As life expectancy continues to rise, planning for retirement has become more complex. Living to 100 is no longer rare, and while this extended lifespan offers more time to enjoy life, it also requires careful financial planning to ensure your savings last. Here’s how you can prepare for a longer retirement:

 

1. Understand Longevity Risk

Longevity risk refers to the possibility of outliving your savings. With Canadians now living an average of 86 years and many surpassing 90 or even 100, your retirement plan must account for at least 30 years of post-retirement living expenses.

 

2. Delay Retirement Benefits

- CPP and OAS: Delaying Canada Pension Plan (CPP) and Old Age Security (OAS) benefits beyond age 65 can result in higher monthly payouts adjusted for inflation.

- Consider working part-time or delaying full retirement to extend your savings period.

 

3. Diversify Your Income Sources

- Guaranteed Income: Incorporate annuities or defined-benefit pensions into your plan for steady income.

- Investment Buckets: Use a "bucketing" strategy—allocate funds into short-term (cash), medium-term (low-risk investments), and long-term (growth-oriented equities) buckets to balance liquidity and growth.

 

4. Save More, Spend Wisely

- Aim to save at least 25 times your desired annual spending, following the 4% withdrawal rule.

- Regularly assess your budget and redirect discretionary savings into retirement accounts.

 

5. Plan for Healthcare Costs

Healthcare expenses rise with age, including long-term care or in-home support. Consider long-term care insurance or setting aside a portion of savings specifically for medical needs.

 

6. Build an Emergency Fund

Maintain a separate fund to cover unexpected expenses without disrupting your retirement income streams. This helps avoid tax penalties from early withdrawals on registered accounts.

 

7. Revisit Your Financial Plan Regularly

Life circumstances and economic conditions change. Review your plan annually with a financial advisor to adjust for inflation, market performance, and evolving goals.

 

By taking these steps, you can create a sustainable financial strategy that supports you well into your later years, ensuring peace of mind as you enjoy the fruits of a long and fulfilling life.