Finance BLIND SPOT: LONGEVITY Assumption: You need to count on your retirement portfolio to last for about 20 years. Reality: You could live longer. A lot longer. The average age of retirement for most Canadians is 63. And, as of last year, the average life expectancy is about 80 years for men and 84 years for women. So do some quick math and it’s pretty clear that most of us will need our retirement savings to last for about 20 years, give or take a few years on either side. Right? Hang on just a second. Averages are just that: averages. For every one of us who passes away earlier than the average life expectancy there must, by definition, be one who surpasses it. Will you be one of those? Ultimately, that depends on your personal health history, your level of fitness, your family medical history and so on. If you are, you’ll need your retirement savings to last for longer than 20 years. But there’s another issue at play, too. As the frequency and pace of medical treatments and developments in biotechnology, nanotechnology and new drugs increase, life expectancy may rise significantly over the next several decades. Add to that the rising awareness of the factors that contribute to our health in old age – exercise, diet, sleeping habits and so on – which gives us the opportunity to avoid health problems for longer, living to age 100 may eventually become relatively common. All of these developments are reasons to cheer, as you enter your golden years. But they have big implications on the saving and investing projections and plans that you’ve made leading up to your retirement. BLIND SPOT: THE KIDS Assumption: Giving the kids a financial leg up is something every parent should do. Reality: Depending on the amount (and frequency) of your support, you could be putting your own retirement (and your kids’ financial future) at risk. You want your children to have the best – who doesn’t? And if you can afford to pay for their wedding, their car insurance, their cellphone bill, their rent or their holiday to Hawaii, why shouldn’t you? That’s definitely one perspective. But the fact is, kids (and grandkids) are one of the biggest blind spots that we have. We parents are, in a very real sense, “programmed” to sacrifice for our offspring in some ways. And that’s not always a good thing. There’s a point at which such self-sacrifice becomes self-destructive. If you’re having to roll over your credit card balance to take your adult children on vacation, or if you’re having trouble managing your monthly bills once you add in junior’s cellphone bill to your own, may we humbly suggest that you’ve likely reached that point. Sure, there will always be items that parents want to contribute to: university tuition, for example, or a surprise health-care bill, or a down payment on a home, or maybe even providing some startup capital for a new business. But these are best considered investments – financial stakes that will (hopefully) reap rewards for your offspring far into the future. But subsidizing your adult children’s lifestyle at the expense of your own retirement savings could come back to haunt you – and the kids, too. Ultimately, the question of howmuch support to give your kids comes down to values. Sacrificing your financial well-being in retirement so that your children can enjoy a higher quality of life might seemnoble and right – but it could also be teaching our children the opposite of what we want: economic dependency rather than independence; financial frivolity rather than responsibility. 32 | www.snowbirds.org
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