MY PURPOSE ON LINKEDIN - DAN ZWICKER

In the delivery of high performance complex financial information and knowledge the delivery platform moves from ‘ME’ to ‘WE’, namely, it is:

 Collaborative

Integrative

Transparent

   Client Centric Fiduciary Based


It is based upon a delivery model which is the antithesis of a top down product driven platform.


Complex ideas are not commodities. Those responsible for their delivery are held to a high performance standard of lifetime preparation, delivery and a commitment to unbiased fiduciary based client centric focus and long term care.


Exponential economic growth of complex knowledge and information based services (Medical,, Legal, Financial) requires open and direct dialogue among each of the professional participants contributing within the delivery platform.


For a better understanding of impartial advice


Check this link:


http://dan-zwicker.blogspot.com/2010/01/ability-to-provide-impartial-advice-to.html


For a better understanding of Integrative thinking


Check this link:


http://dan-zwicker.blogspot.com/2010/09/integrative-thinking-constructive.html


My pupose on Linkedin is to deliver a greater understanding of what it takes to deliver the above.


Dan Zwicker
Toronto, Canada
02 27 2012

'Raising The Bar'

WORKING OUT OF DEBT: HOW ARE WE DOING? A MCKINSEY REPORT JANUARY 2012

An update of our research on the efforts of developed countries to work out from under a massive overhang of debt shows how uneven progress has been. US households have made the greatest gains so far.

The deleveraging process that began in 2008 is proving to be long and painful. Historical experience, particularly post–World War II debt reduction episodes, which the McKinsey Global Institute reviewed in a report two years ago, suggested this would be the case.1 And the eurozone’s debt crisis is just the latest demonstration of how toxic the consequences can be when countries have too much debt and too little growth.


We recently took another look forward and back—at the relevant lessons from history about how governments can support economic recovery amid deleveraging and at the signposts business leaders can watch to see where economies are in that process. We reviewed the experience of the United States, the United Kingdom, and Spain in depth, but the signals should be relevant for any country that’s deleveraging.


Deleveraging: Where are we now?

The financial crisis highlighted the danger of too much debt, a message that has only been reinforced by Europe’s recent sovereign-debt challenges. And new McKinsey Global Institute research shows that the unwinding of debt—or deleveraging—has barely begun. Since 2008, debt ratios have grown rapidly in France, Japan, and Spain and have edged downward only in Australia, South Korea, and the United States. Overall, the ratio of debt to GDP has grown in the world’s ten largest economies.


Overall, the deleveraging process has only just begun. During the past two and a half years, the ratio of debt to GDP, driven by rising government debt, has actually grown in the aggregate in the world’s ten largest developed economies (for more, see sidebar, “Deleveraging: Where are we now?”). Private-sector debt has fallen, however, which is in line with historical experience: overextended households and corporations typically lead the deleveraging process; governments begin to reduce their debts later, once they have supported the economy into recovery.


Different countries, different paths


In the United States, the United Kingdom, and Spain, all of which experienced significant credit bubbles before the financial crisis of 2008, households have been reducing their debt at different speeds. The most significant reduction occurred among US households. Let’s review each country in turn.


The United States: Light at the end of the tunnel


Household debt outstanding has fallen by $584 billion (4 percent) from the end of 2008 through the second quarter of 2011 in the United States. Defaults account for about 70 and 80 percent of the decrease in mortgage debt and consumer credit, respectively. A majority of the defaults reflect financial distress: overextended homeowners who lost jobs during the recession or faced medical emergencies found that they could not afford to keep up with debt payments. It is estimated that up to 35 percent of the defaults resulted from strategic decisions by households to walk away from their homes, since they owed far more than their properties were worth. This option is more available in the United States than in other countries, because in 11 of the 50 states—including hard-hit Arizona and California—mortgages are nonrecourse loans, so lenders cannot pursue the other assets or income of borrowers who default. Even in recourse states, US banks historically have rarely pursued borrowers.


Historical precedent suggests that US households could be up to halfway through the deleveraging process, with one to two years of further debt reduction ahead. We base this estimate partly on the long-term trend line for the ratio of household debt to disposable income. Americans have constantly increased their debt levels over the past 60 years, reflecting the development of mortgage markets, consumer credit, student loans, and other forms of credit. But after 2000, the ratio of household debt to income soared, exceeding the trend line by about 30 percentage points at the peak  As of the second quarter of 2011, this ratio had fallen by 11 percent from the peak; at the current rate of deleveraging, it would return to trend by mid-2013. Faster growth of disposable income would, of course, speed this process.


We came to a similar conclusion when we compared the experiences of US households with those of households in Sweden and Finland in the 1990s. During that decade, these Nordic countries endured similar banking crises, recessions, and deleveraging. In both, the ratio of household debt to income declined by roughly 30 percent from its peak. As Exhibit 2 indicates, the United States is closely tracking the Swedish experience, and the picture looks even better considering that clearing the backlog of mortgages already in the foreclosure pipeline could reduce US household debt ratios by an additional six percentage points.


As for the debt service ratio of US households, it’s now down to 11.5 percent—well below the peak of 14.0 percent, in the third quarter of 2007, and lower than it was even at the start of the bubble, in 2000. Given current low interest rates, this metric may overstate the sustainability of current US household debt levels, but it provides another indication that they are moving in the right direction.


Nonetheless, after US consumers finish deleveraging, they probably won’t be as powerful an engine of global growth as they were before the crisis. That’s because home equity loans and cash-out refinancing, which from 2003 to 2007 let US consumers extract $2.2 trillion of equity from their homes—an amount more than twice the size of the US fiscal-stimulus package—will not be available. The refinancing era is over: housing prices have declined, the equity in residential real estate has fallen severely, and lending standards are tighter. Excluding the impact of home equity extraction, real consumption growth in the pre-crisis years would have been around 2 percent per annum—similar to the annualized rate in the third quarter of 2011.


The United Kingdom: Debt has only just begun to fall


Three years after the start of the financial crisis, UK households have deleveraged only slightly, with the ratio of debt to disposable income falling from 156 percent in the fourth quarter of 2008 to 146 percent in second quarter of 2011. This ratio remains significantly higher than that of US households at the bubble’s peak. Moreover, the outstanding stock of household debt has fallen by less than 1 percent. Residential mortgages have continued to grow in the United Kingdom, albeit at a much slower pace than they did before 2008, and this has offset some of the £25 billion decline in consumer credit.


Still, many UK residential mortgages may be in trouble. The Bank of England estimates that up to 12 percent of them may be in some kind of forbearance process, and an additional 2 percent are delinquent— similar to the 14 percent of US mortgages that are in arrears, have been restructured, or are now in the foreclosure pipeline (Exhibit 3). This process of quiet forbearance in the United Kingdom, combined with record-low interest rates, may be masking significant dangers ahead. Some 23 percent of UK households report that they are already “somewhat” or “heavily” burdened in paying off unsecured debt.2 Indeed, the debt payments of UK households are one-third higher than those of their US counterparts—and 10 percent higher than they were in 2000, before the bubble. This statistic is particularly problematic because at least two-thirds of UK mortgages have variable interest rates, which expose borrowers to the potential for soaring debt payments should interest rates rise.


Given the minimal amount of deleveraging among UK households, they do not appear to be following Sweden or Finland on the path of significant, rapid deleveraging. Extrapolating the recent pace of UK household deleveraging, we find that the ratio of household debt to disposable income would not return to its long-term trend until 2020. Alternatively, it’s possible that developments in UK home prices, interest rates, and GDP growth will cause households to reduce debt slowly over the next several years, to levels that are more sustainable but still higher than historic trends. Overall, the United Kingdom needs to steer a difficult course that reduces household debt steadily, but at a pace that doesn’t stifle growth in consumption, which remains the critical driver of UK GDP


Spain: The long unwinding road


Since the credit crisis first broke, Spain’s ratio of household debt to disposable income has fallen by 4 percent and the outstanding stock of household debt by just 1 percent. As in the United Kingdom, home mortgages and other forms of credit have continued to grow while consumer credit has fallen sharply.


Spain’s mortgage default rate climbed following the crisis but remains relatively low, at approximately 2.5 percent, thanks to low interest rates. The number of mortgages in forbearance has also risen since the crisis broke, however. And more trouble may lie ahead. Almost half of the households in the lowest-income quintile face debt payments representing more than 40 percent of their income, compared with slightly less than 20 percent for low-income US households. Meanwhile, the unemployment rate in Spain is now 21.5 percent, up from 9 percent in 2006. For now, households continue to make payments to avoid the country’s conservative recourse laws, which allow lenders to go after borrowers’ assets and income for a long period.


In Spain, unlike most other developed economies, the corporate sector’s debt levels have risen sharply over the past decade. A significant drop in interest rates after the country joined the eurozone, in 1999, unleashed a run-up in real-estate spending and an enormous expansion in corporate debt. Today, Spanish corporations hold twice as much debt relative to national output as do US companies, and six times as much as German companies. Debt reduction in the corporate sector may weigh on growth in the years to come


Signposts for recovery


Paring debt and laying a foundation for sustainable long-term growth should take place simultaneously, difficult as that may seem. For economies facing this dual challenge today, a review of history offers key lessons. Three historical episodes of deleveraging are particularly relevant: those of Finland and Sweden in the 1990s and of South Korea after the 1997 financial crisis. All these countries followed a similar path: bank deregulation (or lax regulation) led to a credit boom, which in turn fueled real-estate and other asset bubbles. When they collapsed, these economies fell into deep recession, and debt levels fell.


In all three countries, growth was essential for completing a five- to seven-year-long deleveraging process. Although the private sector may start to reduce debt even as GDP contracts, significant public-sector deleveraging, absent a sovereign default, typically occurs only when GDP growth rebounds, in the later years of deleveraging (Exhibit 4). That’s true because the primary factor causing public deficits to rise after a banking crisis is declining tax revenue, followed by an increase in automatic stabilizer payments, such as unemployment benefits.3 A rebound of economic growth in most deleveraging episodes allows countries to grow out of their debts, as the rate of GDP growth exceeds the rate of credit growth.




No two deleveraging economies are the same, of course. As relatively small economies deleveraging in times of strong global economic expansion, Finland, South Korea, and Sweden could rely on exports to make a substantial contribution to growth. Today’s deleveraging economies are larger and face more difficult circumstances.


Still, historical experience suggests five questions that business and government leaders should consider as they evaluate where today’s deleveraging economies are heading and what policy priorities to emphasize


1. Is the banking system stable?


In Finland and Sweden, banks were recapitalized and some were nationalized. In South Korea, some banks were merged and some were shuttered, and foreign investors for the first time got the right to become majority investors in financial institutions. The decisive resolution of bad loans was critical to kick-start lending in the economic- rebound phase of deleveraging.


The financial sectors in today’s deleveraging economies began to deleverage significantly in 2009, and US banks have accomplished the most in that effort. Even so, banks will generally need to raise significant amounts of additional capital in the years ahead to comply with Basel III and national regulations. In most European countries, business demand for credit has fallen amid slow growth. The supply of credit, to date, has not been severely constrained. A continuation of the eurozone crisis, however, poses a risk of a significant credit contraction in 2012 if banks are forced to reduce lending in the face of funding constraints. Such a forced deleveraging would significantly damage the region’s ability to escape recession.


2. Are structural reforms in place?


In the 1990s, each of the crisis countries embarked on a program of structural reform. For Finland and Sweden, accession to the European Union led to greater economies of scale and higher direct investment. Deregulation in specific industry sectors—for example, retailing—also played an important role.4 South Korea followed a remarkably similar course as it restructured its large corporate conglomerates, or chaebol, and opened its economy wider to foreign investment. These reforms unleashed growth by increasing competition within the economy and pushing companies to raise their productivity.


Today’s troubled economies need reforms tailored to the circumstances of each country. The United States, for instance, ought to streamline and accelerate regulatory approvals for business investment, particularly by foreign companies. The United Kingdom should revise its planning and zoning rules to enable the expansion of successful high-growth cities and to accelerate home building. Spain should drastically simplify business regulations to ease the formation of new companies, help improve productivity by promoting the creation of larger ones, and reform labor laws.5 Such structural changes are particularly important for Spain because the fiscal constraints now buffeting the European Union mean that the country cannot continue to boost its public debt to stimulate the economy. Moreover, as part of the eurozone, Spain does not have the option of currency depreciation to stimulate export growth.


3. Have exports surged?


In Sweden and Finland, exports grew by 10 and 9.4 percent a year, respectively, between 1994 and 1998, when growth rebounded in the later years of deleveraging. This boom was aided by strong export-oriented companies and the significant currency devaluations that occurred during the crisis (34 percent in Sweden from 1991 to 1993). South Korea’s 50 percent devaluation of the won, in 1997, helped the nation boost its share of exports in electronics and automobiles.


Even if exports alone cannot spur a broad recovery, they will be important contributors to economic growth in today’s deleveraging economies. In this fragile environment, policy makers must resist protectionism. Bilateral trade agreements, such as those recently passed by the United States, can help. Salvaging what we can from the Doha round of trade talks will be important. Service exports, including the “hidden” ones that foreign students and tourists generate, can be a key component of export growth in the United Kingdom and the United States.


4. Is private investment rising?


Another important factor that boosted growth in Finland, South Korea, and Sweden was the rapid expansion of investment. In Sweden, it rose by 9.7 percent annually during the economic rebound that began in 1994. Accession to the European Union was part of the impetus. Something similar happened in South Korea after 1998 as barriers to foreign direct investment fell. These soaring inflows helped offset slower private-consumption growth as households deleveraged.


Given the current very low interest rates in the United Kingdom and the United States, there is no better time to embark upon investments. Those for infrastructure represent an important enabler, and today there are ample opportunities to renew the aging energy and transportation networks in those countries. With public funding limited, the private sector can play an important role in providing equity capital, if pricing and regulatory structures enable companies to earn a fair return.


5. Has the housing market stabilized?


During the three historical episodes discussed here, the housing market stabilized and began to expand again as the economy rebounded. In the Nordic countries, equity markets also rebounded strongly at the start of the recovery. This development provided additional support for a sustainable rate of consumption growth by further increasing the “wealth effect” on household balance sheets.


In the United States, new housing starts remain at roughly one-third of their long-term average levels, and home prices have continued to decline in many parts of the country through 2011. Without price stabilization and an uptick in housing starts, a stronger recovery of GDP will be difficult,6 since residential real-estate construction alone contributed 4 to 5 percent of GDP in the United States before the housing bubble. Housing also spurs consumer demand for durable goods such as appliances and furnishings and therefore boosts the sale and manufacture of these products.


At a time when the economic recovery is sputtering, the eurozone crisis threatens to accelerate, and trust in business and the financial sector is at a low point, it may be tempting for senior executives to hunker down and wait out macroeconomic conditions that seem beyond anyone’s control. That approach would be a mistake. Business leaders who understand the signposts, and support government leaders trying to establish the preconditions for growth, can make a difference to their own and the global economy.

JANUARY 2012 •

Karen Croxson, Susan Lund, and Charles Roxburgh
Source: McKinsey Global Institute


The authors wish to thank Toos Daruvala and James Manyika for their thoughtful input, as well as Albert Bollard and Dennis Bron for their contributions to the research supporting this article.


About the Authors


Karen Croxson, a fellow of the McKinsey Global Institute (MGI), is based in McKinsey’s London office; Susan Lund is director of research at MGI and a principal in the Washington, DC, office; Charles Roxburgh is a director of MGI and a director in the London office.

THE RETIREE MARKET: A TRILLION DOLLAR MARKET - HOW MANY ADVISORS ARE PROFESSIONALLY PREPARED?

AS a large segment of Canada's population moves into retirement, successful financial advisors will be those who tailor their practices to serving the needs of retirees, according to a recent Investor Economics report.



In the past two decades, the baby boomers, those born after the Second World War between 1946 and 1965, became investors and generated a tremendous amount of growth in the wealth management business. "In those years, Canadian boomers moved from being borrowers to investors," Goshka Folda, Investor Economic's Toronto-based senior managing director, noted in an interview discussing the highlights of The 2011 Fee-based Report. "Their assets under management - investments, assets in their chequing and savings accounts, and fixed-term deposits, but excluding real estate - went from $335 billion in 1997 to $1.1 trillion at the end of 2010.


"They were fortunate enough to benefit from the longest-running bull market of the 20th century that continued into the 21st century, with a disruption when the technology bubble burst," she added." And providers of wealth services also benefitted from this trend."


But boomers are now moving uut uf their accumulation phase as they retire from the workforce. Investor Economics' research shows there were 3.4 million Canadian households over the age of 65 at the end of 201O. "We expect that number to reach 4.7 million by 2020," Ms. Folda said. "By then, one out of every three households will bc made up of retired people who will control $4 of every $10 under management."


Challenge for wealth managers


This poses a real challenge for wealth managers, she added. "In 2020, Canadians over the age of 65 will control 40% of all financial wealth under management. And one out of every three advisors' clients will be part of this group."


This is no surprise to Canada's financial services industry. The 2011 Fee-based Report notes that investment product manufacturers have already introduced a range of products designed for people in retirement, including guaranteed withdrawal bcnefit funds, segregated funds, principal-protected notes, reverse mortgages and payout annuities.


"A long scquence of products has emerged and other products have been repositioned to serve retirees," Ms. Folda said. These address a variety

"In 2020, Canadians over the age of 65 will control 40% of all financial wealth under man¬agement. And one out of every three advisors' clients will be part of this group."


- Goshka Folda


of needs such as principal protections, guaranteed income, risk management, tax efficiency and pre-assembled advice, among others.


The product landscape has exploded in terms of solutions, she noted, "but manufacturers realize there is no single product that will satisfy all the needs of a retired household.

While it is fairly easy to determine the risk profile and appetite for investment growth of investors who are in the accumulative phase, this doesn't hold true for retired households. Retirees have a variety of needs that need to be addressed, including risk management, the need for principal protection, income planning, tax planning and estate planning. No one single product will do it."


Expanding expertise


This bodes well for advisors as retired clients will need financial advice on how to combine these products to scrve their individual needs. "The product shelf is already there," Ms. Folda said. "But retirees will need help in putting together baskets of the right products for them."


But advisors may need to expand their areas of expertise in order to serve this market adequately. They'll have to address issues beyond the investment strategy that have a direct bearing on retired clients' financial standing, the report notes, such as housing, health issues, family dynamics, and the needs of spouses and children.


Retirement planning designations


Most advisors realize that the advice they'll give clients in retirement will differ from the advice they gave in the accumulative phase, and the financial services industry has been quick to position its members as retirement planning experts. "We've uncovered a lot of designations," said Guy Armstrong, a senior consultant with Investor Ecunumics. "In the U.S. where there has been a high uptake on retirement planning designations, we found 14 bodies conferring these designations and a total of 24 retirement planning designations. Canada has seen a stcady growth, with seven bodies conferring retirement planning designations and 11 designations, but our regulatory environment has prevented a real explosion."


And giving advice to a retired client base will be complicated by the fact that, in Canada, financial advice has always focused on the delivery of investment or insurance products, Ms. Folda noted. "The way in which firms and advisors generate their revenues is so highly linked to the investment strategy component of financial planning. But the focus has to shift from prod-
ucts to holistic financial planning. The advisor will need to address issues beyond the invcstment strategy."'



The small number of fee-only planners practising in Canada has only a limited reach into the Canadian population. "The main channels now delivering advice are bank and credit union branch advisors, full-service brokers, financial advisors, including MFDA-Iicensed advisors, and insurance advisors. These are not necessarily all commission-based advisors," Ms. Folda said, "but the major focus of their work is executing investment or insurance strategies. The clients of these channels can now say they are being given financial planning services, sometimes at no extra cost." Fee-based planners need to give serious consideration to how thcy position themselves in the market.


Content of retirement plans


In the coming year, Investor Economics will focus on getting a measure of the number and the content of retirement plans that are being delivered in the industry, Mr. Armstrong said. 

"With the exception of the fee-based advisors, everyone else is delivering financial plans at no additional charge to clients, but the content of these plans are all over the map."


Another challenge that fee-based advisors face, he noted, is that the channels that are currently delivering advice will do their best to hold onto their clients as they move into retirement. Some firms have already started to help clients move into retirement with programs that focus on understanding retirement lifestyle goals and financial needs. These include RBC Royal Bank's Your Future By Design and Sun Life Financial's My Retirement Cafe.


Fee-based business


But it is possible to run a fee-based business, Mr. Armstrong said. 'The trust business has always offered services for fees, and its clients readily accept this arrangement."


With a growing number of retired clients, advisors will also have to come to terms with the fact that retirement is a payout phase and, in many cases, clients' capital will be depleted as they age. To counter this, Ms. Fold a said advisors will need to develop strategies to engage younger generations. "A proper application of retirement planning is in itself a good way to engage younger family members. Thc fact that mom and dad's needs are being taken care of speaks well for the advisor. And the fact that the parents' estate planning wishes were carried out is another big plus."


The greying of Canada's population should also prompt advisors to take a team approach to their businesses, she added. This will allow the client to benefit from the skills and areas of expertise or different professionals.


ROSEMARY MCCRACKEN
The Insurance and Investment Journal
January 2012 

UNDERSTANDING WHAT DRIVES US HEALTH CARE SPENDING

US employers, health care providers, and other stakeholders are running hard to prepare for implementation of health care reform under the Affordable Care Act. In a new report, Accounting for the cost of US health care: Pre-reform trends and the impact of the recession, McKinsey’s Center for US Health System Reform examines trends from 2006–09, a period when health care spending reached record levels, and helps frame the forces shaping the health care industry in this period of rapid change.


Read about the findings or download the full report on the center’s Web site.


http://healthreform.mckinsey.com/Home/Insights/Latest_thinking/Accounting_for_the_cost_of_US_health_care.aspx

CARPE DIEM: The Energy Treasures Beneath Our Feet

CARPE DIEM: The Energy Treasures Beneath Our Feet

TD AGE OF RETIREMENT REPORT - 01 06 2012

Report –



Manitoba and Saskatchewan Fact Sheet



Results for the TD Report on the Age of Retirement were collected through a custom, online survey fielded by Environics


Research Group. A total of 1,006 completed surveys were collected with Canadians aged 25 – 64 who are not retired, including 132 in Manitoba and Saskatchewan. Data was collected between November 22 and December 2, 2011.


Crystal Wong, Senior Regional Manager, TD Waterhouse Financial Planning, based in Calgary, Alberta, is available to discuss the results of the TD Age of Retirement Report and offer advice to residents of Manitoba and Saskatchewan for how to reach retirement in good financial shape.


Age of Retirement in Manitoba and Saskatchewan


The average age people in Manitoba and Saskatchewan think they will retire is 61.


Residents of these provinces are the most likely in the country to say that if given the opportunity, they would retire before age 65 (74% versus 65% nationally).


o More than one quarter (27%) expect they will be older than 65 when they retire.


Residents of Manitoba and Saskatchewan who will keep working past the age of 65, were equally likely to cite a variety of reasons why they’ll stay in the workforce:


o They won’t have enough money saved and will still have debt to repay or kids to support (44%).


o They won’t have enough money to maintain the lifestyle they want (44%).


o Working gives a sense of purpose and they can’t imagine not working in some capacity (44%).


o Another 11% said they love their job and will still have goals to achieve.



Manitoba and Saskatchewan Residents and their Finances


While 61 may be the average expected retirement age in Manitoba and Saskatchewan, some may not be taking into account the amount of savings and investments they’ll need to retire comfortably.


The majority (56%) have less than $100,000 in household financial assets, not including company pensions, life insurance policies and home equity.


o 15% say they have no financial assets whatsoever.


Residents of Manitoba and Saskatchewan on Debt and Retirement


Another major consideration when it comes to retirement is debt. 40% of residents in Manitoba and Saskatchewan expect to have debt when they retire; 15% say it will be a significant amount of debt.


Of those who expect to carry debt into retirement:


o 59% will carry consumer debt into retirement.


o 51% will carry mortgage debt into retirement.


o 6% will carry investment loans into retirement.


o 13% classify their debt as “other”.



What does retirement mean for residents of Manitoba and Saskatchewan?


Residents of Manitoba and Saskatchewan are the most likely in the country (51% versus 47% nationally) to say the see retirement as a gradual slowing down. They’ll likely continue to work part-time or volunteer, but will enjoy
spending more time with family.


36% say retirement is a new beginning and a chance to follow their passions, start new ventures, experience new things and live the life they weren’t able to while working.


Contact Information


For more information or to set up an interview, please contact:


Ali Duncan Martin


TD Bank Group


416-983-4412




Karen Williams / Steve Presant


Paradigm Public Relations


416-203-2223

THE DELUSION - RETIREMENT AT 65

You can't retire early on $100,000


Talk about a gap between hope and reality. It may be no surprise that every generation of Canadians wants to retire before the traditional age of 65, but the fact that most expect to head into the sunset by 61 doesn't even come close to jibing with our level of savings.


Most have rosy dreams of freedom at 61, according to a TD Waterhouse survey released Thursday. And the younger they are, the earlier they think they can retire. Generation X (ages 31 to 46) plan to do so by 60 while Generation Y (ages 25 to 30) would prefer to start their golden years while still in their 50s (by age 59).


But 59% of the 1,006 polled late in 2011 have less than $100,000 in household financial assets. Um, hello?


While that doesn't take into consideration employer pensions, life insurance policies or home equity, there seems to be an egregious disconnect here. Most government pensions don't start till 65 and $100,000 could be counted on to generate only $5,000 a year (assuming optimistically you could get 5% a year from that much capital).

Debt first, then think of golden years

You can take reduced benefits from the Canada Pension Plan as early as 60 but that, plus $5,000 a year from investments, would barely cover property taxes and $100 a week for food.


Ironically, 61 is the year I currently plan to establish my own financial independence, two years from now. I certainly wouldn't contemplate that with only $100,000 in financial assets or, for that matter, 10 times as much. Given current trends in longevity, medicine and fitness, most of us will enjoy three or four more decades of life after 60.


This came home to me when I interviewed 75-year old author Gordon Pape earlier this week in our newsroom. I witnessed a short chat between him and a Post colleague, who also continues to work full-time post-65. It left me thinking I should postpone my own "Findependence Day" - not because of financial necessity but because meaningful work is probably the best way to stay mentally and emotionally healthy over the long haul.


I doubt the two fellows chatting in the newsroom are constrained financially. However, the vast majority of Canadians cited in the TD Age of Retirement report are in a much weaker financial position.

TD finds 16% of Canadians report having "no financial assets whatsoever". Sixty-two per cent of Gen Xers have less than $100.000 as do more than half 53%) of Baby Boomers (aged 47 to 64).


But Boomers are somewhat more realistic about their retirement date: They don't expect to leave the workforce until 64, says Cynthia Caskey, vice-president and portfolio manager at TD Waterhouse Private Investment Advice.


Caskey says early retirement is possible but only if you have a plan and start saving and investing early enough. Every decent financial book I've read urges young people to start saving early in life. Unfortunately, the survey suggests not only do most Canadians fail to do this, many are still mired in debt well into their working lives: 44% expect to carry some debt into retirement, including 13% who expect to retire with a significant amount of debt


In my experience, the only people who can retire in their late 50s are those with employer-provided defined-benefit pensions they joined in their 20s, or those who faithfully socked away 10% to 15% of their earnings in RRSPs since they joined the workforce decades earlier.

There will always be the fortunate few who win lotteries, marry money or strike it rich in business or entertainment, but broadly speaking, younger folk should abandon the pipe dream of retiring at 55 or 60 and resign themselves to working at least five or 10 years longer.

If they don't enjoy their current professions, they should take steps to find something they ean enjoy well into their 70s, even if it won't be financially necessary.

The name of the game is to completely eliminate debt, then build wealth. If you haven't even got out of the hole, you have no business fantasizing about early retirement.

JONATHAN CHEVREAU
Comment
Financial Post
01 06 2012 


Jonathan Chevreau is the author of Findependence Day,