Tuesday, March 12, 2013

How to avoid wrecking your retirement

This is  a review of the book 52 ways to wreck your retirement and how to rescue it. The review was published in the  Herald Business on February 8, 2013 - and written BY KAYE PARKER

It isn’t easy to find a book that gives us a Canadian perspective on retirement, or on anything financial in nature, so I found this first book by Tina Di Vito quite useful.

Out of the 52 mistakes she says we make around retirement, I figure I’ve made about 21 of them. So while her topics and advice may seem simplistic to those who cut their teeth on a math book, the rest of us will find her easy manner, plain language and down-to-earth style quite appealing.

The truth is, some of us really don’t want to think about retirement at all. In fact, one of the problems with retirement is that word retirement itself. It sounds old, useless and tired, and that doesn’t conjure up a particularly appealing visual.

Yet in reality, not all of us will want to work forever and we should start planning for our retirement long before we are ready to really think about it.

De Vito has spent more than 20 years of her life as head of the BMO Retirement Institute, so she has seen her fair share of mistakes people like you and me have made over the years.

She devotes one short chapter to each of the 52 ways we can wreck our retirement, and ends each chapter with three or four actions we can take to salvage that mistake.

52 Ways to Wreck Your Retirement is divided into 11 sections, each covering one aspect of retirement. They include how to plan for retirement — sooner rather than later — and the mistakes we make when it comes to investing, incurring debt and paying it off.

The author talks about ways to save for retirement, about pensions, and what we can do to minimize taxes. She also talks about living and spending in that last third of our life, how our retirement will be different from that of our parents, and the different ways we can protect ourselves during retirement.

She also suggests having conversations with our families about what they may or may not inherit, and asking for help with some of the more complex issues of retirement planning.

Some examples of typical retirement planning mistakes include:

•Taking too long to pay off the mortgage;

•Over or underestimating your Old Age Security and Canada Pension Plan benefits;

•Pinning your hopes on the company pension plan;

•Not knowing all your choices with your Defined Benefit Plan when you do retire;

•Waiting too long to downsize your home;

•Not recognizing that you could be single in retirement;

•Spending too much too soon after you retire.

And know your net worth. Pay attention to bank statements and paycheque information to be sure it is correct. Review your investments and your beneficiaries at least once every five years. Pay off your mortgage, and don’t spend too much on your kids.

Figuring out how much money we need for our retirement is difficult. We don’t know how long we will live or how healthy we will be. We do know, however, that we are living much longer than our parents did.

Many financial planners are using 100 as their target age when they help people plan their retirement. Most of us figure we won’t live that long, but Di Vito points out that there were 6,530 centenarians in Canada as of July 2010. It is also important to note that 5,196 of them were women.

It’s no surprise that women outlive men. Unfortunately, while salaries for women are catching up with those of their male counterparts, they still, on average, earn less.

Women are still more apt to work part time or take time off to raise a family, or look after aging parents. This makes women very vulnerable when it comes to retirement. They often have less access to pension plans and lower retirement savings, so if their husband didn’t provide for them, they could face a bleak future.

Women are often good at day-to-day budgeting but woefully lacking in investment knowledge. Many women and yes, men too, believe it’s just too complicated. In that case get a financial planner to help you.

If you are a novice at investing and planning for your future, ask for help. Pick someone you trust and with whom you feel comfortable. This isn’t the time to be a DIY when you are making plans for 30 or more years of your life.

This book doesn’t need to be read cover to cover. Find those areas that apply to you or interest you and dig in. It’s a good retirement primer.

Reviewed by Kaye Parker. Kaye’s personal website is www.kayeparker.ca. Follow her on twitter at http://twitter.com/ThinkKayeParker. Her email address is Kaye@thinktraining.ca.

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