Financial Planning, Retirement Issues


Lifetime Pension Payments or lump Sum?

July 21st, 2017 ernie Posted in Pension Plans | No Comments »

Lifetime Pension Payments or lump SumShould we take a buyout which amounts to a lump sum payment or should we take a lifetime pension with benefits? There are pros and cons to both scenarios. Some people will be more comfortable with the knowledge that they will receive a fixed amount for as long as they live. While others feel better about managing their own money and having that lump sum to leave to their children as an inheritance. We will list some of the pros and cons for each. There is no right or wrong answer to this question. It really depends on the person, their situation in life and their risk tolerance.

Lifetime Pension Payments

  • Fixed pension for as long as you live
  • May include indexing for inflation
  • No perceived risk, many are guaranteed
  • You don’t need to worry about the impact of the markets
  • Cannot draw down in an emergency
  • If you die early the money is gone, payments stop
  • There is no inheritance for your children

Lump Sum Payment

  • Lump sum is paid into a registered plan
  • You have control over the investments
  • You also have control over how much is withdrawn
  • In an emergency more money can be withdrawn
  • Must take responsibility for managing into retirement
  • Must plan for lifetime withdrawals
  • Risk of running out of cash before you die
  • If you die early, all money left overs goes to your heirs
  • May lose sleep at night, do you have enough to last

As you can see there are some big advantages and disadvantages to both. Work with an advisor to assess what your payments would be in both scenarios and make the right decision for your situation and risk tolerance.

 

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The FUTURE is approaching NOW

June 21st, 2017 ernie Posted in Life Style | No Comments »

the future is approaching nowThe FUTURE is approaching so fast that they cannot handle it. Many people who read science fiction, will already realize that some of the things that were mentioned in science fiction books a few years ago are now reality. The FUTURE is approaching NOW and we better hang on to our hats because it will only speed up! Technology will change everything. If you brought someone from even 50 years ago into present time, they would be shocked at the devices we have and how our lives have changed.

In 1998, Kodak had 170,000 employees and sold 85% of all photo paper worldwide.
Within just a few years, their business model disappeared and they went bankrupt.

What happened to Kodak will happen in a lot of industries in the next 10 years and, most people won’t see it coming. Did you think in 1998 that 3 years later you would never take pictures on film again?

Yet digital cameras were invented in 1975. The first ones only had 10,000 pixels, but followed Moore’s law. So as with all exponential technologies, it was a disappointment for a time, before it became way superior and became mainstream in only a few short years. It will now happen again with Artificial Intelligence, health, autonomous and electric cars, education,3Dprinting, agriculture and jobs. Welcome to the 4th Industrial Revolution. Welcome to the Exponential Age .

The FUTURE is approaching NOW

Software will disrupt most traditional industries in the next 5-10 years.
Uber is just a software tool, they don’t own any cars, and are now the biggest taxi company in the world.

Airbnb is now the biggest hotel company in the world, although they don’t own any properties.
Artificial Intelligence: Computers become exponentially better in understanding the world . This year, a computer beat the best Go-player in the world, 10 years earlier than expected.
In the US , young lawyers already don’t get jobs. Because of IBM’s Watson, you can get legal advice (so far for more or less basic stuff) within seconds, with 90% accuracy compared with 70% accuracy when done by humans.

So if you study law, stop immediately. There will be 90% less lawyers in the future, only specialists will remain.

Watson already helps nurses diagnosing cancer, its 4 times more accurate than human nurses.
Facebook now has a pattern recognition software that can recognize faces better than humans. In 2030, computers will become more intelligent than humans. (NEVER!/Albert)

Autonomous cars : In 2018 the first self driving cars will appear for the public. Around 2020, the complete industry will start to be disrupted. You don’t want to own a car anymore. You will call a car with your phone, it will show up at your location and drive you to your destination.

You will not need to park it, you only pay for the driven distance and can be productive while driving.

Our kids will never get a driver’s license and will never own a car.

It will change the cities, because we will need 90-95% less cars for that. We can transform former parking spaces into parks.

1.2 million people die each year in car accidents worldwide. We now have one accident every60,000 miles (100,000 km), with autonomous driving that will drop to 1 accident in 6million miles (10 million km). That will save a million lives each year .
Most car companies will probably become bankrupt. Traditional car companies try the evolutionary approach and just build a better car, while tech companies (Tesla, Apple, Google) will do the revolutionary approach and build a computer on wheels.

Many engineers from Volkswagen and Audi; are completely terrified of Tesla.
Insurance companies will have massive trouble because without accidents, the insurance will become 100x cheaper. Their car insurance business model will disappear.

Real estate will change. Because if you can work while you commute, people will move further away to live in a more beautiful neighborhood.

Electric cars will become mainstream about 2020. Cities will be less noisy because all new cars will run on electricity.

Electricity will become incredibly cheap and clean: Solar production has been on an exponential curve for 30 years, but you can now see the burgeoning impact.
Last year, more solar energy was installed worldwide than fossil. Energy companies are desperately trying to limit access to the grid to prevent competition from home solar installations, but that can’t last. Technology will take care of that strategy.

With cheap electricity comes cheap and abundant water. Desalination of salt water now only needs 2kWh per cubic meter (@ 0.25 cents). We don’t have scarce water in most places, we only have scarce drinking water. Imagine what will be possible if anyone can have as much clean water as he wants, for nearly no cost. (wishful thinking???!!!)

Health: The Tricorder X price will be announced this year. There are companies who will build a medical device (called the “Tricorder” from Star Trek) that works with your phone, which takes your retina scan, your blood sample and you breath into it.

It then analyses 54 bio-markers that will identify nearly any disease.. It will be cheap, so in a few years everyone on this planet will have access to world class medical analysis, nearly for free Goodbye, medical establishment.

3D printing: The price of the cheapest 3D printer came down from $18,000 to $400 within 10years. In the same time, it became 100 times faster. All major shoe companies have already started 3D printing shoes.

Some spare airplane parts are already 3D printed in remote airports. The space station now has a printer that eliminates the need for the large amount of spare parts they used to have in the past.

At the end of this year, new smart phones will have 3D scanning possibilities. You can then 3D scan your feet and print your perfect shoe at home.
In China, they already 3D printed and built a complete 6-storey office building. By 2027, 10% of everything that’s being produced will be 3D printed.

Business opportunities: If you think of a niche you want to go in, first ask yourself: “In the future, do I think we will have that?” and if the answer is yes, how can you make that happen sooner?

If it doesn’t work with your phone, forget the idea. And any idea designed for success in the20th century is doomed to failure in the 21st century.

Work : 70-80% of jobs will disappear in the next 20 years. There will be a lot of new jobs, but it is not clear if there will be enough new jobs in such a short time. This will require a rethink on wealth distribution.

Agriculture : There will be a $100 agricultural robot in the future. Farmers in 3rd world countries can then become managers of their field instead of working all day on their fields.

Aeroponics will need much less water. The first Petri dish produced veal, is now available and will be cheaper than cow produced veal in 2018. Right now, 30% of all agricultural surfaces is used for cows. Imagine if we don’t need that space anymore.

There are several start-ups who will bring insect protein to the market shortly. It contains more protein than meat. It will be labelled as “alternative protein source” (because most people still reject the idea of eating insects).

There is an app called “moodies” which can already tell in which mood you’re in. By 2020 there will be apps that can tell by your facial expressions, if you are lying. Imagine a political debate where it’s being displayed when they’re telling the truth and when they’re not.

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How can I retire early?

May 21st, 2017 ernie Posted in Financial Independence | No Comments »

Almost everyone at some time in their lives wonder, how can I retire early? They might be having a tough day at work. Or perhaps they are envious of someone who is retired and the life they are able to leave. When you ask yourself this question, how can I retire early, the next step is critical. If you want to retire early, consumers need to put a plan in place and answer the following questions. Then they must work towards these goals to achieve their objective. Unless you are lucky enough to win the lottery, most of us will just have to work hard to make it happen.

Questions to Help Answer – How can I retire early?

These are the questions that will get you started and help achieve your plans. Work with an expert to ensure that you are considering the right questions and making the correct assumptions.

  • How much should I save
  • How should I invest
  • What will my housing cost in Retirement
  • How much will health care cost
  • Manage your tax liabilities

How much should I save – how much income will you need? What interest rate will you assume? How many years do you have to save towards retirement? What pensions will you receive?

How should I invest – Most experts will tell you focus on blue chip, diverse investments that will protect you from catastrophic losses. The market will go up and down.  Over the long term it should continue to increase providing growth in addition to your savings and help with your retirement goals.

What will my housing cost in Retirement – Will you stay where you are, downsize, move in with the kids or live in a seniors home. Each one of these has different costs and must be factored into your planning.

How much will health care cost – this is a huge assumption with huge impacts. What health coverage will you have? What is your co-pay? How will you afford your medical costs.

Manage your tax liabilities  – taxes are present in life and death. Focus on minimizing your taxes to ensure that more money is left in your pocket.

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Best Way to Avoid Boredom in Retirement

April 21st, 2017 ernie Posted in Retirement | No Comments »

Many people find they do not have enough hours in the day during retirement. While others are looking for help. They want to find the best way to avoid boredom in retirement. With so many people retiring these days, many are struggling, especially after the first year. They spend the first year travelling, completing projects around the house and visiting friends they have not seen for several years. They just did not have time when they were working. Suddenly they have all of this free time and they make the most of it. But what happens after the first year when all of the projects are completed? The budget has been max’d out and your friends are also traveling. Now what do you do?

Best Way to Avoid Boredom in Retirement

There are three important elements that consumers need to consider to avoid boredom in retirement. They are:

  • Sufficient budget
  • Good health
  • A purpose to your life

Having only one or two of these is really not sufficient. In fact having a purpose in life is probably the most important of them all. If you do not have a reason for getting up in the morning, it does not matter how healthy you are or how much money you have. You can survive on less money and varying degrees of health. Having a purpose in life is what keeps you going, challenges you and makes life interesting.

Everyone is different. Your purpose in life will be different from everyone you know. Whether it is a second career, pursuing hobbies, looking after the grand kids or volunteering it is something that you look forward too each day. Find what works for you. Try different things until you have that interest in life that makes you get up in the morning looking forward to the day.

 

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Big problem for new retirees

April 7th, 2017 ernie Posted in Uncategorized | No Comments »

problem for new retireesInitially your really busy catching up on all of the things you have been ignoring or delaying until your retirement. You knew that there would be time for these things once you finished work so you put them off. Many retirees find themselves very busy during the first few months or even the first year, but then something happens. It is the typical Big problem for new retirees. Initially they enjoy sleeping in, they get to travel on their schedule and there is a lot less stress in their lives. This new found freedom is actually pretty nice. But over time they run out of things to do around the house. Travel budgets get depleted and while it is nice to sleep in, you have the rest of the day to fill!

Many people suddenly find themselves missing the social interaction they had with people at work. They miss the fulfillment, achievement, and recognition they got from doing their jobs. They try to keep busy, but keeping busy is just not fulfilling any longer. Now what do they do for the rest of their retirement years?

Big problem for new retirees – Boredom

The B word comes into their vocabulary. They are bored and do not know what to do with their time. There three things you need to enjoy retirement. You need your health, you need a good financial plan that matches your lifestyle plans and you need the most important thing, a purpose in life.

For some consumers finding a purpose in life means looking after the grand kids. For others it means returning to the work force in a new career. Many start hobbies which turn into jobs. The most important element that these thing s must have is that they look forward to getting up in the morning and pursuing their purpose.

Everyone has something different. Each person needs to find out what works for them. Their purpose could change over time as well. They might start out on a hobby which leads to other things that they find more interesting. Whatever it is, try many alternatives until you find the one that works for your personal situation at your time of life.

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Financial Independence in Retirement 

March 21st, 2017 ernie Posted in Financial Independence | No Comments »

Financial Independence in Retirement Much was made of the slogan freedom 55. At the time it signified that a person could retire at 55, living the quality of life they wanted on the savings they had accumulated. Unfortunately many people lost a lot of money during the recessions in 2000 and 2008/09. Freedom 55 has been set aside for the time being. We all want to have financial independence in retirement. More importantly, we want to be financially independent at a certain point in our lives so that we can make our own decisions about work vs retirement.

In fact wouldn’t it be nice at age 45 to have sufficient income to allow you to make a decision about continuing to work, changing jobs or travel for awhile without worrying about money. There is a way to do this and it is just simple mathematics.

Financial Independence in Retirement

All consumers need to do is invest 10% of their incomes regardless of how much you make in a diversified group of stocks. They need to be blue chip stocks and they need to pay dividends. They should have an excellent record of paying dividends and increasing their dividends. While it is slow and boring, it is like the race of the tortoise and the hare. The tortoise won because he kept going and finished the race while the hare fooled around and did not focus on the race.

As your income increases so should your savings commitment. As your savings grows, there will come a time when the dividend income is larger than the money you add to the account every year from your salary.

If you begin later in life, you will have to save more to achieve the same result. You might have to work longer as well. But this approach will clearly ensure you are financially independent at some future point in your life.

Remember save 10%, don’t touch it, invest in blue chips only, diversify, reinvest the dividends and watch your savings grow!

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How to Feel Richer in Retirement 

March 7th, 2017 ernie Posted in Financial Independence | No Comments »

Feel Richer in RetirementMany couples have no idea if they will have enough money when they retire. They worry and want to feel richer in retirement, but do not know what to do. They have not taken the time to assess their situation in terms of income, expenses and savings to really know if they will be comfortable or not. This is really the only way to know if you have saved sufficiently and will have enough pension income. Once they set up a budget and assess their financial situation, they can stop worrying. But there are always ways to feel richer in retirement no matter what your income is. Here are a few steps to take.

How to Feel Richer in Retirement

Always ask for discounts – there is nothing wrong in asking for discounts. Many places offer 10% off for seniors or even as much as half price. That’s a pretty good deal when two people can eat for the price of one.

Stay healthy – and avoid expensive medication, trips to the doctor and worse. Exercise, eat well and not only will you feel better, there will be more money in your pocket.

Look for supplemental income – if you are short of money, get a part time job. Many seniors work a couple of days a week. They like the extra income as well as the social aspect of being around people.

Work longer – once you have completed your assessment, you may find that you need to work longer. That’s ok for many people. Again they enjoy the social aspect and they can build their savings even further.

Save early – start as soon as you get your first job. Set aside 10%, invest it well and forget about it. Amazingly you will have sufficient savings and income by the time your 50 to retire or do something different than your current career. It will be your choice.

Invest well – forget the quick rich schemes. Most people lose money. Focus on blue chip stocks that not only pay dividends, but increase them on a regular basis as well. You will be amazed at how fast your savings will grow.

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How Couples Sabotage their Retirement Plans

February 21st, 2017 ernie Posted in Retirement Saving | No Comments »

How Couples Sabotage their Retirement PlansThere are lots of ways that couples sabotage their retirement plans. When they do they have to resort to solutions that are brought out in the picture. some have to down size, some have to move in with their kids. Many have to cut back on their lifestyle drastically. They even need to keep working well past their retirement years just to maintain the standard of living they like to have. There are lots of reasons why this sort of thing occurs, however we are going to focus on how couples sabotage their retirement plans in this post.

How Couples Sabotage their Retirement Plans

There are lots or reasons, however most can be narrowed down into three main categories. The first one being one of the most important.

Lack of Communication – do both partners have the same objectives about retirement? Travel, annual vacation, spending time with the grand kids? What do you want to do in retirement and does your spouse agree? These are just a few of the items that many couples just do not talk about these things and receive a surprise. Set some joint goals now and begin to make plans on how you will achieve them.

Savings in the Wrong Account – Are you placing your savings in the right account? do you obtain the appropriate tax advantages which help save even more funds? A regular savings account is to easy to access, generates too little income and is taxable. Consider a retirement account that protects your gains and income from the tax man.

Not Matching Savings with Dreams – planning for a new car, saving for travel, matching your retirement income with your retirement plans? These are just a few of the ideas that need to be considered. Develop a plan around when you want to retire, how much money you will need saved and when you will achieve this goal.

A financial advisor can help you with all of these questions. You may need to spend a few sessions with them as you develop your plan and make adjustments based on the reality of your situation.

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Retirement or Independence

February 7th, 2017 ernie Posted in Financial Independence | No Comments »

Retirement or IndependenceGone are the days when consumers expected to retire at age 65! Many are working far past this age to make ends meet. Many are forced to retire due to health issues or layoffs at work. They are all struggling to live their lives and have enough money to even put food on the table.If you are 55 to 70 and reading this post it is probably too late to benefit from the concepts expressed further in this post. You will need to keep working and learn to live on what you can earn and what you have managed to save. Younger consumers still have time to reach financial Retirement or Independence and make their own decisions regarding when or if they retire.

Retirement or Independence

Fundamentally, consumers should aim for financial independence by the time they are 45 or 50. This means they have sufficient funds  to live on comfortably for the rest of their lives. It does not mean they need to retire or will retire.

They might be perfectly happy doing the jobs they are doing. They may decide to pursue their dreams whatever that might be. The point is that they have the freedom to make these decisions and not worry about saving enough money for the time when they stop working. How do they do that?

Start saving and investing as soon as you begin working. Invest a minimum of 10% of your income, manage it and reinvest the dividend and interest income. Let it grow and if you do a good job at saving and managing you will reach financial independence by the time you are 45 or 50.

By all means keep working if that is what you need to do. The important thing is you can decide what your next career or life style will be without worrying about earning money.

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How do I know if I have enough Money to Retire

January 21st, 2017 ernie Posted in Financial Planning | No Comments »

how do i know if i have enough money to retireHow do i know if i have enough money to retire? This is the big question that many people ask themselves as they near retirement. Should I work a few more years? Or can I retire now? What quality of life will I have in retirement with the money I have? There are so many questions that we all have and it all comes down to money for many people. But there is much more to it than just money. Sure you need to have sufficient savings to allow you to live comfortably. You also need to have friends, family and things to do. Your activities will need to be interesting, perhaps challenging and give you something to look forward to every day. But let’s get back to the main question, how do I know if I have enough money to retire?

How do I know if I have enough Money to Retire

Start with developing a budget. You will need to know how much savings you will have when you retire and how much income that it will generate from interest, dividend and mutual fund payments. Next you need to calculate your income from private company pensions and government pensions. When will you receive these pensions?

Your expenses are next. Add up all of your regular monthly and annual expenses for everything that you have. Utilities, food, rent, taxes, clothing entertainment etc. Compare your annual income with your annual expenses to get the first indication whether you will have enough in retirement.

You may need to make some adjustments. This could include working longer to save more money. It could also include reducing your expenses. Perhaps you will need to eat out less. Maybe reduce your utilities or downsize to a smaller less expensive home. You also may need to make adjustments to accommodate the objectives you have with regards to travel, etc.

Work with an expert to gain help with this process to answer the question and plan your future retirement.

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