On the first day of January last year, the oldest of the baby boomers turned 60 and the leading edge of Canada’s biggest demographic will continue hitting that milestone at a rate of more than 1,000 a day for years to come.

On the first day of January last year, the oldest of the baby boomers turned 60 and the leading edge of Canada’s biggest demographic will continue hitting that milestone at a rate of more than 1,000 a day for years to come.

It would be great if the eldest boomers and those following them were cruising smoothly into retirement, but that’s not the case. The wealthiest generation in history, the boomers could be facing a poorer retirement than their parents. Chalk it up to a longer lifespan, spendthrift ways and less secure retirement incomes as defined benefit pension plans disappear faster than an arctic pack ice.

If you are turning 60, or that birthday is looming over the next few years, and you’re just now thinking about retirement planning, chances are it is too late.

You can’t wait till you are 60 to plan for a 65 departure, said Barbara Reid, an investment adviser with RBC Dominion Securities in Burlington. You have to start in your 40s, you have to (think) `what is my lifestyle going to be, what are the goals, when I retire what do I want to do?’

Besides how much to set aside for retirement and just how to invest that nest egg, the other big determinant to how golden – or some less lustrous colour – your retirement will be depends upon what sort of post-employment lifestyle you plan to have. Most of us could get by on $40,000 to $60,000 per year, but if retirement means having a big house and lavish vacations every year, expect to set aside a heck of a lot more.

The numbers suggest most aren’t even close to funding those dreams.

A study conducted by BMO Financial last year discovered that just 28 per cent of baby boomers have savings and investments of $100,000 or more.

Worse, about one in five have no savings at all, and 73 per cent are still carrying debt.

There is a tendency for recent retirees to spend heavily in their early golden years on vacations and other indulgences, figuring that they had better live the good life while they have still their health. That strategy is a surefire way to quickly exhaust retirement savings.

A couple who spend 10 per cent of their savings annually would completely exhaust their cash hoard in just over 11 years. By comparison, using 4 per cent of your retirement savings each year will stretch that money out for about three decades.

The fact is that within the next six decades, the average life expectancy will be 100, so if you are planning to live to 85, you better get a new adviser because you could be going longer, said Patricia Lovett-Reid, a senior vice-president with TD.

Lovett-Reid also cautions that boomers are far from a homogenous group. Two 50-year-old couples, for example, may look the same but one has university-age children and accumulated wealth while the second couple is on their second marriage with 8-year-old twins. That second couple, in all likelihood, has less money put away and will face the prospect of paying to put their kids through university when they are in their 60s. There is no cookie cutter approach to retirement, noted Lovett-Reid.

The TD Waterhouse financial expert worries about Canadians’ declining savings rates, demographics and the worsening support ratio of working-age to retired people. Currently at five working-age people to one retired person, it is expected to drop to three to one by 2015 as more boomers leave the workforce.

When you think about retirement, what can you control? asked Lovett-Reid. You can control how much money you put away, you can’t necessarily control your pension, and you can’t control what the government will do.

Based on predictions of a continued low inflation environment and low interest rates, boomers can’t rely on traditional fixed income products such as bonds to carry the investment load. Instead, they will need to add more equities and income trusts to their fixed income holdings to grow their retirement hoard in a low-inflation, low-rate world, Lovett-Reid said.

Because many boomers don’t have the luxury of playing it safe with a fixed income-heavy portfolio, investment firms have recently developed a new fund class for investors who want the yield of equities but the safety of bonds and GICs. Those seemingly contradictory goals have resulted in market linked or structured GICs thatcombine income-producing Canadian fixed income and equities with other investment vehicles such as international bonds and equities, income trusts and high-yield bonds.

Getting their financial situation in order is only half the battle, said Reid, of RBC Dominion Securities. She spoke of a recent retirement bash for a colleague who, when asked what his post-work plans were, admitted, I don’t know, I just know how to work. While she is immersed in the markets every day on behalf of her clients, Reid said she is spending increasing amounts of time counselling clients on life-planning issues.

The boomers who are facing retirement right now are facing more issues than just money, Reid said. People say, `We’re going to travel.’ That takes up how many weeks a year? What are you going to do for the other 10 months? People need to address how do they keep their mind and spirit happy and healthy in retirement.

She advises people to start compiling a life list, things that they want to do, but currently don’t have time to accomplish.

Do you want to go back to school? Learn a language? Those are the kind of questions I have started asking people.

The August stock market swoon and the recent shock treatment delivered by the U.S. Federal Reserve in the form of a big interest rate cut to get stocks rising again should prompt investors to look over their portfolios and weed out holdings that aren’t ready for rough times.

The August slide, and the economic uncertainty that hasn’t been erased with the Fed’s cut, prompted full-time investor Murray Soupcoff to prune his portfolio.

Over the last month and a half, I’ve sold a lot of my winners in the materials and energy sectors, as well as the few bank holdings I had, and I pretty well sold all my holdings in the U.S. markets, said the 64-year-old retiree who now devotes his days to his investments.

To further `bear-proof’ my portfolio, I sold a lot of my mining and energy small-cap stocks, since small caps tend to get hit the worst during most market declines.

In times like these good, solid, big-cap stocks are to be preferred, in my opinion.

Market observers often talk of a flight to quality as investors redirect money to blue-chip investments in times of economic uncertainty, for which today’s environment certainly qualifies.

The U.S. housing crisis is still playing out, the U.S. greenback’s sinking against most of the world’s currencies and our formerly clipped loonie has soared to parity with the U.S. dollar for the first time in three decades.

So should investors be following Soupcoff’s lead and dumping all but the safest stocks?

I think an investor has to decide which sort of philosophy to have, said David Bruce, an associate portfolio manager with ScotiaMcLeod.

The one I hold is (that) I cannot predict the future and time the entry into and out of the markets. I know from the (investment) literature that very few people can.

The Scotiabank investment adviser believes people should aim to have well-diversified holdings. Having lots of asset classes, small caps, large caps and geographically spread out or diversified I think works well, said Bruce.

August was a particularly stressful month, he said.

My bear-proofing – not that I knew that August was going to be as tough as it was – my portfolios were set up with lots of different asset classes. The adviser’s all-equity portfolio fell 1.6 per cent for the month while his balanced portfolio (60 per cent stocks/40 per cent fixed income) fell 0.6 per cent.

In the up, down and up again month of August, the benchmark S&P/TSX index fell back 1.5 per cent.

That volatility carried over into September until the U.S. Fed was moved to institute a mid-month surprise in the form of a 0.50 per cent rate cut to overnight rates.

The Fed move spurred a rally in international markets but that decision has since raised fears that it may have only delayed inevitable economic troubles.

Still, Scotiabank’s Bruce advises against taking money out of the markets in an effort to sit on the sidelines and wait out any uncertainty.

So many people I have talked to are sitting on a large amount of cash because they are all nervous, I guess they are bear-proofing. But they missed a big upswing in the equity markets in September, he said. Part of my philosophy is just to be there when the big up days (happen). The statistics say if you miss the 10 best days, or 20 days or so on, your returns are far, far less.

Sitting on the sidelines is, to a certain extent, the situation that self-investor Soupcoff finds himself in.

His recent portfolio trimming has raised a fair amount of cash which I intend to hold until November in case of another pullback, he said.

I hope to use the cash to return to the energy and mining sectors and possibly buy back some of the stocks I sold – at lower prices I hope – as well as any other mining, oil or uranium stocks with good potential for the next few years.

Patricia Lovett-Reid, a senior vice-president at TD Waterhouse in Toronto, said investors should worry most about quality.

If you have good-quality, dividend-paying stocks that you are prepared to hold for the long run, then I would not be changing my portfolio right now, she said.

She could not help looking to the past for a hoped-for glimpse of the future, however. Based on an examination of the sectors than prospered during the 12 Fed rate-cut periods that have occurred from 1950 until today, she identified some patterns.

On 11 of those occasions, equities went higher by an average of 11.8% in the three-month period after the Fed rate cut, she observed. We saw strength in consumer staples, consumer discretionary and financials while energy and industrials and infotech tended to lag.

After 12 months, the best performing industries were semiconductors, diversified financials and retailers.

At that point, she put away the crystal ball and reiterated her advice for people to park their money in quality holdings.

You can’t afford not to be in blue-chip investments. You work too hard not to, she said.