CAP members are advised to plot a strategy to achieve retirement goals
Eckler’s Capital Accumulation Plan (CAP) Income Tracker for October 2023 revealed CAP member outcomes rose in the third quarter of 2023 while gross income replacement ratios remained at multi-year highs despite negative market returns, with decades-high annuity payout rates recorded.
An average male member retiring at the end of September achieved a gross income replacement ratio of 64.2 percent, while an average female member achieved 62.7 percent. Despite market volatility, CAP members were able to maintain their standard of living in retirement.
How much is enough for retirement?
According to a 2023 CIBC poll, more than half of Canadians say they have no idea how much they would need for retirement. Also, almost two-thirds of Canadians say they worry about running out of money during retirement. Considering at present there are more people over the age of sixty-five than there are people under the age of 15, the statistics show a significant number of people are concerned about their retirement.
The income replacement ratio needed for Canadians to maintain living standards in retirement can vary. With this in mind, Dr. Bonnie-Jeanne MacDonald developed an alternate solution called the Living Standards Replacement Rate (LSRR), which plan sponsors can use in helping members develop a strategy for retirement. The LSRR helps determine how a person’s living standards can be maintained in retirement through the estimation of how much money is needed to support living standards while working as compared to how much money is available for spending during retirement years.
Tools like the LSRR can help members in determining a savings target that is more accurately aligned with their preferred lifestyle. Having a savings target that is based on living standard continuity help employees to have an idea on whether they are on track to achieve their personal retirement goals or act as a reminder to revisit their retirement plan.
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