Social Studies New Retirement EN - CI Investments · Retirement Engineering Inc. 2006 Shift Late...

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

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%

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of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.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

Individual Aging: Activities for Daily Living

65-7475-84

Eating

65-7475-84

Toileting

65-7475-84

Transferring

65-7475-84

Dressing

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of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.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

Calculus of Retirement

• Market opportunity

• Relationship management

• Solutions

Market Opportunity

Source: Retirement Income Industry Association, Innovative Retirement Income and Old-Age Insurance Products, Retirement Engineering Inc. 2006

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

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>.

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

I wonder if I have saved enough and am prepared for retirement

I question whether or not I’m getting the best advice

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

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>.

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?

Tim Horton's

Zellers

Movie theaters

Cdn. government

Boomers

(% selecting)What Triggers Retirement Readiness?

18%Achieving financial freedom

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

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

Basic ExpensesFood | House | Insurance | Taxes

CPP/OAS | Employer PensionPrivate Pension Annuity

Security ExpensesUnexpected Events & Expenses

Cash | Insurance(Life | Disability | CI | LTC)

Social ExpensesHobbies | Travel | Gifts | Entertainment

Income from investments

Esteem ExpensesRecreational Property | Boat

Sale of investments

Legacy ExpensesEstate | Philanthropy

Remaining investment,insurance proceeds

Esteem ExpensesRecreational Property | Boat

Sale of investments

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 pd@ci.comif 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.

Social Studies New Retirement EN - CI Investments · Retirement Engineering Inc. 2006 Shift Late...

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