We've all heard about how time equals money when it comes to planning financially for retirement. But are those who spent all their money caring for their families during their younger years destined to work until they die? Or if they choose to quit working, must they exist in poverty for the remainder of their lives? Neither option is very attractive considering that the average Manitoban's life expectancy is more than 78 years.

Larry Hillmer, financial advisor with Berkshire Securities Inc. in Winnipeg, acknowledges that those who invest earlier in life benefit from compounding. "Simply stated, compounding is when you get interest on your interest. Over 30 to 40 years, this can be significant." However, those who invest later in life may have more funds at their disposal. "Later in our careers, our homes are paid for, our kids are done and we are in our peak earning years," said Hillmer. "This is typically the time we can increase our savings toward retirement goals."

It is important to save for retirement because although the government pays seniors, the amount of money is not enough to live comfortably. In 2004, the average 65-year-old Canadian will receive only $869.26 per month from the Canadian Pension Plan (CPP) and the Old Age Security Pension (OAS). This is approximately $10,500 annually.

Some financial experts recommend preparing for a retirement income equal to 70 per cent of your pre-tax (gross) earnings in order to maintain your standard of living. Using this suggestion, if you currently earn $40,000, this means you would need a minimum post-retirement annual income of $28,000 in order to live comfortably. The $15,000 from the government barely covers half the suggested amount.

The recommended 70 per cent is a ballpark figure that other financial planners claim is too simplistic. "Every investor is unique," said Hillmer. Factors, such as lifestyle choices and health issues, can change the amount of money required for a comfortable retirement.

According to the Canadian Bankers Association, a more effective way to determine how much you need to save for retirement is to figure out the amount of money you spend today. Expenses include all costs associated with food, clothing, shelter, transportation, entertainment, personal care, healthcare, gifts and charitable donations, debt and savings, and miscellaneous items such as vacations.

Once you've determined what you currently spend your money on, eliminate expenses that will no longer be applicable after you retire. For example, once you retire you may not need to spend as much on transportation. When you've completed your expenses, calculate your current retirement income. Current retirement income includes CPP, OAS and any personal or company pension plans you may have. The difference between the two will give you an idea about what you still need in order to retire comfortably.

If your budget shows you that you won't have enough money to pay for the type of retirement you hoped for, don't give up all plans. "In an attempt to boost the retirement nest egg, there are a few options," said Hillmer. "You can save more. You can take more risk [on your investments] to achieve a higher potential return. You can downsize to a smaller home. Or you can reduce your retirement lifestyle."

The Canadian Bankers Association offers other options to try if you feel you'll fall short of what you need. You can retire later than you originally planned. As unappealing as this may sound, postponing your retirement from 65 to 70 will give you five more years to save money, and five more years for any interest on invested money to increase. If you choose not to delay your retirement, you can continue to work part-time during your post-retirement years.

Larry Hillmer warns that while there are many ways to bridge the gap between your retirement income and expenses, those who start financially preparing for retirement later in life will likely need to give up some of their retirement dreams. "It is never too late to start investing," he said, "but it could be too late to achieve your expectations."

The best way to go about investing and planning for retirement is to call a financial advisor and ask for a full review of your situation. "An advisor will help you stay on track and make adjustments as your unique situations change," said Hillmer. An advisor will help you decide whether to put your money into registered, non-registered, cash or equity investments.

Financial advisors are usually compensated in one of four ways.

1. Fee Only: With this method the advisor either charges by the hour or sets a flat fee for an interview and the development of a financial plan.
2. Commission: An advisor may interview and develop a plan for free. Compensation would come from a third party based on the products sold when the plan is implemented.
3. Fee-Based: An advisor will interview and develop a plan for free. His fee is based on a percentage of your assets and income.
4. Combination: An advisor charges a fee to interview and develop a plan. In addition to the fee received for developing a plan, the advisor receives commission on products sold.

Be sure to interview an advisor prior to entrusting him with your finances. "You may want to ask your advisor questions about his investment philosophy and what services he offers," suggests Hillmer. "For the most part, the advisor will be asking most of the questions. The client needs to be open and honest about what he wants and what he expects."

Financial advisors can be found in most Yellow Pages phone books in Manitoba under Financial Planning Consultants.