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Catherine Khan had let her husband take responsibility for their retirement planning. When he passed away, she quickly found that she had a lot to learn about managing her family's savings.

Fortunately, Ms. Khan's husband had been saving and planning for retirement since his thirties. For many Canadians, however, this is not the case.

All Canadian baby boomers will be eligible for retirement within 20 years However, less than half have an adequate retirement strategy, warns a report by the BMO Retirement Institute.

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The results of BMO's survey, conducted in May and released on Wednesday, "clearly underscore the need for the country's boomers to shift their focus from saving for retirement to retirement income planning," the report says. Only 48 per cent of boomers approaching retirement have begun to plan for investments and contingencies with a financial adviser.

According to a report released by Statistics Canada this month, 80 per cent of working Canadians are saving for retirement. Nevertheless, only half have a good idea of how much they actually need to save in order to sustain a comfortable standard of living in retirement.

Saving measures, however, aren't enough to secure a sustainable retirement, says ," says Tina Di Vito, head of the BMO Retirement Institute. Without planning for efficient spending, "the retirement lifestyle you were hoping for may not be sustainable," she says.

Ms. Khan, whose daughter is starting medical school, retired two years ago. Still, she said she is confident that she will be able to help fund her daughter's tuition, as well as sustain a comfortable retirement lifestyle in Lake St. Peter, Ont., because of careful planning.

When most Canadians think about retirement planning in their thirties and forties, they consider it in terms of saving for a future date. But RRSP contributions can become "almost like auto-pilot," Ms. Di Vito warns.

During retirement, you begin to use your savings, and how you withdraw and use that money will significantly effect how long it will last. The spending decisions you make in the first five years of retirement, she says, "will have significant implications for the rest of your retirement years, and I don't think that people have actually come to grips with that."

Canadians often think their health care costs are taken care of by the government. But as we live longer, saving strategies that account for health concerns, such as long-term care insurance, home care, dental costs and similar health-related expenses, are becoming more important.

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"The fact that we are living longer requires our money to last as long as we do," says Ms. Di Vito.

How prepared are you for retirement? Share your story with Globe readers.

When people realize that they will outlive their money, they are shocked, says Greg Kennedy, a financial planning specialist at Meridian Credit Union. Mr. Kennedy fears that many Canadians have a big gap between what they spend on "toys and big houses" and what they commit to retirement.

A budget is an important first step. But what about taxes?

"Taxes don't just disappear because you are retired," cautions Ms. Di Vito. In planning for withdrawals from such devices as Registered Retirement Income Funds (RRIFs), taking account of taxes is essential.

Even if growth in an RRIF was derived from dividends and capital gains, withdrawals are taxed as income from one's interest or salary, which can "create unpleasant surprises," BMO's report says. Withdrawals can shift your tax bracket if not planned carefully, potentially leading to situations involving limited cash flow and even the gradual elimination of old age security benefits. Tax-free savings accounts can be a helpful way to avoid such risks.

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Understanding what you are entitled to in terms of pension payment is an essential step toward sustainable retirement planning. Canadian Pension Plan resources are no longer enough to support the average lifespan, and employer pensions continue to decrease, the report says.

While the monthly maximum payment to an individual from the CPP is just under $1,000, the average cheque mailed out in 2009 was only for about half of that, says Ms. Di Vito, who worries that Canadians often don't fully understand how much they are entitled to.

While most people in the boomers' parents' generation had a stable pension, the situation is not the same today. There has been a "dramatic reduction" in pension availability, and many of the pensions that do exist have "no guarantee of outcome," Mr. Kennedy says.

More on retirement and pensions:

  • How not to outlive your money
  • Annuities: An option for any retiree
  • You won't live forever, so read this
  • Seven tools for rebuilding retirement savings

Larger companies tend to have defined benefit pension plans, which guarantee income throughout your retirement based on a percentage of your salary, but most smaller companies will usually have defined contribution pension plans. Defined contribution plans don't provide guaranteed income during retirement; rather, your employer agrees to contribute on your behalf into a particular plan, the sum of which you receive upon retirement. There is no guarantee how much there will be when you retire, nor how long it will last. Defined contribution pensions put "a lot more risk on the individual employee," says Ms. Di Vito, as seen by those who retired in 2008 who discovered that the pension sum they received was drastically lower than they had expected, due to the economic recession.

While the share of Canadian seniors in low-income bands is among the lowest of industrialized countries, groups such as immigrants and the divorced have higher rates of low income than the rest of the population.

Immigrants who arrived in Canada after 1980 are three times as likely as others to believe that their retirement income will not be sufficient to comfortably cover monthly expenses, according to Statscan. One of the important things that recent immigrants will benefit from in terms of planning for a sustainable retirement is investigating whether Canada has a reciprocal social security agreement in place with their country of origin. For immigrants who have contributed to a pension policy in another country, there are opportunities to make claims on that.

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The share of divorced seniors is nearly three times higher now than it was in 1976. The odds are high that an individual will be single at some point in their retirement, and the chances of that person being a woman are even higher, Ms. Di Vito says. It is also critical to account for the implications of one partner dying before the other. Even such measures as keeping up-to-date wills and designating the proper beneficiaries of bank accounts can go a long way, she says.

"Retirement income planning is very, very different from income planning and it's crucial that Canadians get the advice that they need," Ms. Di Vito says.

Some things to consider when planning your retirement:

  • Be consistent.
  • Know what type of pension you might be entitled to, and how long it is likely to last.
  • If you have a partner, ensure that you both understand your financial situation and the plans that you have in place for retirement.
  • Understand how withdrawals from your savings and investments will be taxed.
  • Be sure to factor in contingencies like medical expenses.
  • If you are new to Canada, see if you are eligible to claim social security benefits from your home country.

Tools you can use

Do you know what it takes to create a secure retirement? Use this calculator to help create your retirement plan

An interactive explainer breaking down the different kinds of pension plans and the payouts depending on income and age of retirement

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Use our glossary to find explanations of key terms related to retirement and pensions

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