Financial Retirement Planning


Seniors Saying Yes too Often are Getting Into Financial Trouble

December 7th, 2017 ernie Posted in Life Style | No Comments »

Money Management for KidsMore and more often we are hearing about seniors saying yes too often are getting into financial trouble and then have nowhere to turn. They may be supporting elderly parents who themselves do not have the funds to pay for their own health care in long term stay homes. Then there are the children who used to a life of never wanting for anything expect the same thing as grownups. They forget that their parents worked hard for the money and saved before they bought a big home, car etc.

Why are Seniors Saying Yes too Often are Getting Into Financial Trouble

In most situations, they just want to help their family members now while they are still alive. If they help them now they can also enjoy what their financial gifts have purchased for their kids. Quite often it is the children putting pressure on the parents for them to help out.

Perhaps a down payment on a home or a new car. There credit card bills are due and they need help paying the bills. It might even be verbally worded as a loan, however one the money is given, most never see a penny back again. If you do give money to a family member, assume you will never see it again. If you do it is a bonus.

Seniors sometimes give too much money away. Then they find that they are living longer than anticipated and run out of funds to pay for whatever expenses they have. Many are forced to take room mates, move in with the kids or just downsize to a one room apartment. If only they had been more careful with their money and perhaps had held back a bit. If only their kids were now in a financial situation to help them now.

Sadly, the money is gone and no one has enough to support their parents in this kind of situation. The answer is that every senior should evaluate the impact of loaning or giving money to a family member. Will impact their lifestyle or quality of life in the future? What will be the impact if you never see this money again?

Make plans now to set up a budget that ensures you will have the funds you need to pay all of your bills and living expenses. Then if you think you will have money left over, you might consider gifting funds to your family while still alive.

For more information on life style issues and retirement, click here.

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Investment strategies and using full service Investment Advisors

December 1st, 2017 ernie Posted in Investing | No Comments »

Investment strategiesI recently had a conversation with my kids around what the MERs mutual funds charge and also what sales commission is charged when you buy or sell an equity (I use equity and stock interchangeably). Mutual funds charge from 1% to 3%, the norm being around 1.8% whether you make money or not in any given year. Investment strategies for many consumers never considers these costs, however over the years, the approach you take can add considerable costs to your plan.

Trading directly in equities (stocks) with a firm like Edward Jones result in high trading fees compared to other online no service trading accounts with the banks etc. Over the life of your RRSP savings, a significant amount of money could be saved and reinvested making even more money by using discount traders and staying away from mutual funds. So why not invest directly in equities instead of mutual funds? The devil is in the details.

My own personal strategy is to use Edward Jones  to bounce ideas off of and for them to keep me abreast of changing legislation that could impact me. There have been two major ones over the past 15 years which has saved me quite a bit of money. The amount I pay Edward Jones for MER and trading fees has been well worth it. If I was trading more often then using a discount broker is definitely the way to go.

Investment Strategies

These are some of the rules that I try to follow with regards to my investment strategy.

  • Set goals related to when you want to retire and how much you will need to maintain the standard of living that you want to have when you retire. Your income will come from pensions, CPP, OAS, and Savings. Life will throw curve balls at you so you need to be prepared for whatever comes your way.
  • Your investment advisor works for you and should provide you with guidance however only you understand your investment goals and direction and requirements over your lifetime. You need to pay attention and learn as much as you can to make well informed decisions, just like your job.
  • Treat investing like a project as part of your job. Apply the same approach to investing that you would to do your job. This means you need to pay attention all the time to your investments. Set a time twice a year to do a full review. Are you meeting your goals?
  • Diversify your investments between high-risk, moderately conservative and ultra conservative. Your investments should be roughly 10% high risk 85% moderately conservative and the rest in cash or money market waiting for opportunities.
  • Always diversify your investments across industries, banking, energy, communications, goods and services.
  • Invest in high-quality stocks for equities, that are paying regular dividends, and have a history of increasing their dividends at regular intervals.
  • Minimize trades to minimize costs for trading commissions, only rebalance when absolutely necessary.
  • Mutual funds should be part of your plan but only 10 to 15% of your total investment strategy. Although you are paying MER, investing in a dividend focused mutual fund gives you additional diversification.
  • Many people use the DRIP approach, dividend reinvestment plan, offered by many companies to avoid paying advisor fees when they buy stock. This is a great way to increase your investment in the quality stocks that your own, without additional advisor fees.
  • If you invest in high risk stocks, that appreciate considerably, lock in profits by selling a minimum of 50% of the shares you own. High risk stocks can go up and down very quickly. Remember until you sell you have not locked in any profits or losses.
  • The stock market goes through minor corrections of 10% every year. Be prepared to ride out these volatile situations, since history has shown the stock market will appreciate 10% and more after a correction within six months. Major corrections such as 20 to 25%, example 2008 and 2009, take longer to correct. You only lose money if you sell at a loss, the market corrected itself and has more than doubled since 2008.

With this strategy in mind, utilize your investment advisor as a consultant that can help you adjust your investment strategy over the years. They will try to get you to make trades to rebalance your investments etc. but if you’re comfortable with your strategy there should be no need to sell and trade equities very often.

If you follow this approach, the commission you pay on mutual funds will be minimal, and the trading costs associated with trading through someone like Edward Jones or another full-service investment company will also be minimal.

 

 

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4 Questions to Ask Yourself Before Retiring

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

4 questions to ask yourself before retiringWith so many people retiring over the next 20 years, many are wondiering if they will have enough money to last through their retirement. Should they keep working? Should they retire now and enjoy life? What are the questions we should ask ourselves to make sure we are ready for retirement. We have assembled 4 questions to ask yourself before retiring which many people will find challenging. It is definitely worth it to address these areas to ensure that you will achieve your objectives in retirement. Another key recommendation is to discuss your retirement plans and the answers to these questions with your partner or spouse. They need to be on board and satisfied with the lifestyle that you both will have in retirement. Here is a list of 4 questions that all consumers approaching retirement should consider.

What are the 4 Questions to Ask Yourself Before Retiring

It should be pointed out that these 4 questions are all inter related. The decisions you make in one area will impact the decisions that you make in another. Consider them carefully and review the answers every 6 months to ensure you are om course to achieve your objectives.

  • Will You Have Enough Money
  • Where will you Live
  • What will I do With My Time
  • How will Retirement impact My Financial Life

Will You Have Enough Money – Add up all of the income that you will receive in retirement from pensions, savings and even part time jobs. How does this income compare with what you make now. Do you need to save more or work longer to meet your objective.

Where will you Live – will you downsize or stay in your current home? Can you afford the expenses associated with your current house, the taxes, the upkeep and the regular utilities etc. Do you need to move to control your costs and put them in line with your retirement income?

What will I do With My Time -Suddenly you will have 40 plus hours a week to fill. Once you complete all of the projects around the home, golfed as much as you want, traveled and got all of this out of your system, what will you do? How will your plans affect your expenses? Do you have sufficient money to do everything you want?

How will Retirement impact My Financial Life – There will be lots of changes to your lifestyle, your expenses associated with work that you no longer have etc. Take a few minutes to determine what the impacts will be on the positive and minus sides. With more time on your hands you could end up spending more money than you planned.

Revisit these questions and the answers you gave every 6 months. There will be changes and adjustments you need to make that reflect your plans and the reality of your life.

For more retirement income discussion, click here.

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Prioritizing Debt Reduction or Adding to My Saving for Retirement

November 7th, 2017 ernie Posted in Debt Reduction | No Comments »

prioritizing debt reduction or adding to my saving for retirementMany people want to know if it is better prioritizing debt reduction or adding to my saving for retirement? They also should add to this question of whether they have emergency savings available to deal with big financial surprises. As with most questions of this type there are several different answers depending on the situation that each consumer finds themselves in. Factors such as loan interest rates, existence of emergency savings, whether you own or rent, how long it will be before you retire and how much you have saved for retirement. We will look at each of these issues. Bottom line is that each consumer must make their own decision based on their personal situation.

Prioritizing Debt Reduction or Adding to My Saving for Retirement

A little more detail about each of these major areas.

  • Debt Interest Rates
  • Emergency savings
  • Years to retire
  • Retirement savings

Debt Interest Rates – Basically if you have a thousand dollars and you can  earn 5% income by investing the money compared to your loan at 3%, then you probably should save the thousand and invest it. If the 5% income will be taxed, then it might be equivalent since taxes will take some of your income. For loans and debts carrying interest rates higher than 6% e.g. credit cards at 21%, pay off the credit cards first.

Emergency savings – Everyone always needs to have money set aside for emergencies. Whether it is major repairs to your home, your car or a health issue, make sure you have 6 months of savings set aside to deal with emergencies. It could take 6 months to find another job if you lost yours.

Years to retire – If you are planning to retire shortly, pay off all of your debt as quickly as possible so that you are debt free when you retire. You may work longer, however saving will be much more efficient when there is no debt.

Retirement savings – Saving for retirement is incredibly important. So is paying off debt. Finding the right balance depends on how close you are to retirement, how much debt you have, the interest you are paying on this debt and what you can earn in your retirement savings plan.

Generally experts advise paying off debt as quickly as possible since in most cases the interest rate is higher than any investment income you can earn after taxes are paid.

Comments are welcome. For more information on this subject, click here.

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What can Retirees Do if a Retired Lifestyle Makes Them Miserable

October 21st, 2017 ernie Posted in Changing Jobs | No Comments »

What can retirees do if a retired lifestyle makes them miserable? Plan your retirement in just the same way you planned your career. Think ahead and try different things that may make life more interesting? There may even be many false starts, but at least you are trying something and learning from your mistakes. Exactly what you used to do on the job! This critical step appears to be what many pre-retired people and newly retired people seem to forget. Get going and do something, anything that has some interest for you. We will disscuss a step by step process that retirees can adapt to their own situation. But the important thing is for the person to get started.

What can Retirees Do if a Retired Lifestyle Makes Them Miserable

The following is our step by step approach:

Make a list of those things that you could do to improve your life. It could even include going back to work, volunteering, travel etc.

For each item on your list, describe how you would achieve or complete it. This could include steps such as updating your resume to looking for organizations that need help.

Create a satisfaction index from one to ten and describe in your own words what you are looking for that would increase your level of satisfaction. e.g. more social interaction, more challenge, giving back etc

Apply these criteria to each item on your list and rank then from one to ten.

Discuss your plans with a partner or your spouse or a friend. Ask for their input and what they think about each one as it applies to yourself.

Take the time to investigate each item on the list based on your ranking factors. Then decide which one or perhaps even several that you will pursue. There may be some false starts. Some may not turn out the way you thought they would. That is ok you are learning more about yourself and what will make you happy instead of being miserable in retirement.

For more information about finding a new meaning in life and changing careers, click here.

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What can Retirees Do if a Retired Lifestyle Makes Them Unhappy

October 7th, 2017 ernie Posted in Retirement Risk | No Comments »

This is the big question for many people about to retire. What will they do in retirement? Will they be happy and what can retirees do if a retired lifestyle makes them unhappy? Sure there is lots of talk about being on the golf course every day, going for coffee with the gang and afternoons snoozing by the pool. Will this make them happy? Do they have enough money? What rewards to they get out of life? Do they have a purpose in life and what can they do about it?

What can Retirees Do if a Retired Lifestyle Makes Them Unhappy

There is lots that retirees can do if they are unhappy. But first they need to figure out what makes them happy. Some need the regularity of going to work. Some need the friendships they obtain at work. For others, it is the challenge and the fear of the unknown. Will they make the deadline? Will they deliver on time. The adrenaline rush of success can be pretty sweet.

Many retirees keep themselves very busy. Busy hours fill the days and leaves them feeling that they have accomplished something. Whether it is looking after the grand kids, pursuing hobbies or improving their golf score, their days are full. They do not have time to wonder if they miss the challenges and the successes.

If you feel you have an unhappy retirement, it is time to do something about it. Start by reflecting on what is making you unhappy. Make a list if needed. Next determine what actions you can take that will positively change those items that make you unhappy. These might be broad brush strokes which you will need to refine in more detail.

Next make a plan. Decide how you will tackle the task and lay out the step by step approach to achieve your objectives. As will all projects there will be obstacles and detours along the way. They actually add to the challenge and make it even more interesting.

For more information about retirement surprises, click here.

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Signs and Symptoms of Baby Boomer Elder Abuse

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

 

What are the signs and symptoms of baby boomer elder abuse? They are many and anyone who is providing care, or is a friend or a family member of the senior needs to be on the alert. Often the most visible are bruises that really should not be there. Falls do take place causing broken bones etc. These can cause bruises as well. But if there is no fall and the senior you are visiting has a lot of bruises it might be worth your time investigating.

Another common form of elder abuse is financial which is the focus of this web site. Financial abuse takes place when there is outright stealing or when the senior is being charged for things that they really should not pay for or are paying too much for. Often care givers, whether they are family members or not cannot resist the monetary attraction. Several people should jointly monitor the seniors funds to make sure that their savings are not being prematurely spent leaving them destitute.

Elder Abuse from a Financial Perspective

Elder abuse from a financial perspective is pretty difficult to uncover unless there are large amounts of money involved. Regardless of the amount of savings and investments that a senior might have, family members should always monitor what is being spent. Unusual amounts or one time large amounts that you are not familiar with should be investigated.

More than one person should be checking accounts and spending levels. Money can corrupt no matter who it is. With two people monitoring accounts etc, there is less chance of collusion and financial elder abuse.

Elder financial abuse can come in many different forms. One time I was cutting my father in-laws lawn and a person drove in to the yard. He indicated that he was here to collect the monthly fee for the newspaper. The amount was around $45. I asked him how long he had been delivering the paper and how long he had been collecting cash from my father inlaw. This gentleman was around his mid 40’s and indicated he was relatively new, but it had been several months since he started collecting.

I got his name, his license number and then informed him that I had prepaid the subscription for the paper and that no collections should have been initiated. He quickly realized that the jog was up and left before I could say much more. What a scumbag. Taking money from the elderly. It was a small amount but still it makes him a scumbag.

I called the news paper and got him fired. However I am sure he has continued his ways and is taking money from seniors as I write this note.

The point of the story is that everyone must be alert. There are thieves everywhere. The elderly are particularly vulnerable.

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Baby Boomers Elder Abuse

September 7th, 2017 ernie Posted in Senior Life Style | No Comments »

baby boomers elder abuse Many baby boomers, born between 1945 1954 are now retiring. Although the financial advisor community, banks and government have talked about building sufficient retirement savings to cover them during retirement, many do not have sufficient funds  to take them through retirement. On top of that there seems to be in increasing level of elder abuse that is taking place. As more and more baby boomers move into their late retirement years this is becoming an increasing problem.  The chart summarizes the various kinds of elder abuse that takes place. Often the most visible or those of physical abuse. But there are five other types of abuse, including financial, verbal, emotional, neglect and even abandonment. How can people be so cruel and treat their elderly family members this way? How can care workers treat people this way?  It can be a terrible thing to experience this kind of abuse. Having lots of money does not always protect you either.

Elder abuse in our Community

Unfortunately in our society everything is driven by sex and money. If it is not sexual abuse, it is some form of abuse that is triggered by the greed of grabbing their money. Sometimes it is the fact that they don’t have enough money to pay for the services that seniors need. We cannot emphasize enough that baby boomers planning to retire  need to make sure that they have sufficient funds to pay for top quality care during their later years.

In addition family members need to take steps to protect their elder parents or relatives. Always have two members of the family looking after a senior, and two members of the family looking after the financial affairs. If you suspect any kind of elder abuse, whether it’s emotional, financial or other takes immediate steps to rectify the situation.

There are the obvious criminal cases that can be dealt with when someone is exposed to physical abuse and the perpetrator is caught and prosecuted. But there many more subtle situations that are never deal with that trouble many seniors today. Elder abuse is rampant and in many cases it is our own family members that are the guilty ones.

Examples of Elder Abuse

What about the son or daughter who slowly drains their parents bank accounts leaving them destitute and abandoned? What about care givers who are rough in their treatment? They never leave bruises, but you know that there is something going on. Then there are situations where they get the parents to pay for everything. The kids could even be well off.

Abandonment is one of the worst. Not everyone wants to look after someone who is old and frail. They may not have the patience and the personality. The senior ends up living by themselves and living as best they can until they cannot look after themselves any longer. They depend on the good will of neighbors who take pity. Where is the family in this situation?

Knowing that this is going on will at least help seniors takes steps to prepare for this situation. Plan now how your frail years will be to ensure that they are as good as they can be. We are going to write a series of posts on this subject so stay tuned.

 

 

 

 

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What is your Financial Life Expectancy

August 21st, 2017 ernie Posted in Fin Independence | 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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Do I Have Enough Savings for a Secure Retirement 

August 7th, 2017 ernie Posted in Retirement Saving | No Comments »

secure retirementThis is the main question we all have about our retirement future. How can we figure out what our future will be ? How long will we live? Should we base our life expectancy on how long our parents lived? Or perhaps our neighbors since we share a similar economic situation. A secure retirement means that we need to make an estimate of how long we will work, how long we will live and many other assumptions. In this post we will discuss these issues and others that many consumers need to factor into their decisions.

Will You Have a Secure Retirement

If your already retired and wondering if you have enough to live comfortably during retirement, it is time to take stock of a number of things about your life style and your situation. Here are a few, but bottom line, your income must be the same or more than your expenses, plus you needs savings set aside for emergencies that invariably will come along.

Track expenses – to get an understanding of where your money is being spent. If you need to reduce, then you can start here and identify those areas where you can reduce and how much it will save you.

Track income – to understand how much is coming in and whether it will be enough or not. If not you may have to reduce expenses, go back to work, even if it is just part time.

Re-evaluate every 6 months – life events and inflation happen all of the time. Recheck all of your calculations on a regular basis to make sure all of your assumptions are still accurate.

Balance income and expenses – as we said income must be higher than expenses otherwise it will eat into your savings quickly leaving you without enough to live on when you are much older.

Earn more, go back to work etc – going back to work can make a huge difference in both your life style as well as your savings. Your money will last much longer.

Reduce expenses – do you really need to eat out all of the time? Can you make cost cutting painless. Look at all of your expenses and make a decision on those that can be reduced.

Downsize , rent , move in with the kids – if you must, these are drastic reductions that can be made to reduce your expenses.

Obtain expert help – find a financial advisor you can trust and review your situation with him or her. You may want to get several recommendations before settling on one direction or another.

For more retirement saving ideas, click here.

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