Living to 100 in retirement

Canadians are living longer than ever before, so the chances of you topping 100 and beyond isn’t out of the question. That means your retirement could span 40 years–or more. Let’s explore some key ways to help you prepare for a longer–and better–retirement. 

Living to 100 used to be an exception, but the number of Canadians reaching this milestone is growing, with over 12,000 centenarians right now. In fact, there are nearly 1 million people over 85. While exciting, this reality can also pose a challenge for workers to save, invest, and plan for a retirement that could last decades. 

According to a recent Manulife survey¹, workers expect to retire at 66 at the earliest, with some hoping to end their career closer to 70. However, the reality is that Canadians retire at an average age of 59¹, with some much earlier. This means you may need to plan and save for a retirement that’s four decades in length–or more. 

There are steps you can take to help boost your savings and prepare for a long retirement. Consider these four actions to take now, and an additional four to take when you’re closer to ending your career. These can help you make the most of your money 

1 Picture your future

Think about what you want for your later years. Some want to travel, volunteer, take care of grandkids, or even move abroad. You can’t truly begin planning for this period of your life without considering these details. Your choices will guide your planning and budgeting.

2 Estimate your future expenses

Once you settle on a general retirement preference, you can start considering the cost. Look at your current budget and write out:

• The ones that will carry over into retirement—You’ll still have to pay for groceries, transportation, and electricity once you stop working.
• Those that may go away—Luckily, you can say goodbye to transportation costs to work and other job-related expenses like office clothes or professional dues
• New ones that may pop up—You may need to factor in long-term care or other medical expenses

You can use this general list to start making a budget for your retirement. Don’t worry if you aren’t sure about certain areas. You can always meet with a financial advisor or use online resources to help get you on track.

3 Save as much as you can now

It’s difficult to save for the future when the cost of living is high right now. More than one-fifth of Canadians have less than $5,000 earmarked for retirement². But you can’t put off saving for this period. Many retire earlier than planned due to illness, caregiving, and job loss¹. There are ways that can help maximize your saving and investing including taking advantage of employer matching contributions if available, RRSPs, and investment strategies. You don’t have to start with a large amount of money or significant contributions. A little bit of money can add up over time.

Benefits of compounding

This illustration is hypothetical and does not represent any specific investment or imply any guaranteed rate of return. It assumes a $0 starting balance, $200 per month in contributions, and a 6% annual rate of return. There is no guarantee that the results shown will be achieved or maintained over any time period. This example assumes no withdrawals; does not take into account fees associated with investing, which, if included, would reduce the account balance; and assumes reinvestment of earnings. Taxes are due at withdrawal. Individual circumstances may vary.

4 Invest with your future in mind

Selecting and managing investments can be tricky. Fewer than half of Canadians say they’re knowledgeable in this area and the majority have a low or medium risk tolerance.¹ In fact, only 18% of Gen Z workers hold higher risk investments in their retirement accounts. Although risk tolerance levels can be personal, you could consider investments with growth potential for your retirement, since it is a long-term portfolio. This can be especially true for younger workers who have more time for losses to rebound.

5 Plan your retirement spending

Keep track of your sources of retirement income. This includes your RRSPs, non-registered investments, and CPP/QPP. Most Canadians intend to rely on their RRSPs for spending money in retirement.¹ There are online calculators available to help you see how long funds in this account could last, depending on your estimated monthly budget.

6 Plan for your future mental and physical well-being

Physical health and well-being are concerns for aging adults. While many healthcare issues are covered by provincial medical care, specialized care, advanced conditions, and long-term assistance often require additional funding. Allocating money for this purpose can be important and can always be used for another purpose if medical support isn’t needed.

7 Look for ways to boost your retirement income

Considering your retirement budget while you still have years left to work can be key. Perhaps you dream of moving somewhere warm or pursuing a new passion. These activities may require more money than you can afford with your current savings trajectory. That doesn’t mean you need to give up your goals; you may just need to adjust your habits. Consider increasing your contributions, starting a side gig, or increasing your hours at work during a busy period. Just be sure to keep an eye on any tax implications before you begin.

8 Map out your withdrawals

Your work isn’t done when your job is. You’ll still need to file taxes in retirement and will pay taxes when withdrawing from your RRSPs. You can work with a financial advisor or other professional to help reduce this amount and stretch every dollar.

Aging can be intimidating, but it can also be exciting. You could have the opportunity to celebrate 100 years, or perhaps even more. Advanced planning and organization can make a big difference, no matter how much money you can comfortably set aside. 

Q: What if you live to 110?

A: Longevity planning is preparing savings, investing, and planning for a retirement that could last decades. Canadians are living longer than ever, which means the years following retirement will be longer as well. People need to consider this shift when planning for the future.

Q: How can you plan to live to 100?

A: Consider following these eight steps to help make your retirement savings last as you age.

1.      Picture your future: think about how you want to spend your time in retirement

2.     Estimate your expenses: consider where you want to live and what regular costs you may have

3.     Save as much as you can now: maximize your saving opportunities while working

4.     Invest with your future in mind: seek help to select and manage your investments with longevity in mind

5.     Plan your retirement spending: looking into CPP/QPP and OAS, along with other government benefits.

6.     Plan for your future mental and physical well-being: put aside money for future medical expenses and care.

7.     Look for ways to boost your retirement income: consider other sources of income to maximize your savings after you can no longer work

8.     Map out your withdrawals: talk to a professional to see how taxes will affect your withdrawals from registered accounts.

Q: How do RRSP withdrawals affect taxes?

A: RRSPs are tax-deferred accounts. While you can get a tax benefit, like a refund, for adding money to the account, you must also pay taxes when you withdraw the money. That’s why generally people wait until their retirement years to take money out – taxes are typically lower at this time, because you’re no longer working.