Boomers $400,000 short of ideal retirement nest egg

Canadian baby boomers are significantly unprepared financially for retirement, according to a survey by the BMO Wealth Institute.

They anticipate they will each need, on average, $658,000 to feel financially secure in retirement but they have only saved an average of $228,000, which leaves them $430,000 short of their retirement savings goal.

The average senior couple spent $54,100 in 2009, according to Statistics Canada. Based on historical returns and a four per cent withdrawal rate, retirement nest eggs should be about 25 times the size of annual withdrawals, said Chris Buttigieg, senior manager of wealth planning strategy at BMO Financial Group. This would mean that to be able to generate $54,100 in retirement income per year, a retired couple would need to have saved roughly $1,352,000.

Almost one-half (46 per cent) of the 1,003 yet-to-retire Canadians surveyed are not confident they will be financially secure in retirement, up from 20 per cent in 2006, found BMO.

Boomers would like to retire, on average, when they turn 59. However, they feel they will need to work, on average, until the age of 63. More generally, 34 per cent would like to retire in their late 50s (56 to 60), compared to 29 per cent in 2006.

Generating income

In addition to delaying retirement, boomers plan to generate income in a variety of other ways, found BMO:

•Almost three-quarters (71 per cent) expect to take on a part-time job to earn extra income after they officially retire.

•Forty-four per cent will sell off collectibles, antiques or possessions they no longer use.

•About one-third (32 per cent) expect to sell their home, while 19 per cent will rent out part of their home for additional income.

Regional data