those pre-retirees are consistent with the experience of actual retirees. The results indicate that expectations are often not in line with reality.
One of the reasons that boomers’ intentions do not always materialize is because they tend to think in set dollar terms of what retirement will cost as opposed to understanding how they are going to spend their time retirement, says Sandra Abdool, regional financial planning consultant with RBC in Burlington, Ont.
Thus, financial advisors with boomer clients approaching retirement should go beyond these clients’ set dollar figures and get them to talk about how they see their time in retirement unfolding, she says, which will, in turn, help advisors create an appropriate retirement strategy.
“Until we understand what [retirement] represents for each client, it’s really difficult to truly plan for the future of that client,” says Abdool.
This also presents an opportunity for advisors to help clients understand that their retirement can unfold in a completely different manner than what they expected, as the recent RBC poll demonstrates.
A striking difference exists, for example, in the issue of choosing when to retire. Eighty percent of pre-retirees say they expect to choose their retirement date themselves, but 43% of retirees say they did not make that choice. The reasons they gave include health, the need to be a caregiver to someone else and an employer’s request.
The possibility of a more sudden retirement date needs to be approached with each client individually, Abdool says: “[Advisors] and clients don’t know which of our clients will fall into that 43%, but if we plan for it, it provides clients with the flexibility if it were to happen to them.”
As well, when pre-retirees were asked how they believe they will spend their time in retirement, the most popular answer, from 70% of respondents, is “travel”; 64% say they will take time for themselves. However, the reverse is true for retirees: 72% say they are taking time for themselves and 62% say they are travelling.
Respondents were also asked about what they would miss about their working days. Forty-nine per-cent of pre-retirees feel they will miss their paycheque the most. But that is a concern for only 26% of those already in retirement. The most popular response to this question for retirees (51%) was “socializing/interacting with colleagues.”
Helping clients understand that their social network will change is not only a wake-up call to those who think money is the most important change, but also an important way to determine the financial resources clients will need, Abdool says.
For example, a client who sees a simple lifestyle of staying in his or her community and volunteering will require different funding than a client who would like to keep up with friends at a golf course.
RBC also looked into retirement income expectations for pre-retirement single women who are unmarried, widowed, separated or divorced; as well as business owners. In a separate study, RBC examined the same issue among the lesbian, gay, bisexual and transgender (LGBT) community.
The poll found that the single women and business owners were equally worried (41%) that they would not have enough money to support their lifestyle when they retire.
Almost one-third (30%) of LGBT pre-retirees shared similar concerns that their funds would be inadequate for them to experience the retirement they envision.
Ipsos Reid conducted the sixth annual RBC Retirement Myths and Realities poll through online interviews between Mar. 16 and Mar. 24. The survey used a national sample of 2,223 adults aged 50 or older who have household assets of at least $100,000.