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Paul Lorentz, President of Manulife Investments, Manulife Financial

As Canada's early baby boomers enter their retirement years, the big question is how to reach their goals in this new life stage without their money running out, says Paul Lorentz, President of Manulife Investments, Manulife Financial.

Retirees, or those about to enter retirement, face a number of challenges. Interest rates are at a historic low, so the income from accumulated savings may be less than anticipated. Equity markets are highly volatile, at a time when retirees can't afford the risk. Plus, with Canadians living longer than ever before, there is a real risk that their savings will not sustain them in retirement.

With Defined Benefit Pension Plans becoming less common, it's up to investors to manage their income in retirement. Generating guaranteed income is an increasingly important part of a retirement strategy. To help Canadians achieve this, Manulife Investments recently launched a new, innovative income solution called Manulife PensionBuilder.

Q: How financially prepared are Canadians who are approaching retirement age?

Lorentz: Our research shows that fewer than half of Canadians aged 50 to 65 surveyed are confident that their retirement savings will be enough to provide a steady income for the rest of their life.*

Q: When people are looking at their retirement income, what's the ideal?

Lorentz: On average, the respondents in our survey would like to have 75 per cent of their income guaranteed. They're willing to play with some of it, but they want a base that they know isn't going to change and that they can rely on with certainty. Almost 90 per cent of those surveyed feel that having at least a portion of their income guaranteed for life is important to their planning.

Q: How important is flexibility when talking about retirement income?

Lorentz: Almost as many Canadians in that 50 to 65 group – 67 per cent – rated the ability to get access to their money as even more important than having guaranteed income for life.

Q: Considering that flexibility and predictability are so critical, how do some current financial solutions measure up?

Lorentz: Because of the volatility in the markets, a lot of people have moved to more conservative investments. They have some conservative investment options to consider. Buy a traditional annuity and get guaranteed income – this type of investment provides security through guaranteed income that is available for life, but you typically give up access to your money, and we know that liquidity is almost as important. Alternatively they can get a GIC [Guaranteed Investment Certificate]which provides liquidity, but may not provide a great return given low interest rates, and may not address the concern about outliving your money.

Q: So there are tradeoffs in both cases. Is there a financial vehicle to address all of these concerns?

Lorentz: We're helping Canadians address these concerns with Manulife PensionBuilder, which was launched this past October. It's a straight-forward, low-risk investment that allows you to convert some of your retirement income savings into a source of guaranteed income that you can't outlive.

Q: How does this provide a measure of certainty?

Lorentz: Manulife PensionBuilder provides a dependable income stream that you can count on throughout retirement, regardless of market fluctuations or interest rates. This product also offers bonuses in years where withdrawals are not taken, which can increase the amount of income that will be available in retirement.

Q: What about flexibility?

Lorentz: As not all retirement plans are the same, you can choose when to begin taking income to suit your own income needs. In the event that you need access to your investment, the market value is available at any time (fees may apply).

Q: In the run-up to retirement, what's the most common mistake you see people make with their financial planning?

Lorentz: Number one is not having a proper plan. Most people don't realize how much money they actually need in retirement to achieve their desired lifestyle, and don't spend enough time thinking that through.

Q: So your best advice?

Lorentz: Talk to an advisor and start making your retirement plans today. Think about what you will need to achieve financial success in your retirement years – we spend our younger years working hard so that when we retire, we can do so comfortably. It's important to plan now so you can enjoy retirement and not spend it worrying.

*Source: Manulife Financial survey conducted with 1,001 Canadians between ages 50 to 65 with household income of $50,000+; conducted online by Research House from July 14 – 23, 2011.