Social Studies of the New
Retirement
Social Studies of Retirement
Calculus of Retirement1
Rethink Retirement Planning
Source: 1 Adapted from: Milevsky, Moshe Arye. Calculus of retirement income financialmodels for pension annuities and life insurance. Cambridge: Cambridge UP, 2006. Print.
Calculus of Retirement
• Longevity risk
• Inflation risk
• Market risk
Rethinking Retirement Planning
Longevity Risk
95
90
85
80
75
70
FemaleMaleAge
52.61%33.44%
71.42%54.76%
84.90%73.99%
93.94%89.13%
12.03%4.34%
30.60%15.14%
Joint
68.46%
87.07%
96.07%
99.34%
15.85%
41.11%
Probability an Average 65 year-old Canadian Will Live to Age…
Source: Moshe Milevsky, The IFID Centre
Longevity Risk
Individual Aging Population Aging
Family Aging
44%24%13%7%At least one parent alive
AT AGE 60
2000196019401900
The Sixty Year Old Child
The Impact of Longevity on Family Structure
Source: P.I. Uhlenberg, Mortality Decline in the Twentieth Century and the Supply of Kin Over the Life Course, The Gerontologist, Volume 36, Issue 5, Pg. 681-685, The Gerontological Society of America, October 1996.
Family Aging
Sandwich Generation
Empty Nest:Lots of Disposable $
Sandwich Generation:$ for parents & children
Percentage Needing Assistance 75 – 85 years old
Source: U.S. Bureau of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.
7.0%Bathing
Dressing 5.0%
Transferring 4.8%
Toileting
Eating
3.9%
1.9%
Individual Aging: Activities for Daily Living
1%2%
65-7475-84
Eating
1%4%
65-7475-84
Toileting
3%5%
65-7475-84
Transferring
2%5%
65-7475-84
Dressing
3%7%
65-7475-84
Bathing
Change from 75 – 84 to 85+
Age Rates
Activities of Daily Living
+200%21%85+
+120%11%85+
+100%8%85+
+120%11%85+
+50%3%85+
Individual Aging
Source: U.S. Bureau of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.
$183A DAYAverage cost of a semi-private
room in a nursing home
$152A DAYAverage cost of a home health
aide: $19 an hour, eight hours a day
Source: The MetLife Market Survey of Nursing Home & Home Care Costs, MetLife Mature Market Institute, 2006.
Family Aging: Long-Term Care Costs
Family Aging
The majority of middle age peoplenow have more parents than they
have children.
Inflation Risk
Inflation: What Does a $1,000 Payment, Really Buy You?
35302520151051
4%2%1%0%Year #
$1,000$1,000$1,000
$1,000$1,000$1,000$1,000$1,000
$905$952$990
$861$820$780$742$706
$820$906$980
$743$673$610$552$500
$676$822$962
$555$456$375$308$253
Source: Moshe Milevsky, The IFID Centre
• Sequence of Returns Matters
Market Risk
Social Studies of Retirement
Calculus of Retirement
Rethinking Retirement Planning
Social Studies of Retirement
• Market opportunity
• Relationship management
• Solutions
Rethinking Retirement Planning
Market Opportunity
Source: Retirement Income Industry Association, Innovative Retirement Income and Old-Age Insurance Products, Retirement Engineering Inc. 2006
Shift
Late Retirement
Accumulation Pre-Retirement
Early Retirement
Hopeful Accumulation
Best-Efforts
Risk-Sharing
Guaranteed
Reliable Income
ActivityNeedsMindsetSolutionActivityActivityMindset
• by 2014, Canadians 55 and over will control almost 72% of investable assets1
Source: 1 Investor Economics Household Balance Sheet, 2006 and 2005 edition.
Canadian Retirement Market
• Significant assets are held in tax inefficient investments such as:
• $647 billion in near cash deposits with the chartered banks1
• $71.2 billion in fixed incomemutual funds2
• $12.1 billion in CSBs3
Source: 1 Department of Finance. Bank of Canada Banking and Financial Statistics Publication. 2010. Print., 2 IFIC, December 2009, 3 Department of Finance. The Fiscal Monitor. Publication. 2010. Print.
Large Market & Inefficient Investments
• 51% of Canadian retirees say they had no idea of what they wanted their retirement to look like2
Canadian Retirement Market
• by 2014, Canadians 55 and over will control almost 72% of investable assets1
Source: 1 Investor Economics Household Balance Sheet, 2003 and 2005 edition.2 Common vision lacking among retired couples: survey. Transcontinental Media inc., 2010. Web. <http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=52213&idsection=3&cat=3>.
Canadian Retirement Market
Increased Awareness of the Dangers of Retirement Raises Some Important Questions (% Agree)
76%I wonder if products exist that could help protect/manage losses
I need to rethink how aggressive or conservative my portfolio should be
66%
I wonder if I have saved enough and am prepared for retirement
62%
I question whether or not I’m getting the best advice
54%
Source: Prudential, Survey of American Pre-Retirees, 2003.
• among non retired Canadians age 35 – 55 years old 52% are not confident that their financial situation in retirement will be adequate3
• 51% of Canadian retirees say they had no idea of what they wanted their retirement to look like2
• by 2014, Canadians 55 and over will control almost 72% of investable assets1
Source: 1 Investor Economics Household Balance Sheet, 2003 and 2005 edition. 2 Common vision lacking among retired couples: survey. Transcontinental Media inc., 2010. Web. http://www.investmentexecutive.com/client/en/News/DetailNews.asp?id=52213&idsection=3&cat=3. 3 Where Has the Money Gone: The State of Canadian Household Debt in a Stumbling Economy. Publication. The Certified GeneralAccountants Association of Canada, 2009. Web.<http://www.cga-canada.org/en-ca/ResearchReports/ca_rep_2009-05_debt-consumption.pdf>.
Canadian Retirement Market
Canadian Retirement Market
Reason Standard of Living Worse than expected in Retirement
General expenses were higher than expected 38%
14%Thought government/private pension benefits would be higher
3%Unable to find employment/lost employment
3%Investments not doing as well as expected
18%Other
7%Don’t know
Source: 2002 Retirement Confidence Survey, 2002 Employee Benefit Research Institute
• Change from Linear to Cyclical
Living in Retirement
Living in Retirement: Linear
Living in Retirement: Cyclical
Relationship Management
How Old is Old?
CARP
Tim Horton's
Zellers
Movie theaters
RBC
Cdn. government
Boomers
50
60
55
65
60
55
76
(% selecting)What Triggers Retirement Readiness?
18%Achieving financial freedom
54%
Significant birthday (e.g., 55, 60, 65) 16%
Layoff or career setback 6%
Empty nest when children leave home 6%
Spouse or partner retired 6%
Becoming a grandparent 4%
Divorce 3%
Illness or health issue 15%
Death of a family member or friend 8%
Source: Ameriprise Financial, Age Wave, Ken Dychtwald, Ph.D. Harris Interactive, Inc.,The New Retirement Mindscape. Ameriprise Financial Services Inc., January 2006.
Longevity Risk:
Will I outlive my money?
Inflation Risk:
What will a dollar buy me in 20 years?
Market Risk:
Will a drop in the market set
me back?
Retirement Risks
• Averages
• Make it personal
• www.livingto100.com
• www.nmfn.com
Longevity Risk
Longevity Game: www.nmfn.com
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nwmf.com, 2007.
Welcome to the Longevity Game
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 75yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Longevity Game: 55yr. old male
Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www.nmfn.com, 2007.
Inflation Risk
• Massive impact over time
• CPI vs. CPI-E
• Make it Personal
• CPI – (Your client’s name here)
• Personal situation
• Personal Advice
Market Risk
Solutions
Maslow’s Hierarchy of Needs
Safety/SecurityPhysical safety, economic security, freedom from threats
Ego (Esteem)Recognition from others, prestige and status
Social (Belonging)Acceptance, be part of a group, identification with others
Self-ActualizationRealization of potential, fulfillment
PhysiologicalPhysical survival needs – water, food, sleep, warmth
Retirement Income Solutions Pyramid
Safety/SecurityPhysical safety, economic security, freedom from threats
Ego (Esteem)Recognition from others, prestige and status
Social (Belonging)Acceptance, be part of a group, identification with others
Self-ActualizationRealization of potential, fulfillment
Basic ExpensesFood | House | Insurance | Taxes
CPP/OAS | Employer PensionPrivate Pension Annuity
Retirement Income Solutions Pyramid
Security ExpensesUnexpected Events & Expenses
Cash | Insurance(Life | Disability | CI | LTC)
Basic ExpensesFood | House | Insurance | Taxes
CPP/OAS | Employer PensionPrivate Pension Annuity
Ego (Esteem)Recognition from others, prestige and status
Social (Belonging)Acceptance, be part of a group, identification with others
Self-ActualizationRealization of potential, fulfillment
Retirement Income Solutions Pyramid
Social ExpensesHobbies | Travel | Gifts | Entertainment
Income from investments
Security ExpensesUnexpected Events & Expenses
Cash | Insurance(Life | Disability | CI | LTC)
Basic ExpensesFood | House | Insurance | Taxes
CPP/OAS | Employer PensionPrivate Pension Annuity
Ego (Esteem)Recognition from others, prestige and status
Self-ActualizationRealization of potential, fulfillment
Retirement Income Solutions Pyramid
Esteem ExpensesRecreational Property | Boat
Sale of investments
Social ExpensesHobbies | Travel | Gifts | Entertainment
Income from investments
Security ExpensesUnexpected Events & Expenses
Cash | Insurance(Life | Disability | CI | LTC)
Basic ExpensesFood | House | Insurance | Taxes
CPP/OAS | Employer PensionPrivate Pension Annuity
Self-ActualizationRealization of potential, fulfillment
Retirement Income Solutions Pyramid
Legacy ExpensesEstate | Philanthropy
Remaining investment,insurance proceeds
Esteem ExpensesRecreational Property | Boat
Sale of investments
Social ExpensesHobbies | Travel | Gifts | Entertainment
Income from investments
Security ExpensesUnexpected Events & Expenses
Cash | Insurance(Life | Disability | CI | LTC)
Basic ExpensesFood | House | Insurance | Taxes
CPP/OAS | Employer PensionPrivate Pension Annuity
Retirement Income Solutions Pyramid
Income Solutions
• The Boomer Century, Richard Croker
• Turning Silver to Gold, Mary Furlong
• Advising Mature Clients, Neal Cutler
• Future Perfect, David Bond
• www.nmfn.com
• www.ci.com
• Your CI Wholesaler
• www.livingto100.com
Resources
www.ci.com/PD
Please email [email protected] you have any questions or concerns.
Thank you
DisclaimerAll charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
®CI Investments and the CI Investments design are registered trademarks of CI Investments Inc. ®SunWise is a registered trademark of Sun Life Assurance Company of Canada.
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