Financial Planning, Retirement Issues


What is your Financial Life Expectancy

August 21st, 2017 ernie Posted in Retirement Planning No Comments »

If we all knew how long we were going to live, planning our finances would be easy. Many people base their estimate on how long their family lived. This can be a good indicator as long as your parents died of natural causes and lived a simalir life to your own. We now know that this comparison is not always accurate.

With improvements in food, medical treatment and knowledge about how to take care of ourselves, we are all living longer. The question now is what is your real life expectancy and how will you plan for it financially?

Life Expectancy and Financial Impacts

The first step is to figure out your life expectancy based on genetics. Let’s assume both parents lived to age 75. It could be an easy assumption that their children will live until around age 75 as well.

With the help of a financial advisor you could use this age as a guide to calculate how much money to take out if your savings so that it will last until your demise. This is a first step only. You may find you have to work a bit longer to achieve the life style you want while in retirement. Or you have sufficient savings already.

Now assume you will live 10 years longer. Better food, better medical care and a healthier life style could contribute to living 10 or even 20 years longer than your relatives!

Adjust your financial plan for a longer period. Will you have sufficient funds? Will you need to work longer and save more? Perhaps you will need to cut back on expenses to ensure a comfortable life style as you live longer.

Do your analysis now and make some informed decisions to ensue you have sufficient funds to meet your extended life expectancy!

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Are You on track to a secure retirement

December 21st, 2016 ernie Posted in Retirement Planning No Comments »

Are You on track to a secure retirementThe question, are you on track to a secure retirement is a common one that many people have. They may be nearing retirement or their company is about to provide a special retirement plan. They wonder if they should take it and whether they will be OK financially in retirement. Whether you are retired about to retire or have a few years yet to work it is never too late to assess whether you will be comfortable in retirement.

Are you on track to a secure retirement

One of the best ways to answer this question is to build a retirement budget. First you should identify where your income is going to come from. Your income may include company pensions, government pensions, income from investments, and other miscellaneous income that is on a recurring basis.

Next you must consider all of your expenses. Your expenses will include all of the regular monthly expenses such as heat, Hydro or electricity, utilities such as cable TV, telephone etc. You should also include your taxes and mortgage payment if you have one. Your home is going to need maintenance over the years and you should budget an amount each year for maintenance of your home. The same applies to your car and whether you have a car payment or car maintenance, insurance etc. this should be part of your budget.

Once you have totaled up all of your income and expenses you will have some idea as to whether you will have sufficient money during your retirement.You may find that your expenses are going to be greater than your income. You will either have to work longer or cut your expenses. You may also decide that you will increase your savings if you have time.

Another area that we did not mention is all of your expenses associated with your free time. You now have a great deal of free time to pursue hobbies, travel and even go back to work. Depending on what you decide he may need to budget for this activity.

A good plan developed early, reviewed regularly and adjusted as needed will help to ensure a secure retirement.

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5 Essentials to the Best Retirement

March 21st, 2016 ernie Posted in Retirement Planning No Comments »

Essentials to the Best RetirementSometimes you do not get a choice in whether you retire or not. Your company may lay you off or offer incentives that cause you to retire earlier than planned. Whatever the reason, it is never too late to start thinking about the essentials to the best retirement plan you can have. Planning now before you retire or are forced out will ensure that your retirement years are much better than they might have been otherwise. Defining your own schedule will provide you with independence and freedom to make your own decisions on your terms.

Essentials to the Best Retirement

Take the time to address the following 5 questions. Your best answers will be the immediate ones that come to mind, however revisiting them from time to time as you near retirement or events in your life trigger changes. If you can answer these questions you are well on your way to planning the best retirement.

Why Do I Want to Retire – tired of your job, looking for a change, company initiated, health reasons are just some of the reasons that might push you into retirement

What Should I Accomplish before Retirement – are there major achievements that you want to accomplish before you retire – major projects at work, pay off the house and mortgage, save for a trip, pay off all loans, downsize, major upgrades or renovations to your home, retrain for another job are just a few of the things you might consider.

Important things to Accomplish After Retirement – what is your plan after retirement – you cannot just sit and watch TV or play golf. Will you find a part time job, go back to full time work, volunteer, look after the grandkids, take up hobbies that you have put off for a long time?

Define Perfect Days in Retirement – what would be the perfect day in retirement? This is very personal and will depend on the answers to the above questions. For some it will be a perfect round at golf, while others will be achieving a major objective that you have set for your self.

Impact on My Spouse – this is one of the most important issues to consider. Will your spouse retire at the same time? What will he or she do during retirement? Do they share the same or at least complimentary goals and objectives.

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Rent or Buy in Retirement 

March 7th, 2016 ernie Posted in Retirement Planning No Comments »

Rent or Buy in Retirement This is the big question for many people who are contemplating retirement and also thinking of downsizing. Should they Rent or Buy in Retirement? Should they sell their current home and purchase another smaller home that has a lower cost profile or should they invest their equity from the sale of their home and rent a place? This is a tough decision for many people on an emotional level as well as on a financial level. We will discuss some of the issues that consumers should consider when making a decision like this.

Rent or Buy in Retirement

Advantages

  • Mortgage interest write off
  • Property tax write off
  • Asset appreciation
  • Freedom to make changes as desired
  • Renting can mean a short term commitment to test a location
  • Renting might be cheaper – run the numbers
  • Moving into a brand new apartment with new amenities

Disadvantages

  • Repairs and maintenance of a home
  • Gaining access to equity can be difficult or slow
  • Selling a home can take a long time
  • Coming up with a down payment to buy a home
  • paying the mortgage each month
  • Landlord can change his mind and force you out
  • Apartment is unlikely to be upgraded over time
  • Leaving the family home can be difficult

Each person needs to evaluate each of these issues carefully and then makes the best decision for their personal situation. They also need to run the numbers for both scenarios to assess which one meets their financial needs. Build in inflation for things like rent increases, utilities etc to ensure that you do not get a big surprise.

 

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Retirement is not Just About Money

January 7th, 2016 ernie Posted in Retirement Planning No Comments »

Retirement is not Just About MoneyRetirement is not just about money, it is much more than that. Yes you need to have sufficient money to keep you living comfortably. But it is also about the type of lifestyle that you want to lead. It can take some getting used to. After all you are giving up your work contacts in many cases and losing that daily interaction you received from going into work. Many retirees are looking for the right balance to enable them to enjoy their new retirement lifestyle. They turn to other endeavors to gain what they need to fill their days, to find satisfaction out of their life and to pass the time. Here are a few examples of what retirees are considering. Usually the first 6 months is no problem. After that, boredom sets in unless you do something about it.

Retirement is not Just About Money

Social Butterflies – These folks spend a lot of time with friends in each others houses, going to social events and spending time with each other.

Community Minded – Volunteering at a local charity, helping at events and getting involved in the community provide a great deal of social interaction as well as contributing to a feeling of self-worth.

Mall Walkers – Exercise might be on their mind, but they also meet friends at the mall and combine exercise with social interaction in a pleasant environment.

Still Working – Some go back to work in different industries or even the same industry. They might need the money, but many miss the interaction with colleagues and this gives them a chance to get out each day to meet friends, colleagues and the public.

Sports – Now you have more time to follow the sports you never had time for in the past. Golf, hiking, bicycling etc

Snow Birds – Yes they go south for the winter, but what do you do when you get there. Basically the same things as mentioned above. They pursue the same activities in warmer climates.

Family – For some this is a huge issue. Babysitting the grand kids, spending time with family, supporting someone who needs a lot of help.

Happiest – The most satisfied people appear to be the ones that have social involvement with others regardless of how they obtain the interaction with others. For many it is a combination of all of the above and you will live longer by interacting with others.

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Things to do Before You Retire

November 7th, 2015 ernie Posted in Retirement Planning 1 Comment »

Things to do Before You RetireWe have divided out list of things to do before you retire into two categories. First there is the usual financial priorities which we will list in a moment. These are the ones that most people focus on. There are other areas that are non financial that are also important if you are going to truly enjoy your retirement, regardless of when you retire.

Financial Things to do Before You Retire

The first section is all about creating the right conditions to provide as much flexibility as you can financially to enable you to do the things you want to do in retirement, whatever they are. Basically it is maximize income, minimize expenses and have a budget that helps you avoid more debt.

Pay off the Mortgage – no mortgage payment frees up all kinds of cash flow that can be used for all kinds of things. Without this burden you have much more freedom to live in the manner you wish.

Reduce debt i.e pay off cars and loans – the same applies to loans and other debt that you may have. Pay it off, go to one car, focus on reduce your debt payments to zero so that you have the flexibility of cash flow to deal with whatever comes at you later in life.

Ensure you have sufficient pension income and savings income – review your income and where it will come from. If you feel you do not have enough, added savings may be in order, reduced expenses or even downsizing might be needed.

Minimize your expenses – we tend to be a bit frivolous with money especially the small change. Before we know it the money is gone. Watch the big and especially the small expense areas. Reduce or eliminate where possible to build cash flow, to build savings and have more free cash to do some of the really important things you always wanted to do.

Lifestyle Things to do Before You Retire

You may have all of the money that you need to live a comfortable lifestyle, however if you are bored, not challenged or miss the social side of work there is a good chance of really not enjoying your retirement years. Focus on the following areas can sometimes help with these issues.

Create goals – for yourself, review them regularly, adjust them as needed and most important build a plan to actually make them happen, just like you might at work. This will give you purpose and something to look forward to.

Getting adjusted to Retirement – does take time and it is different for each person. Some have so many hobbies and things to do that they wonder why they ever worked while others watch the grass grow and are bored. Review all of the items in this post and figure out what is right for you and what would make it interesting for you during your retirement.

Exercise and eat in a healthy manner – to stay healthy. If you do not have your health you are not going to enjoy retirement. Your health is a precious commodity that you can lose at any time.

Travel – may not be for everyone, but if you want to travel do not put it off. There will come a time when you are unable to travel and you will wonder why you did not do it.

Live on a reduced budget – let’s you sleep at night, especially when you know you have enough income and savings to live comfortably. Establish a realistic budget, track your expenses and adjust as needed.

Keep in touch with friends – having a social life is incredibly important. Never lose site of your friends, help them when needed, and enjoy them for as long as you can.

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Retirement Numbers to Watch

September 21st, 2015 ernie Posted in Retirement Planning No Comments »

Retirement Numbers to WatchWhen you are approaching retirement there are lots of things to think about, but there are a few retirement numbers to watch and pay attention to. You want your money to last and you want your retirement to be pleasant and comfortable throughout your retirement life. If you are going to achieve these objectives, consumers need to pay attention to the withdrawal rate from your savings, the level of pensions that you will receive and the amount and timing of the government pensions that you will receive. Pay attention to these numbers, make the right decisions and re-evaluate as you get closer to retirement to make sure you working with the most up to date information.

Retirement Numbers to Watch

Withdrawal Rate – this is the rate that you withdraw from your savings. The amount you need vs. take will depend on a number of factors. First you need to decide just how long you need your savings to last, what the income level is from your savings and of course how long you will live. Many advisers suggest 4% as a reasonable withdrawal rate. We happen to think that the rate you use should depend on the income level from your investments and the health of your investments. Some years when investments are not doing well you may want to take less, while in good years you can afford to take more out.

Reliance Rate – percentage funded by pensions from employer and government. How much will your income amount to in retirement compared to what you were making prior to retirement. The difference is how much you will need to make up from savings, perhaps working longer and expense reduction.

When to Claim Government Pensions – claim early and you will suffer a penalty i.e. a reduction in the amount paid out, claim later and the pension amount goes up, but you have to do without that income until you claim it. Can you afford it? Will your cash flow allow you to delay your claims?

Add up all of your income from all sources in retirement, compare to your current income level and develop a plan to source the difference in income.

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Have You Saved Enough for Retirement

September 7th, 2015 ernie Posted in Retirement Planning No Comments »

Have You Saved Enough for RetirementHave you saved enough for retirement? Most people don’t know and do not know how to even figure it out! This is the sad reality and one of the things that this website and writer are trying to help consumers with. You can meet with a financial adviser, but that typically costs money. Unless you have some kind of investment portfolio, they probably will not want to spend too much time with you. What can you do to answer the question, have you saved enough for retirement? The answer is fairly simple and we will attempt to help you with  this question.

Have You Saved Enough for Retirement

Start by assessing where your income will come from during retirement. Do you have social benefits, old age pensions, medical benefits, company pension, government pensions and any savings that you may have. Add all of the sources of income you will have during retirement to gain some idea of the income available to you during retirement.

Also take a look at how long these various incomes will continue, whether they will increase or not and how safe they are. Government pensions are often indexed based on the inflation rate. Other pensions may not increase as much. Savings income will change as well based on the type of savings you have and how they are invested. Always try to preserve your original investment and just live off the income.

Next compare this number to your current level of income to see if you have enough to live on during retirement. If your income during retirement is less than your current level of income don’t despair. You will need to make changes, but maybe not as much as you might at first think.

The next step is very important. What are you going to do about the situation you find yourself in? Can you save more money, can you reduce your expenses, can you share expense with a family member etc?During retirement some expenses will naturally be reduced. Commuting and clothing costs will certainly change. Asses how your expenses will change compared to what they are now.

Develop a plan to address this problem and begin working towards developing the income you need to have in retirement. Or perhaps how you can reduce your expenses overall.

Note that your savings are very important, both the amount and how you invest it. Always invest diversely, live off the income it generates to maintain the principle during your retirement. If you spend the principle, it is gone and there may not be anyway to replace it. Spend the principle carefully and wisely if you have to. It has to last a lifetime during retirement.

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Money Moves for a Happier Retirement

August 21st, 2015 ernie Posted in Retirement Planning No Comments »

Money Moves for a Happier RetirementMixed messages about retirement are everywhere. Most people are confused about what they will do in retirement. They just float along through life and hope for the best. The message here is that you can love retirement, have a great time, be fulfilled and satisfied while living comfortably. All you need to do is do a little planning and preparation before you retire to have the type of lifestyle that you really want to have. We cover a few Money Moves for a Happier Retirement in this post that are based on experience as well as many years of research.

Some people ask, “What will I do with my time?”. Will I be bored, will I keep working and what about all of the people from work that will be missed? Some people are so ready to get away from work that they really don’t care what they will do. The sad reality is that they may end up being bored to death literally! Then there is the big elephant in the room! Do I have enough money to live my life in retirement the way that I want to ? If you do not do a little planning and saving, they you probably will not live a happy retirement and certainly not in the manner you expected.

Money Moves for a Happier Retirement – Start Planning

Start planning for retirement! When will you retire? What debts will you have when you retire? What will you do in retirement? Travel, work, babysit the grand kids, or just take up the hobbies you never had time to do? There are some basic things you can do to begin answering these questions.

The first step is hire a financial planner who can walk you through the financial side of things. You may want to meet with several in order to get several opinions. They should be reviewing your income in retirement, your expected savings at retirement, your life style plans while retired and your overall health relative to how much money you will need while retired. This will take several iterations before you settle on a final plan since there really is a lot to think about.

Visualize what you will do in retirement since this is a really big issue for many people. Even if you are an avid golfer, you cannot golf all the time. What hobbies will you take up? what will you do with all of that time.

How much money is available from your employer retirement fund? This is probably a first step. Find this out and then figure out how much more you will need to live the lifestyle that you really want to have while retired. The early you begin planning and take action the better off you will be in retirement!

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Retirement Penny Pinching

July 21st, 2015 ernie Posted in Retirement Planning No Comments »

Retirement Penny Pinching

Are you worried about retirement penny pinching that you are going to have to do? Because you did not save enough for retirement or suddenly found yourself out of work or have an illness that prevents you from working? These are all issues that unfortunately cause many older people to either pinch pennies in their retirement or find another job.  No one wants to be uncomfortable in retirement and we all want to enjoy the good life after working all of our lives at a job that we may or may not have enjoyed. How do you avoid having to be careful about how much money you spend while retired?

Retirement Penny Pinching

The obvious one is to work longer but not everyone can. Even if you do work longer it never hurts to have a backup plan that will help you if you suddenly find yourself out of work and unable to live the life you always thought that you would. Here are some ideas in addition to working longer.

Reverse mortgages – are advertised a great deal and have the benefit of providing access to the equity you have in your home. It does mean that you will have a mortgage which many people do not like to have after they are retired, but it does provide a source of funds to use while retired. Remember to negotiate the best terms you can and especially a low interest rate

Reduce spending – in non essential areas. Some might consider this penny pinching, but it is also about setting priorities so that you spend money on those things you want vs those that are really not needed.

Save more – if you are still working, set aside more money for retirement. The more you save now, the more you will have during your golden years. Remember to invest wisely, conservatively, diversely and seek several opinions before you make your decisions.

Start saving early – for the youngsters that are reading this, begin saving for retirement now. I know it seems like a long way off, but the beauty of compound interest means you will have a large sum sitting their waiting for you when you do retire and if you have a pension, then it is a special bonus providing you with an excellent quality of life in retirement.

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