Retirement Sense and Nonsense from Fidelity Investments

Yesterday, journalist Jonathan Chevreau published an article and a blog post about a report just released by Fidelity Investments Canada, available here under the title The Changing State of Retirement in Canada, which claims that Canadians need to aim to replace 80% of their pre-retirement income in retirement. The post and article do a good job debunking the nonsense aspect of the report, namely the 80% figure, which is too high for a number of reasons:

• in their fifties, most people finish paying off their mortgage and their kids finish school/university, get a job and move out, all of which significantly reduce the expense side of being able to ''maintain the same comfortable lifestyle'', a fact not addressed in the report
• that this is so may be indirectly reflected in the report's survey results, which showed that the 55+ age group are on track to have a significantly higher ratio of income replacement - i.e. I would guess they suddenly started to be able to save at a much higher rate and decided to do it
  
• since when does need = comfortable? comfortable is perhaps a worthwhile goal but it shouldn't be presented as a minimal/hardship level of income
  
• other sources of retirement income are discussed but dismissed - home equity (a much more prevalent form of retirement income here in the UK than in Canada), inheritances (where are all those billions in the preceeding generation to disappear to?) and working in retirement; Fidelity documents the fact of people over 65 (17.8% of those in that age group) continuing to work (primarily because they enjoy it) but doesn't factor that into its calculation of retirement income

Along with the nonsense, there is much sense in the report and several recommendations worth heeding.

• for individuals: 1) Save!! (duh, but how many people actually don't do it); 2) Plan - try to figure out and budget what you will need, which gives you much more confidence than any rule of thumb, whether it be 80, 70 or 60% income replacement rate; 3) Learn about finances and supplement this with help from a professional planner if you find it overwhelming, to which I would add make sure he/she is a good, unbiased, fee-based planner
• for government, employers and the financial services industry: public education, including through the school system; higher specialized training and skills related specifically to retirement amongst planners as often there is too much emphasis on the pre-retirement, accumulation phase of investing and planning