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

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of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.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of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.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


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

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



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

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


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?

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


Longevity Game: 55yr. 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 [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.

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

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