Chapter 6-Media Article

"Are You Going To Outlive Your RRSP?"
The Canadian Press TORONTO-Monday, March 6, 2006

Many Canadians are now satisfied because they have registered themselves, before the deadline of March 1, for the registered retirement savings plans, otherwise known as RRSP. However, there are also a number of Canadians whom are still questionable about just how much money is enough to get through retirement?
Recent data shows that in the total population, a lot of us are living a lot longer now. For example, the life expectancy at birth for women rose 0.3 years from the previous year, and to a high record of 82.4 years old in 2003. As for men, the life expectancy at birth rose to 77.4 years old, and up 0.2 years. Despite the data, there are experts that say this information collides with indications that boomers, turning 60, wants out earlier. Also, approximately 56% of the boomers say they want to retire early, before the age of 65.
The boomers are very unaware of how much longer they may live up to if they retire at the age of 60 or so. Although nobdy can tell you how much money will be enough for retirement, there are many things that one can do to stretch their money as far as possible. Drawing a realistic spending plan for retirement would be one.
If your rate of spending the assets you have saved is higher than 4%, your portfolio will not stand the rate of withdrawl of the 30 years plus time horizon. In addition, you would have to consider how much capital you can draw from your RRSP in the years before you turn 69 and put it into a retirement income fund, in which there is a minimum amount of capital that you must withdraw annually.
A recent report from TD Economics on long-term rates of return predicted the following:
- A return on cash of 4.4 per cent
- Bond returns of 5.6 per cent
- Canadian equity gains of 7.3 per cent
- U.S. equity gains of 7.8 per cent
Furthermore, inflation is needed to be taken into consideration beacuse low inflation means interest rates stay low. Thus it tends to minimize fixed-income gains. Most importantly, it is not to be forgotten that there is a chance that you will end up in a retirement home with a medical facility. In order to pay for those high monthly fees, it may be better to leave the equity in your home untouched in order.

Relationship to Ch.6-Investment, RRSP and Inflation
Registered retirement Savings Plans, RRSP, is considered to be a type of investment. In this article, it has been stated that many baby boomers are retiring earlier (than they should). Personally, I don't think these group of the population should retire at an earlier age, considering that the life expectancy of the population is gradually going up. Therefore, if an average person retires during their 60's, and if they live up to the average life expectancy age, which is around the 80s, they may not have enough money for retirement. Furthermore, like the article stated, how much does one REALLY need for retirement? In my opinion, I agree with the article. There is no definite amount of how much one really needs for retirement. I think this depends on whether one would like to live a more luxurious retirement or whatsoever. In order to save up more for retirement, an option would be RRSP. Having to start RRSP at an earlier age will benefit grately when one retires. As a result, it is probably recommended that RRSP plans would benefit the most to the young employed workers. This is because RRSP plans are only for people who have a job.
On the other hand, RRSP plans may not be so beneficial when it comes to inflation. This is because when there is an inflation, the value of dollar would decrease, consequently, your RRSP plan would not be worth as much.
Another option that one may consider for retirement savings may be to invest. Investment is a great way to save up money for numerous reasons. For example, if one invests their money in the bank, there would be an interest rate. The higher the interest rate, the better because that means one will benefit more and gain more money during the period that they invest their money.
These are just some ways that one may save up for retirement. What do you think is a reasonable age for the population to retire? Also, do you think everyone will benefit greatly from RRSP and if so, why doesn't everyone have a RRSP plan?