Tag Archives: Retirement Cash Flow

4 Questions to Ask Yourself Before Retiring

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.

Challenges in Retirement

Challenges in RetirementThere are lots of challenges in retirement. Many people retiring without enough money, health issues and family issues to deal with. Still many people can have a great retirement if they properly planned and saved enough money. Unfortunately many Retirees are broke due to poor savings while they were working. Sometimes there are uncontrollable events in their lives, and the need to provide support to their families.

Challenges in Retirement – Stress in Retirement

Not having enough money to live comfortably in retirement causes a great deal of stress during what should be the best years of their lives. Without sufficient funds to live on, wondering where food is going to come from or how you will pay for it and going to secondhand stores it can be very difficult for many seniors. North America is not exactly a senior friendly continent as compared to other locations such as  in Europe. We do not seem to value our seniors in the same manner that they do in Europe and as a result many are struggling with a great deal of stress in their lives.

Loneliness in Retirement

Not having sufficient money during retirement with family often many miles away it can get quite lonely in retirement. Unless they live in a neighborhood where people have lived all their lives, they have friends to socialize with many seniors find themselves unable to get out to be with friends and socialize.

Ignoring Health Issues

Lack of money also means that they tend to ignore health issues. If there is insufficient insurance to pay for health coverage many health related issues will be ignored until it becomes an emergency. Older age seniors develop life-threatening issues just because they do not have sufficient funds to pay for health costs.

Worry about Health costs

There is a constant worry about how they’re going to pay for health related costs. Even a visit to the doctor or the dentist may add additional stress and aggravate an already existing health condition. Insufficient savings, or insufficient health coverage can lead to stress related health issues. Ignoring health issues can also cause more serious issues to develop.

More Retirees are Working

As a result of all of the above, we are seeing more and more retirees going back to work. They may choose to work at part-time jobs that pay minimum-wage but at least they are getting out and making some money to put food on the table. This income along with  meager savings that they may have and in a few cases provides healthcare coverage allows them to live a better life.

Still Getting Frisky

Another interesting fact is that many seniors are still getting frisky with the opposite sex even though they may be getting up in years. Recent articles in the news has referred to seniors partying and dancing leaving to extracurricular activities. This is great news and will keep everybody healthy.

Moving in With the Kids

In some cases when ones spouse passes away, the other spouse will move in with the kids. If there is insufficient room in the home, this can lead to lots of stress for everybody. In some cases mom or dad will integrate well with your family until  health related issues crop up.

Traveling is a Dream

And for many seniors traveling is actually a dream that they dream about while they were still working but sadly are unable to fulfill that dream once they retire due to insufficient funds. They have enough to live on, in some cases comfortably but not the extra money that they need to travel and see the world the way they anticipated. This is a sad reality that sinks in a few years after they retire.

Targets for Scammers

Many seniors are also targets for scammers. It’s an unfortunate aspect of our society. With lots of sales pressure placed on seniors, they often will separate them from their money leaving them in an even worse situation than they were before. This is a terrible reality.

With all of these challenges and retirement it is still possible to enjoy retirement and make the most of your life regardless of the situation.

5 Retirement Tactics in a Low-interest-rate World

Retirement TacticsAt the time of writing this post, it appears that interest rates are going to stay low for some time. Developing Retirement Tactics is getting harder all of the time. Canada has tightened the mortgage rules even more than previously to prevent a US style real estate bubble. The opportunity to earn reasonable  investment income is getting tougher all of the time. Retirees are going to need even more money set aside in order to earn the money they need during retirement. So what can investors do and specifically what can retiree’s do to ensure that they are comfortable during retirement and have enough to live on?

The chart above shows the interest rates for the past 40 years. There was a huge spike in the early 80’s which we never want to go back to again. Inflation and high mortgage rates of 21% even for the best customers with the best credit rating were the norm. Investors loved it because yields were very high.

Retirement Tactics

Today, interest rates are very low. Mortgage applicants love it since their costs for a mortgage are at the lowest they have been in the past 40 years. However for investors, it is a tough time. Corporate and government bonds are paying yields less than 4%, GICs are even lower and money markets are paying so low that it is not worth it to put the money in them other than to protect your capital! Governments around the world have telegraph that they are going to keep interest rates low to continue stimulating the economy. If you are in the Euro zone, some countries are paying high interest rates that reflect the high risk that are attached to their bonds. In other words they might not meet their interest payments and they may not repay the capital. Investors should be very careful if you are going to invest in this area.

Retirement Tactics – So what should an investor do?

There  are a number of things to do that will allow you to manage your investments and balance your risk vs. yield, however it looks like yields will remain low for some time.

Analyze Your Risks and Prioritize

This is something you should do on a regular basis and now is a really good time given the volatility in the markets to look at all of your investments, analyze the risks and then prioritize any actions that you may decide to take. Higher yields tend to have higher risk and that is certainly true for investment in Greek and Spanish bonds. But what about closer to home?  Some corporate dividends pay quite well, over 5%, however investors are encouraged to look at any potential risks associated with these corporations and exposure based on the volatility associated with the economy and the Euro crisis.

Retiree’s tend to focus more in income generation as well and that is why many people are moving to dividend producing stocks that have a history of increasing their dividends over time. This is one of the best ways to give yourself a raise over time while retired.

Assess your Expenses

All corporations do this and investors should be no different. Review all of your expenses and make decisions regarding were you can cut back and reduce your expenses. This is a very individual decision, however most people have money that they spend every day or every month that can be reduced or eliminated. This is a great way to make your money go further.

Seek Higher Yields vs. Safety

Balance yield and safety as we mentioned earlier. High yield bonds are inherently risky. Low yield bonds and GIC’s are very low risk, but your yield is going to be much less. Either increase your capital and save more to generate the income you feel you need or take more risk to generate the yield that you require to meet your income requirements.

Focus on Income

Speculation is a great thing and sometimes pays very well. Can you afford to take that kind of risk? Will you need to sell some of your equity at a time when stocks are low to give you the money you need? Most retirees will gradually shift from growth oriented portfolios to income oriented portfolios as they age and need the income to live on. Even if you go for low yield bonds with government or blue chip corporations, the income will be more secure and the capital will also be more secure.

Go Back to Work

After you have completed all of this analysis you may find that you cannot generate the income you need. You may also not be able to reduce the expenses enough to balance income vs. lifestyle. You might decide that even if you can find that balance you need there are other things you want to do. Maybe you would like to have some extra money to go on a trip, fix up the house or buy a new car. Whatever the reason, consider looking for a job that is fun and  rewarding. Find something that you enjoy and pays you what you need to meet your objectives.

Retirement Tactics – Other Options

In your personal life, there may be other options that are specific to your situation. Evaluate these as well and make a decision regarding whether they should be pursued or not.  They might make sense for you in your situation. Whatever you do, avoid procrastination. Get going now to assess your situation to maximize your income and minimize your expenses! Do it today.