Rising retirement age can be good for your finances

More Canadians arechoosing to work for a longerpart of their life than their predecessors did, and while that choice definitely has its drawbacks,the impact on one's retirementfinances is generally positive, financial advisers say.

Canadians are working at leasttwo years longerthan workers did just a decade ago, Statistics Canada figures suggest.Themedian retirement age in 2011 was 63.2 for men and 61.4 for women, compared to 61.3 and 59.9, in 1997.

The median retirement age has been steadily increasing since the late 1990s, a time when the public sector was urging workers to retire early in an effort to cut payrolls, andanalysts say there is plenty of anecdotal evidence to indicate the upward trend is continuing.

"In 1997,the public sector was offering early retirement packagesfor a lot of people. Now, we're seeing that trend reverse," said Larry Moser, a sales manager for BMO Retail Investments in Toronto.

"The longer people work, the higher your pension is going to be. And when you retire at 60,Old Age Security and Canadian Pension Plandon't kick in until 65 (unless you are willing to pay a penalty for collecting CPP early). So,you may not haveas muchmoney as you had hoped."

Formost people, the decision to delay retirement isone of necessity, butother factorsdo play a role.

"Some people really enjoy working and just want to stay active," Moser said.

Other reasonsfor theupward creep inretirement age include better health care, longer life expectancy and the changing nature of work, which is less physically strenuous than it used to be.

Keep it simple

Withlife expectancy increasing, retirement can now last 25 to 30 years, soyour 50s are probably the best time to start planning, say advisers.

"You're going to want look atyourasset base andyourinvestments,"Moser suggests. "Risk management is very important at this point, because you need to havesome fixed income to protect your assets. Older people still need to have some growth in their portfolio."

The older peopleget, the more conservativethey generallybecome in terms of the investmentsthey choose,said Cherith Cayford, a financial educator at CMG Financial Education in Victoria.

"As a general rule of thumb, the equity portion of your portfolio shouldn't exceed your age minus 100," Cayford said.

Adrian Mastracci, the Vancouver-based president of KCM Wealth Management, suggests that retireesdo best when they stick to a disciplined investment approach.

'Be aware of how much risk is in your portfolio the closer you getto retirement and whether your investments are ready.' Jim Yih, financial educator

"You have tomaintain your long-term perspective," he says. "What should my portfolio look likefive, sevenyears from now? Start there, and keep it assimple as you can."

Analysts also caution againstneglecting investments.

"Be informed about the investments in your portfolio and ask yourself: WouldI buy it again today? What's it doing in my portfolio?If youcan't answer all those in the positive, then you need to revisit it,"Mastracci says.

Jim Yih, anEdmonton-basedfinancial educator and blogger, agrees.

"Most people pick a few investments, thendon't really do anything after that," he said. "Be aware of how much risk is in your portfolio the closer you getto retirement and whether your investments are ready.

"I know some people who have had to delay retirementbecause their portfolio dropped. There's a big difference between investing for retirement and investing in retirement."

Global trend

In Canada, the government has already signalled its intention to makelater retirement the new normal.Itincreased the eligibility age for Old Age Security benefits from 65 to 67 by 2029 in its 2012 budget andpushed back the ageat which MPs and public sector workers can start collecting government pensions from 55 to 65 for MPs and from 60 to 65 for civil servants.

The trend toward later retirement can also be seenacross the U.S. andEurope, wherethe choice to work later isalso most likely economically driven.

In the U.S., the average retirement age has climbed over the past 20 years to 64 from 62 for men and to 62 from 58 for women.

"The trend for retiring later has been somewhat offset by the recession," said Steven Sass from the Center for Retirement Research at BostonCollege. "People have a reduced savings, whichentices themto stay in the workplace longer."

In the U.K.,the average age at which men stopped working rose from63in 2004 to 64 in 2010.The average retirement age for women rose from 61 to 62 in that time, according to data from the Office for National Statistics.

And with theBritish government set to increase the qualifying age for state pensions over the next few years,the figures are likely to keep rising.

"These trends indicate that working past the state pension age is increasingly becoming part of our way of thinking," said Joanne Segars of Britain's National Association of Pension Funds. "For many, working longer is a must because they have not built up enough funds to be able to retire."

Germany raised its retirement age from 65 to 67about six years ago and is currently consideringdelaying the eligibility age for full pension payments to 69.

InGreece, meanwhile,workerscan take early retirement at58,although in a recent move to keep the pension limitconsistent with Greece's creditors, the finance ministry increased the normal retirement age from 65 to 67.