Social Studies of the New Retirement Rethink

Social Studies of the New Retirement

Rethink Retirement Planning Calculus of Retirement 1 Social Studies of Retirement Source: 1 Adapted from: Milevsky, Moshe Arye. Calculus of retirement income financial models for pension annuities and life insurance. Cambridge: Cambridge UP, 2006. Print.

Rethinking Retirement Planning Calculus of Retirement • Longevity risk • Inflation risk • Market risk

Longevity Risk Probability an Average 65 year-old Canadian Will Live to Age… Age Male Female Joint 70 89. 13% 93. 94% 99. 34% 75 73. 99% 84. 90% 96. 07% 80 54. 76% 71. 42% 87. 07% 85 33. 44% 52. 61% 68. 46% 90 15. 14% 30. 60% 41. 11% 95 4. 34% 12. 03% 15. 85% Source: Moshe Milevsky, The IFID Centre

Longevity Risk Individual Aging Population Aging Family Aging

The Sixty Year Old Child The Impact of Longevity on Family Structure 1900 1940 1960 2000 7% 13% 24% 44% AT AGE 60 At least one parent alive 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

Individual Aging: Activities for Daily Living Percentage Needing Assistance 75 – 85 years old Bathing 7. 0% Dressing 5. 0% Transferring 4. 8% Toileting 3. 9% Eating 1. 9% Source: U. S. Bureau of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations.

Individual Aging Activities of Daily Living Age Rates Bathing 65 -74 75 -84 85+ Dressing 65 -74 75 -84 85+ Transferring 65 -74 75 -84 85+ Toileting 65 -74 75 -84 85+ Eating 65 -74 75 -84 85+ Change from 75 – 84 to 85+ 3% 7% 21% +200% 2% 5% 11% +120% 3% 5% 11% +120% 1% 4% 8% +100% 1% 2% 3% Source: U. S. Bureau of the Census, 1991 Survey of Income and Program Participation, Functional Limitations and Disability File, wave 3, unpublished tabulations. +50%

Family Aging: Long-Term Care Costs $183 A DAY Average cost of a semi-private room in a nursing home $152 A DAY Average cost of a home health aide: $19 an hour, eight hours a day Source: The Met. Life Market Survey of Nursing Home & Home Care Costs, Met. Life Mature Market Institute, 2006.

Family Aging The majority of middle age people now have more parents than they have children.

Inflation Risk Inflation: What Does a $1, 000 Payment, Really Buy You? Year # 0% 1% 2% 4% 1 $1, 000 $990 $980 $962 5 $1, 000 $952 $906 $822 10 $1, 000 $905 $820 $676 15 $1, 000 $861 $743 $555 20 $1, 000 $820 $673 $456 25 $1, 000 $780 $610 $375 30 $1, 000 $742 $552 $308 35 $1, 000 $706 $500 $253 Source: Moshe Milevsky, The IFID Centre

Market Risk • Sequence of Returns Matters

Rethinking Retirement Planning Calculus of Retirement Social Studies of Retirement

Rethinking Retirement Planning Social Studies of Retirement • Market opportunity • Relationship management • Solutions

Market Opportunity

Solution Shift Mindset Activity Needs Hopeful Accumulation Best-Efforts Risk-Sharing Reliable Income Guaranteed Accumulation Pre. Retirement Early Retirement Source: Retirement Income Industry Association, Innovative Retirement Income and Old-Age Insurance Products, Retirement Engineering Inc. 2006 Late Retirement

Canadian Retirement Market • by 2014, Canadians 55 and over will control almost 72% of investable assets 1 Source: 1 Investor Economics Household Balance Sheet, 2006 and 2005 edition.

Large Market & Inefficient Investments • Significant assets are held in tax inefficient investments such as: • $647 billion in near cash deposits with the chartered banks 1 • $71. 2 billion in fixed income mutual funds 2 • $12. 1 billion in CSBs 3 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.

Canadian Retirement Market • by 2014, Canadians 55 and over will control almost 72% of investable assets 1 • 51% of Canadian retirees say they had no idea of what they wanted their retirement to look like 2 Source: 1 Investor Economics Household Balance Sheet, 2003 and 2005 edition. 2 Common vision lacking among retired couples: survey. Transcontinental Media inc. , 2010. Web. .

Canadian Retirement Market Increased Awareness of the Dangers of Retirement Raises Some Important Questions (% Agree) I wonder if products exist that could help protect/manage losses 76% 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.

Canadian Retirement Market • by 2014, Canadians 55 and over will control almost 72% of investable assets 1 • 51% of Canadian retirees say they had no idea of what they wanted their retirement to look like 2 • among non retired Canadians age 35 – 55 years old 52% are not confident that their financial situation in retirement will be adequate 3 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/Detail. News. 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 General Accountants Association of Canada, 2009. Web. .

Canadian Retirement Market Reason Standard of Living Worse than expected in Retirement General expenses were higher than expected 38% Thought government/private pension benefits would be higher 14% Unable to find employment/lost employment 3% Investments not doing as well as expected 3% Other Don’t know Source: 2002 Retirement Confidence Survey, 2002 Employee Benefit Research Institute 18% 7%

Living in Retirement • Change from Linear to Cyclical

Living in Retirement: Linear

Living in Retirement: Cyclical

Relationship Management

How Old is Old? CARP 50 Tim Horton's 60 Zellers 55 Movie theaters 65 RBC 60 Cdn. government 55 Boomers 76

What Triggers Retirement Readiness? (% selecting) Achieving financial freedom 18% Significant birthday (e. g. , 55, 60, 65) 16% Illness or health issue 15% Death of a family member or friend 8% Layoff or career setback 6% Empty nest when children leave home 6% Spouse or partner retired 6% Becoming a grandparent 4% Divorce 3% 54% Source: Ameriprise Financial, Age Wave, Ken Dychtwald, Ph. D. Harris Interactive, Inc. , The New Retirement Mindscape. Ameriprise Financial Services Inc. , January 2006.

Retirement Risks Longevity Risk: Will I outlive my money? Inflation Risk: Market Risk: Will a drop in the market set me back? What will a dollar buy me in 20 years?

Longevity Risk • Averages • Make it personal • www. livingto 100. com • www. nmfn. com

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: 75 yr. old male Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www. nmfn. com, 2007.

Longevity Game: 55 yr. old male Source: The Northwestern Mutual Life Insurance Company/Northwestern Mutual, www. nmfn. com, 2007.

Inflation Risk • Massive impact over time • CPI vs. CPI-E • Make it Personal • CPI – (Your client’s name here)

Market Risk • Personal situation • Personal Advice

Solutions

Maslow’s Hierarchy of Needs

Retirement Income Solutions Pyramid Self-Actualization Realization of potential, fulfillment Ego (Esteem) Recognition from others, prestige and status Social (Belonging) Acceptance, be part of a group, identification with others Safety/Security Physical safety, economic security, freedom from threats Physiological Physical survival needs – water, food, sleep, warmth

Retirement Income Solutions Pyramid Self-Actualization Realization of potential, fulfillment Ego (Esteem) Recognition from others, prestige and status Social (Belonging) Acceptance, be part of a group, identification with others Safety/Security Physical safety, economic security, freedom from threats Basic Expenses Food | House | Insurance | Taxes CPP/OAS | Employer Pension Private Pension Annuity

Retirement Income Solutions Pyramid Self-Actualization Realization of potential, fulfillment Ego (Esteem) Recognition from others, prestige and status Social (Belonging) Acceptance, be part of a group, identification with others Security Expenses Unexpected Events & Expenses Basic Expenses Food | House | Insurance | Taxes Cash | Insurance (Life | Disability | CI | LTC) CPP/OAS | Employer Pension Private Pension Annuity

Income Solutions

Resources • The Boomer Century, Richard Croker • Turning Silver to Gold, Mary Furlong • Advising Mature Clients, Neal Cutler • Future Perfect, David Bond • www. livingto 100. com • www. nmfn. com • www. ci. com • Your CI Wholesaler

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Disclaimer All 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. ®Sun. Wise is a registered trademark of Sun Life Assurance Company of Canada.