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wealth management - retirement savings

A report by the Institute for Research on Public Policy takes a darker view of the adequacy of post-retirement incomes than some other high-profile reports.

The past few years have tested the mettle of even the most diligent investors. A global financial meltdown, a deep and lengthy recession and a so-called "lost decade" of stock returns have eaten away at the assets you thought you'd have by now.



Which is why it's time to get serious, double down on your savings, and be prepared for everything this risky world can throw at you. Because those "average" returns that you plug into your retirement calculations – well, they are absolute fiction.



"Most financial plans are basically useless, because they're based on averages and assumptions," says Jim Otar, a financial adviser based in Thornhill, Ont., and author of Unveiling the Retirement Myth. Instead, he says, you have to design your plan for worst-case scenarios.



"It's like if you're constructing a building. You don't design it to withstand average wind speeds of two or three miles an hour. You design it to withstand a 120-mile-an-hour storm, to make sure it stays up if things go horribly wrong."



That's exactly what Doug Cooper is trying to do.



As country manager for Intel Corp., he heads up the chipmaker's Canadian operations. But at age 54 and in his prime earning years, he's also trying to bulk up his assets.



"It's not something you can do at the last minute," says Mr. Cooper. "There's always a risk of a major downside event, and if you don't have enough saved up as you enter retirement, there might not be enough time to make it back up."



Mr. Cooper's favourite investments at the moment are high quality, blue-chip stocks that throw off healthy dividends. By automatically reinvesting that income, maxing out his RRSP and hiring Warren MacKenzie of Toronto's Weigh House Investor Services to steward his portfolio, Mr. Cooper figures he's on track to have sufficient assets once retirement swims into view.



But when it comes to our savings, many Canadians haven't been as dedicated as Mr. Cooper. In fact, we've likely already factored an asset shortfall into our retirement plans.



According to a recent survey by Sun Life Financial, just 28 per cent of respondents expect to be fully retired at age 66. Only three years ago, more than half of Canadians expected to hang up their skates by the same age.



In addition to working longer, though, investors need to set in motion a multi-pronged savings effort to accumulate assets as early as possible.



"Many people's savings are totally inadequate, and I've seen many clients in the red zone," says Mr. Otar, who runs the website Retirementoptimizer.com. "If you're in bad shape, you have to cut back expenses now, which will make a huge difference for asset accumulation. Maxing out RRSPs is very important, and that money should stay in there until retirement."



After that, if you still have money in your pocket, by all means set up a non-retirement brokerage account as well, he recommends. "And emergency funds are critical, so you can have comfort that you won't have to dip into any retirement investments," he says.



It's not an impossible task, even though one third of Canadians between the ages of 18 and 34 believe their best shot at making a million bucks is to win the lottery, according to a recent survey by TD Canada Trust.



The key is not to throw up your hands, despite the dispiriting job market and the underwhelming equity returns of the past decade. Investors simply have to put their shoulders to the wheel and save more than they ever expected. When retirement rolls around, you'll be grateful you did.



"You have to take charge, start early and have a plan," says Weigh House's Warren MacKenzie. "You can't just hope it will happen."



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