Financial Retirement Planning


Working Beyond 60 Needs a Healthy Body

September 1st, 2013 ernie Posted in Retirement Risk No Comments »

Working Beyond 60More and more people are planning to work well beyond the age of 60 years of age, simply because they cannot afford to quit their jobs. They did not save enough money for retirement and they do not have enough money coming in from pensions, so there is no choice but to work. As long as their health holds out they can continue working with no problems, but as soon as health issues get in the way, they may not be able to work even sitting down at a desk. What are they to do at this moment?

This is a really tough question that more and more baby boomers are beginning to face. They do not have enough money saved for retirement and they cannot work. How will they survive?

Sufficient savings no worries

If you have sufficient savings that can generate an income for you then you really have no worries. Continue working as long as it is interesting and meets all of your personal objectives. This is the most enviable position to be in since you can really quit when you want and retire or find another job that gives you some pleasure. But if you do not have enough money, then it is time to start saving money.

Not enough, top up savings

Save as much as you can for retirement. If you are starting late, you may not be able to save enough, but then something is better than nothing. Talk to a financial advisor and figure out how much you will need to save in order to have the life style that you want to have, then start saving money now.

Working Beyond 60

Even if this means you have to work well into your 60’s at least you will have a plan that will make your life a little easier and if your health gives out and you cannot work then you have something that you can fall back on. Working when you know you have savings to fall back on is much easier than when you have nothing or not nearly enough saved and must work just to make ends meet.

Set aside a minimum of 10% from every paycheck and watch it grow over the years. The earlier you start the faster it will grow.

A healthy body helps

Keep your body healthy. Exercise a bit, go for 20 minutes walks every day and eat the right foods. The odds will be better for you when you exercise that you will maintain your health and if you need to work you will be able to. This is one of the most important things you can do to ensure that you have a healthy body if you need to work.

Take care of it and avoid getting some of the ailments that many older people get when they do not eat right, exercise etc. Stop smoking and reduce your drinking as well to protect your body.

Health issues get in the way

When you do get sick it usually means time off the job. Serious health issues can take a long time to deal with and they can mean you have a lot of extra cost as well as reduced income. With a large savings and paying for health insurance until Medicare kicks in will help you avoid becoming totally broke as you age. Health issues can come up at any time so you need to be prepared .

Plan for surprises

One of the largest issues that many people have to deal with is that they are not ready for surprises from a financial perspective. Whether it is repairs to the car or the house or some other major issue, if you do not have the savings for major issues such as these then the money has to come out of your current income and this can be difficult to deal with.

It also means you must keep working for a longer period than perhaps you planned. Always have at least 6 months of equivalent income saved up to deal with layoffs, and other emergencies that occur from time to time. If you have to dig into your emergency savings, top it back up as soon as you can.

For more thoughts about retirement risks, click here.

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6 Retirement Surprises

August 18th, 2013 ernie Posted in Retirement Risk 1 Comment »

6 Retirement SurprisesWe live with our parents for approximately 25% of our life, then we are working for about 40% of our lives and the remaining time we are on this earth is spent in retirement. This is the  time when our pensions and our savings are most important to ensure that we have the quality of life that we have always wanted. There are many things that can get in the way of attaining and keeping the quality of life that we want to have in our retirement.

Six Retirement Surprises

Here are 6 retirement surprises that we all need to pay attention to during retirement and also when we are planning for our retirement.

Live within your means

We have all of this extra time to spend and sometimes people plan trips etc that they have been waiting for until retirement. They may buy a new car and they may spend a lot of money upgrading their homes all of which eats into their savings and as their savings decline, there is less income from the savings to help them with daily expenses. Plan your major expenses and make sure that you are living within your means to enable a quality of life that you desire as you get older.

Budget changes

If you do not have a budget, you should. Once you have a budget, living within that budget is important as mentioned above. But sometimes there are changes to your budget that are needed to reflect additional income as well as additional expenses. We suggest updating your budget at least once per year to assess your ability to live within your means and make sure you have sufficient income to live on.

Health changes

Health issues can creep in any time. From heart attacks to strokes, diabetes and on and on. Most people will have some form of health insurance to cover them. However there is the deductible and most only cover up to 80% of the health bill for hospital stays etc.. Even 20% of a $200,000 is $40,000 which is a substantial amount to cover. If you or your spouse needs to go into a home to be cared for the bill for this can be high as well. Even at $3000 a month or $36,000 a year, this is a substantial amount that needs to be covered.

Inflation

For the past 20 years our governments have been able to control inflation and keep it in the manageable range of 1 to 3%. Some countries have experienced far higher levels of inflation. We can only hope that were we live will remain in the 2% range for the foreseeable future. Even 2% over 20 years adds a hefty increase to your daily bills. This is something that should also be planned for.  A 40% increase over 40 years is substantial.

Not working forever

While some of us may plan to work well into our 60’s and beyond the reality is that many of us will not be able to work due to health issues. Availability of work is another factor. We have seen some 80 year olds still working. They are probably for the money and also for the social part of the job. However as soon as your health goes or as soon as they downsize it is much more difficult to find a job unless it is a minimum wage job.

Volatile markets

The last 30 years have seen really volatile markets. In 2008 the market dropped by 50% and has since come back and exceeded the levels pre 2008. If you need to withdraw money from your savings plan or your retirement when the market is down. You are actually eating into more of your capital than may have been planned or budgeted. Accounting for these changes is necessary to ensure that you will have a retirement plan that lasts.

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Main Financial Risks in Retirement

May 1st, 2013 ernie Posted in Retirement Risk No Comments »

Financial Risks in RetirementFinancial Risks in Retirement – Everyone should have a retirement plan in place to ensure that they have explicitly considered, and have strategies in place to address any or all of the issues listed below. When you review the list, you may feel that some of these may not be ever an issue for you. That’s fine, set those aside and focus on those that you are concerned about and if you have time and / or the inclination come back to the others and address them. At least you will have a plan to deal with those issues that concern you the most.

The main Financial Risks in Retirement which may occur during retirement:

Outlive your money: Many people are living longer than their ancestors and their parents these days and as a result must plan for longer life. Running out of money can make retirement very uncomfortable and even miserable. Take stock of your assets and plan withdrawals from your savings in such a manner that they will last beyond your anticipated demise.

  • Ensure a reasonable plan is in place: expense level, income sources, asset draw
  • Develop plan at least five years before retirement, and review it annually

A temporary loss in value of investment assets, resulting in less income: the stock market, the housing market etc appears to take corrections every decade. When this occurs will this impact your living standard and will you be able to sustain your living standard? What plans can you put in place that will sustain your income and allow you to sleep at night without worrying about whether your assets will be available or not?

  • Is this a major proportion of retirement income?
  • Are the investments balanced for regular income, versus growth?
  • Structure portfolio to ensure no income is available for at least a five-year horizon
  • Are guarantees needed to lock in a portion of this income.

Other Risks that Consumers do not Like to Consider

Death of a spouse, and resulting reduction, up to 50%, pension income: we have seen it over and over again. One spouse will die and the company pension plan is halved or eliminated as a result leaving the other spouse without the funds to live comfortably in their remaining years. Decide before you retire if a survivor option should be added to your retirement plan?

  • Is this a major proportion of retirement income?
  • Is life insurance required?

The need for long-term care, resulting in the depletion of assets: What is the probability that you will need long-term care? Long term care is extremely expensive and all of your assets can and will be consumed if you spend any significant time in long-term care. Can your spouse look after you? Will your spouse look after you?

  • Disability for one, or both, spouses. Others close wishes to retain or live in the home
  • Other assets which can be sold to provide additional funds?
  • Do a long-term insurance analysis.

Continuing elderly parent or disabled child support: who will look after your disabled child when you are gone? How will you work and look after your elderly parents and your disabled child?

  • Is this a large proportion of the expenses?
  • Are RRSPs, and Henson trust in the will.

Inability to handle your financial affairs: this can happen slowly over several years providing you with time to prepare wills etc., or you can be suddenly smitten with a stroke or heart attack leaving you unable to look after your own affairs. What do you do in a situation like this? What does your spouse or family do in situations like this?

  • Ensure that wills and POA’s are in place in advance.
  • Create a complete estate plan: beneficiaries, testamentary trusts, funeral costs.
    Is joint insurance required to cover: estate capital gains and RRIF taxes?
  • Large legacies or charitable gifts?
  • Special circumstances or considerations e.g. business owner?

Summary

We may not have covered all of the situations that we all must deal with in retirement and as we age. However these appear to be the main issues and if nothing else we hope that it will get you thinking about your personal situation and making some plans with regards to those issues. Doing nothing is really not an option although many people do just that and then have to live with the consequences.

Don’t be one of those people. Take control of your life and make sure that you can live the life you want for yourself and do not become a burden for your family. In the end no one wants to be a burden. We all want to be independent as much as we possibly can even if we are incapacitated.

For more information about retirement risk, click here.

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Manage Financial Risks in Retirement

July 21st, 2012 ernie Posted in Retirement Risk 1 Comment »

Manage Financial Risks in RetirementWhile everyone should have a retirement plan to help them ensure they will have sufficient funds to see them comfortably through retirement. They should also assess that plan from a risk perspective to ensure that their plan will withstand any curve balls that life throws at them. This is part of the risk analysis that every one of us should be doing to ensure that we and our families have a comfortable life in retirement.  We have put together  a list of 7 items to consider (there are probably more) that a proper plan should consider. Manage financial risks in retirement to increase the odds of a satisfied retirement. If you have these at least considered and have taken mitigation steps then you are well on the way to making sure that you will be ok.

We assume of course that you already have a financial plan in place. If not the first step is to build one and then consider these issues from a risk assessment perspective.

Manage Financial Risks in Retirement

Here is our summary and we discuss each one in a little more detail later in this post.

  • Outlive your money
  • A temporary loss in value of your investments, resulting in decreased income
  • Death of a spouse, decreased pension income
  • Long term care requirements
  • Elderly parent support or disabled child support
  • Inability to handle your financial affairs
  • Special circumstances not in the above such as a business owner

Outlive your money

This is probably everyone’s worse might mare. No one can predict how long you live other than considering actuarial tables, statistics and looking at your own older relatives. We are all healthier now than our parents were and we are living longer.  chances are that you will live at least 5 years or maybe even 10 years more than what your parents did. Tack on another 10 years to your financial plan to see what impact that has on your assets. You may find that you either have to save more , live on less or keep working!

A temporary loss in value of your investments, resulting in decreased income

If you depend on your assets for income and they go down with the stock market, what will the impact be on your plans?  This happens all of the time as we have seen over the past 30 years. What is the impact on your income with a 20 % decline in your asset value? What do you need to do to make your assets less prone to this kind of income drop?

Death of a spouse, decreased pension income

Many spouses depend on each others income to have enough money to live on as well as share expenses. Some pensions drop by half when a spouse dies and at the very least government pensions will stop for the spouse that passed away.  Can you deal with a 50% drop, or do you need additional income sources to protect your self and you spouse in this kind of situation.

Long term care requirements

Sometimes we live a long time, but this does not always mean we have our mobility or our mental faculties with us. Long term care is expensive and you either need to have sufficient funds to cover the expenses or you should have long-term care insurance. Evaluate the impact of one or both of you requiring long-term care?

Elderly parent support or disabled child support

If this is a concern for you and you are near retirement, you may want to assess your parents assets as well as your own and whether you have sufficient funds to pay and provide elderly parent support.

Inability to handle your financial affairs

A stroke or an accident, or some of the other major diseases can rob you of your ability to make your own decisions.  Is your will up to date as well as your power of attorney ? Does the person you have designated know what to do and what your requirements are. Avoid a stranger making these decisions, by having an up to date power of attorney in place.

Special circumstances not in the above such as a business owner

There are thousands of special circumstances that we have not mentioned.  Some will come as a complete surprise, while others will not be much of a surprise based on your family’s situation. Take a moment to evaluate those and decide if you need to do some risk analysis to help you deal with these situations.

This is a start, everyone of us should be doing this sort of risk analysis prior to retirement and after retirement to assess if anything in your savings plans, your retirement age or your life style needs to change!

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