Thursday, June 27, 2013

Retirement fears

As a former teacher, this is the time of year that many of my younger colleagues are thinking about retirement. Here are some of the fears that I faced when I first thought about retirement. I am sure that many of us had the same fears:
1. Will I outlive my money?
2. Will retirement affect my quality of life?
3. Do I have the right investments for me at this time of my life?
4. What happens if I become ill; or a burden to my family?
5. Will I be able to help my adult children if they need help?

I am a big believer in the idea that you should face your fears and deal with them if you can.

So for the first question, I suggest you sit down and figure out how much you need to live. Remember that you should eliminate all work related expenses from this calculation. Once you have figured out this dollar amount, then look at how much money you will have coming in once you retire. In Canada, we have Canada Pension--for those who have worked, Old Age Pension--for everyone in Canada plus any pension you have from your company or from your savings. If you have RRSP 's (Registered Retirement Savings) you can start to use these at the latest age of 71. In Canada, it is required that you turn your RRSP into a RRIF (Registered Retirement Income Fund. By December 31st of your 71st birthday year, Canadian law requires that you convert your RRSPs to a RRIF – an investment plan that establishes a retirement income stream. Annual minimum payment is based on your age on January 1st, and is calculated as a percentage of your RIF value at the beginning of each year)
 By knowing what you will have coming in and what you are spending you will then be able to calculate a budget. The unknown is how long  will you live. For an  answer to that you have to look at your health and your family history.

For the second question, the simple answer is yes retirement will affect your quality of life. How you think about quality of life is important. If quality of life means having more stuff then your quality of life will suffer, unless you have enough money to continue to buy stuff. If quality of life means having time to do the things you want, to visit with friends, to spend more time with family, to enjoy leisure time and to appreciate life and the simple things in life, your quality of life will improve. The choice is yours and depends on your vision and outlook on life.

For the answer to question three, which is tied to question one, I suggest you contact a certified financial planner that you pay for service. I don't trust any advisor that is paid for his or her services through commission. They have a vested interested in selling you a product that will pay them a good commission. If you are dealing with a person that you trust and they are paid by commission, try to get a second opinion on your investments before committing to a plan.

Illness is part of growing old for most of us. One of the biggest expenses you will have as you age, is medical cost that are not covered by (in Canada) our medical plan. Prescription drugs are expensive and not usually covered, so just be aware of that expense. Other illnesses such as dementia may be a concern and I recommend that you talk to an estate planner and a lawyer and get a Power of Attorney put in place while you are healthy. You may become a burden on your family if you become too sick, but you can minimize the impact if you plan ahead.

Can I help my adult children if they need help is a big concern for many of us. I think it is important that you take care of yourself first and then if you can help out when and if they ask for help to the extent that you can. Remember that once you die, what you have in your estate will go to your adult children-(it that is what you want and you have prepared your Will corectlty)

Finally, if you are in your 50's and have not started to save start now and try to invest as much as you can in good stocks and bonds--a financial advisor may be needed to help you get started. I suggest you talk to your credit union or your local bank to start.

Remember that any amount you can put away now will help you later on and it is never to late to start saving. Face your fears, plan and overcome them.

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