It's Never too Late to Plan Ahead for Retirement

Canadian Dollar

New Year's has passed and many resolutions are hopefully still be in place - whether it is losing weight, eating healthier, or a myriad of other goals. These resolutions change with the passage of time, issues that did not have a “best before date” could be handled sometime in the future. Then middle age comes out of nowhere, and many of those “things” that need to be handled are now right over the horizon.

A Cautionary Tale

I have a personal story that should serve as a cautionary tale for anyone either nearing or contemplating retirement.

My uncle passed away in 1998, he had worked until age 82, (the last ten years part time) and my aunt worked until age 68. When he passed away his children felt that their mother was in relatively good shape financially. They had encouraged her to look after her funeral arrangements, while she was still mentally sharp and had the financial resources to do so.

My cousins noticed signs of dementia when she was 83 years old. She went into an assisted care retirement home. The cost was approximately $3,500 per month, and she stayed there for 6 years, (the cost was up to $4,100 per month by then) until her dementia had progressed to the point where she needed to be placed in a nursing home. The nursing home costs $2,800 per month*, plus extra help brings the total up to $3,600 per month. My aunt is now 94 and has burned through the majority of her life savings.*

All of my friends who having living parents have one question they are all asking themselves. What happens when their parents money runs out, and they are either in or will be needing to go into some sort of retirement home.

Peak Levels of Personal Wealth


You typically hit the peak level of your wealth when you are 55 to 64 years of age. By that point, the average household has accumulated a net worth of about $670,000. But don’t forget that this figure is inflated by a small number of wealthy households. The median household of the same age is worth only about $420,000. In recent years, Canadians have experienced little joy from the stock market, and so called safe investments are paying a minuscule amount of interest.

More and more, we have come to depend upon the real estate market to drive our wealth upward. Thanks to record low interest rates and innovations such as 30-year-mortgages, eager home buyers have propelled housing prices to double in value from a decade ago. Real estate now makes up an unprecedented share of our personal balance sheets. Despite the recession, most of us can take some satisfaction in the growth of our net worth over the past decade; however we should be aware of three warning signs that may indicate trouble ahead.

The Three Warning Signs

Warning Sign No. 1 is our addiction to debt. Back in 1990, the typical Canadian owed 91% of his or her disposable income. By 2000, our ratio of personal debt to disposable income had grown to 111%. It has now soared past 140% and is still climbing. We appear to have compensated for our stagnant paychecks over the past few decades by borrowing to make up for the raises we missed.

High debt levels are an excellent predictor of bankruptcies, so the staggering increases in our personal debt makes it likely that we will see more insolvency during the years ahead. We are already witnessing a dramatic increase in bankruptcies among older Canadians.

Call this Warning Sign No. 2. Since 1990 the rate of insolvency among Canadians 55 and older has shot up by more than 500%. It is a striking and worrisome fact that more and more Canadians are reaching the end of their working lives encumbered by debt. It seems that as the boomer generation edges into their 60s, a significant number are finding themselves unprepared for retirement.

This brings us to Warning Sign No. 3: our fascination with real estate. One reason that so many older Canadians have large amounts of debt is because of our growing reliance on real estate and hence mortgages and lines of credit backed by this real estate. Back in the mid-1990s, real estate constituted about a third of a typical household’s assets. It now accounts for 40%. If real estate prices remain strong, our willingness to go into debt to purchase homes will be justified. But our wealth could take a major hit if prices dip. *

Retirement Plan

All of the experts agree, if you do not have sufficient savings to fund your retirement start a savings program now. It is also essential to have a valid will and have designated a responsible person to be your Power of Attorney, in case you becoming incapacitated and cannot make your own decisions.

All financial experts agree that prepaying your funeral is one of the best gifts you can give your family; it ensures that your wishes are carried out and removes the emotional and financial burden on your family. No one is left scrambling to try to ascertain what kind of a final sendoff you desired, along with the stress of finding the funds to pay for the funeral itself.

The Final Needs Planning Program, is considered the most efficient and effective way of looking after both the planning and prepaying of your funeral in Canada. To find out how our program can help both you and your family contact us at: or 1-800-661-8908.

.* All figures are in Canadian Dollars
** Figures compiled by Money Sense