Is Your Pension Plan Enough?
I can recall various conversations with my grandparents about what it’s like to live into your 80s and 90s. The responses varied on the day and the specific topic of discussion, but there was always an undercurrent that life was worth living, and that extending life was a good thing. The dreams you have for your ‘elder years’ may be diverse or focused, but how you are going to support those plans is something you may already have banked on, literally and figuratively. For many Canadians, their retirement plan includes a pension, and a reliance on those funds to live the life of freedom they have long worked hard for, and for some, the pension is the lifeline and the only means by which they will financially survive. Yet, in the ever changing economy, and in planning for the future, how much consideration ought to be given to the pension plan’s investment strategy when planning for your life?
Statistics Canada reports that between 1950–1952, the average life expectancy for a Canadian Male was 66 years and 71 years for a female. The life expectancy for the average Canadian now, is 79 years for a male and 83 years for a female. Life expectancy in Canada may surpass 90 years by 2100. This increase is substantial, and most everyone in the country breathes a sigh of relief to know that we have those precious extra years to spend with our loved ones in retirement, as noted, many relying on pensions to survive. Yet, as recently reported in the Globe and Mail, more than $1-trillion of Canadian pension assets and annuity reserves face longevity risk[1]. As we live longer, we are putting our pension plans, many created and based on historical valuations, together the security they provide, at risk. The solutions to this problem are far reaching and there are certainly those who will be focussing their attention on this particular field in the near future, perhaps, in an ironic twist, exploring this potential financial deficit will be of financial benefit to some.
I suppose the most important question for the moment is whether the pension plans will have sufficient funds to pay out on their obligations, and how will this interplay impact your estate planning and livelihood.
Thanks for reading,
Nadia M. Harasymowycz - Click here for more information on Nadia Harasymowycz.
