Tag Archives: Retirement Expenses

Life After Age 65

Life After Age 65This is an entire repost from Sun Life Financial. We thought our readers would find this interesting. We are doing many posts about retirement and looking for different viewpoints. This is about Life After Age 65. Men and women have different views of life after 65; Sun Life Financial study finds

Does the “Men are from Mars, Women are from Venus” idea fit when it comes to retirement?

Life After Age 65 – the Article

TORONTO, Jan. 21 /CNW/ – The gender gap seems to have extended into Canadians’ views of retirement, with twice as many men (32 percent) than women surveyed saying they want to work past age 65, according to the second edition of the Sun Life Canadian Unretirement(TM) Index.

“We also found that men and women had diverse opinions around what factors should be considered in a retirement plan, with women more likely to cite long-term care, low-interest rates, and death of a spouse,” said Kevin Dougherty, President, Sun Life Financial Canada. “Interestingly, Canadians, on the whole, were significantly more confident about their retirement if they had worked with a financial advisor for a year or more than those who did not have an advisor.”

Other Findings

Other survey findings show that men and women think differently about financial planning and confidence in retirement:

– Seven in 10 women (71 percent) who said they will be working past
age 65 said they will be doing so to earn enough money to pay for
basic living expenses compared to 65 percent of men. More women
(61 percent) also believed their company pension would not be enough
to live on compared to men (56 percent).
– Forty-nine percent of Canadian women surveyed were very confident
they would have enough money for basic retirement living expenses
compared to 57 percent of men.
– Twenty-nine percent of women were very confident they would have
enough money to enjoy the lifestyle they want compared to 36 percent
of men.
– Women tended to be less confident about the overall economy and their
personal finances compared to men.

“Women have substantial reasons for worrying that they won’t have enough money to enjoy the lifestyle they want in retirement,” said Alison Konrad, Professor of Organizational Behavior at the Richard Ivey School of Business, University of Western Ontario. “The average Canadian woman earns about 66 percent of what the average Canadian male earns. So even though women tend to put a larger percentage of their income into their retirement nest eggs, men save almost $1,900 more each year.”

Measuring Canadians’ overall retirement confidence

The Sun Life Canadian Unretirement(TM) Index measures Canadian workers’ confidence towards issues that influence retirement. The lower the index number, the more negative or pessimistic the outlook is on issues that influence retirement.

This second of multiple studies yielded an overall index score of 51 on a scale of 0 to 100, compared to a score of 50 in December 2008. This compares to the American Unretirement(SM) Index score of 44.

Confidence levels were significantly higher for Canadians who worked with a financial advisor. The overall index score was 51 for all working Canadians surveyed. Those who did not have an advisor scored 48, while those Canadians surveyed who have worked with an advisor for a year or more were much more confident, scoring 54.

The Index is a blend of confidence scores in five sub-indices: Macroeconomics (score = 40), Government Benefits (score = 47), Personal Finance (score = 49), Employer Benefits (score = 47), and Health (score = 70).

Which of these describes what you think you will be doing at age 66, shortly after the normal retirement?

    -------------------------------------------------------------------------
                      Women    Men  Women    Men  Women    Men  Women    Men
                     --------------------------------------------------------
                      30 to  30 to  40 to  40 to  50 to  50 to  60 to  60 to
                         39     39     49     49     59     59     65     65
    -------------------------------------------------------------------------
    Working full time    7%    13%    13%    17%    13%    21%    15%    32%
    -------------------------------------------------------------------------
    Working part time   24%    29%    19%    31%    26%    35%    31%    36%
    -------------------------------------------------------------------------
    Fully retired/
     not working for
     money              68%    57%    68%    51%    59%    43%    53%    31%
    -------------------------------------------------------------------------
    No longer living     1%     1%     1%     1%     2%     1%     1%     1%
    -------------------------------------------------------------------------

What should a retirement plan address?

    -----------------------------------------------------------
                                                  Women    Men
    -----------------------------------------------------------
    Won't have money to leave to heirs              42%    37%
    -----------------------------------------------------------
    Changes in marital status                       48%    37%
    -----------------------------------------------------------
    Family members have unforeseen financial
     needs                                          54%    50%
    -----------------------------------------------------------
    Financial market risk                           60%    58%
    -----------------------------------------------------------
    Death of a spouse                               67%    56%
    -----------------------------------------------------------
    My rate of return won't be high enough          66%    59%
    -----------------------------------------------------------
    Employment risk - job market or personal
     health problems                                65%    59%
    -----------------------------------------------------------
    Employer health benefits stop when I stop
     working                                        62%    63%
    -----------------------------------------------------------
    Money will be locked in when I need it          66%    64%
    -----------------------------------------------------------
    Low interest rates                              71%    60%
    -----------------------------------------------------------
    Money won't last my full lifetime               67%    64%
    -----------------------------------------------------------
    Long-term care needed                           72%    60%
    -----------------------------------------------------------
    Poor health results in extra costs or
     care needed                                    71%    68%
    -----------------------------------------------------------
    Inflation                                       79%    71%
    -----------------------------------------------------------

Methodology

The study was conducted by Fleishman Hillard from August 17, 2009, to September 9, 2009. Telephone interviews were conducted by Interviewing Service of America using a random-digit-dial (RDD) sampling method. Quotas and weights were applied to gather a sample of 1,202 people working either full- or part-time, representing the Canadian working population between the ages of 30 and 65. The sample was also representative in terms of gender and region census break. Analysis and construction of indexes involved the application of factor analysis. Final indexes are based on summated averages across the attributes which make up an index.

Age groups were divided by workers in their 30s, 40s, 50s, and 60+ and by three ranges of total assets, not including the net worth of the person’s place of residence (less than $100K, between $100K and $500K, and greater than $500K). This sample has a margin of error of plus or minus three percent at the 95 percent confidence interval.

 

Retirement Planning

Retirement PlanningRetirement is a really big step for most people. There are many issues to think about when you retire which represents a lot of change for both you and your spouse. Most people do not even think about retirement planning until a few weeks before they walk out the door. Some companies will encourage people to think about retirement. They will even send them on courses, however, most do not simply because of the cost.

Everyone should take it on to do their own retirement planning well before they retire so that they can approach it without fear or nervousness. The most important issue most people think about is whether they will have enough money to live the life they wish without having to sacrifice their quality of life. This is an important element, however, there are many other items to consider as well.

We will focus on the financial issue in this post, however, we wanted to list some of the other areas everyone should think about as well before they retire. We will cover these issues in subsequent posts.

Issues to Consider as Part of Retirement Planning

This is a simple list. We would appreciate your comments if we missed any.

  • Downsizing Homes
  • Pre-retirement expenses such as car and house repairs
  • Travel planning
  • Volunteering
  • Cabin Fever
  • Spousal Conflict
  • Grand-kids
  • Second Homes
  • Health Issues

How Do I Know If I Have Enough Money

This is probably the single most important question for many people. I once met a friend of ours who was forced to retire at age 65. He had been well paid, had saved while working, and was going to receive a very good pension. On top of that, his wife had retired with a pension as well. He was very concerned as to whether he would have sufficient money to live the way he wished during retirement.

At first glance you might conclude, that of course he has enough money! He has two pensions and savings to live on, what more could you want? Well, it is not that simple. Both he and his wife had their kids later in life, so one was still at university and neither was married or holding down jobs of their own yet. He was still supporting them in a fairly high-quality lifestyle. However, these areas are really not the issue. Everyone has their bills to pay and some are higher than others.

The real issue is that he did not know what his income was and he did not know what his expenses were now or going to be post-retirement. He had never had a budget and did not have any idea of how to go about building one. This is really the first step towards retirement planning. Build a budget that is fairly reliable and takes into account unforeseen expenses that we all know happen along from time to time.

Retirement Planning Fundamentals

The fundamental thing you have to do is build a realistic retirement planning budget. This is the only way you will know for sure what your income will be and what your expenses will be. If revenue-less expenses are negative then you have a problem and need to make some cuts on the expense side somewhere.

Also, account for major expenses that you know are going to come along. You can either save for them, pay for them a lump sum from savings or pay for them through a loan over time. They are not going to disappear and you need to deal with them and include them as part of your retirement planning exercise.

A good example is that most people need to replace their car every 5 or 8 years. Some people will do so more often, while others will be longer, but sooner or later you’re going to need another car. In your plan, decide when you think this will happen and plan accordingly.

This same approach can be applied to all other areas as well. My friend was concerned about paying for two weddings. These will happen and he needs to include them in his planning for post-retirement. He was also concerned about expensive upgrades that he was thinking about for the house. These kinds of retirement planning expenses are optional unless you are talking about the furnace, water heater, air conditioning, or roof. Build your plan with everything in it and then decide what you can actually pay for.

Examine Your Options for Retirement Planning

There are optional expenses that can be either spent or can eliminate from your lifestyle. There are also options with respect to work now as well. Another friend of ours has a very good pension and can live on it quite comfortably. However, it is not enough to allow her to do some of the things she wants to do. She loves to travel 3 or 4 times every year and when she travels she likes the best.

For her, the option is to go back to work on contract for part of the year. She continues to collect her pension however the extra money she makes allows her to pay for her trips and other upgrades around the house. There is another big advantage for her in this scenario as well. She gets out every day and she is with people every day which is very good for her.

So if your budget income comes up short for your retirement planning task, then another option is to take on a contract job that allows you to live the life you wish.

Summary

The first step to retirement planning is to do a budget and then take the steps you need to make the budget work for you to avoid a shortfall in funds, while at the same time allowing you to live the life you wish.

We will discuss some of the issues mentioned in this blog in future posts.