Retirement a richly deserved break?

Most of us in Canada dreamt about and looked ahead to retirement as a well-deserved rest after a lifetime of labour and we still do. For a long period, the dream was reality. In 1977, about 46% of all Canadians were covered by a registered pension plan (RPP). But time and practice worked against us. Many of those who had a pension plan had a defined benefit pension plan, which promised to pay a benefit regardless of how the underlying investments perform. In the ensuing decades, however, pension plan coverage declined, with less than 40% of Canadians having an RPP in 2011. Defined benefit plans declined even more sharply.

With employer-sponsored pensions on the decline, we looked to other ways to fund our retirement. The sources we use are the Canada Pension Plan (CPP), Old Age Security (OAS), and savings through Registered Retirement Savings Programs (RRSP) or Tax-Free Savings Accounts (TFSA) if we have any. Up until the late 1970s, defined benefit pension plans provided Canadians with comfortable retirement income. During the '80s and until today we have had to come up with other means to fund our retirement, as employers moved away from defined plans. The unfortunate truth is that retiring comfortably is getting harder and harder for most Canadians. The following three facts explain why that is.

CPP and OAS won’t cover your expenses

According to a Sun Life Financial report, the average Canadian has $2,611 in monthly expenses in retirement. That includes food, shelter, taxes, and transportation. In larger cities, that figure is higher, because rent and mortgage payments are typically higher in urban centres. Unfortunately, CPP and OAS won’t cover $2,611 in monthly costs. In 2019, CPP paid $679 a month on average, and OAS paid $613 a month at maximum. Together, that’s only about $1,300 a month. That’s 49% what you’ll need to retire on! Or from another point of view, you only have to save enough to give you an income of $1300 a month which is about $400,000. (400,000*.04 =16,000/12=$1333.00 a month).

Defined benefit pension plans are on the decline

Registered pension plan coverage is declining in Canada which is not good, but the other pension plan is the defined benefit pension plan (the kind that pays a guaranteed benefit). The decline in this type of plan has been even steeper. According to the Office of the Superintendent of Financial Institutions (OSFI), the proportion of RPP plans that had defined benefits decreased from 80% to 67% from 2006 to 2016. That implies an even sharper decline in defined benefit pension plans than in pension plans as a whole. That’s a problem because only defined benefit pensions pay a guaranteed amount: with other plans, your payout depends on how the underlying investments perform.

Inflation will eat into your spending power

Inflation is one harsh reality that many Canadian retirees are familiar with. Although CPP is supposed to be inflation-indexed, the CPI excludes many categories of items. As a result, inflation can really eat up your purchasing power in retirement.

The last wave of Boomers turns 56, what happened to Freedom 55?

The oldest of my generation, the Boomers, will turn 75 in 2021. The youngest will be 57. The Boomers made marks on society as we grew, due to the force of numbers. We fought for peace while waging war, we used illegal drugs while fighting the war on drugs, we lined up for cheap gas while creating environmental awareness of how bad oil is on the environment. 

We believe in the sanctuary of marriage yet lead the generations in our level of divorce. Our generation invented the personal computer, the internet fought the culture wars and the war on terror. There are so many of us that some say that we are that is responsible for the best in our society, while others hold us responsible for the worst of the human condition as we live it today. We are getting old. And as always because of sheer numbers, the media and the pundits are making our ageing all about us. 

We are living inconveniently long lives. Over the course of the next three decades, the number of people aged 85 and older will more than triple. Yet the generation before us, the silent generation has more people living past 100 than ever before, but the total number of that generation is small so this outstanding achievement is ignored or downplayed. Why? Because this generation is a small cohort and therefore whatever they do, it does not make an impact on society and our thinking about ageing.

Since the boomers were identified by demographers’ people have known that we would have an impact on ageing. Yet policymakers seem to be surprised that there is an upcoming crisis because the rapidity of ageing is the real issue for policymakers. It is difficult to blame policymakers because they work at the whim of their political masters who, if they have a vision, hold it just long enough to win the next election.

I've heard this claim before that my generation hasn't saved enough for retirement and this is our fault. Those who say we are to blame, forget that since 1945 there have been 12 recessions that have taken a toll on our ability to save. For example, the recession from 1973-1975 saw a quadrupling of oil prices by OPEC, coupled with the 1973–1974 stock market crash which led to a stagflation recession in the United States and Canada. 

We make easy scapegoats for the politicians and others who look for someone to blame for the upcoming crises. The critics complain that we will have to rely on younger generations to help us and this means more taxes, more welfare and more stress for the younger generations. The critics decry the boomers because we were also the first generation to stop having enough children to replace ourselves, meaning there are fewer young people available to look after the old. Yet we, as a generation are doing whatever it takes to help our children, either by taking on student debt, helping to finance homes or by looking after our grandchildren so their parents can work.

The reality is that there is a paradigm shift in society and every generation is having fewer children than the generation before. The policymakers are only concerned about making the policies that get the politicians elected. This isn’t some abstract policy challenge. This is about us, caring for our parents or our spouse. This is us, worried about our children’s future. This is about everyone getting older every day and realizing that we are on our own. 

Unless governments, families and individuals act now to bend the curve on the cost of ageing, many of us will not enjoy our later years. For a few years, seniors living in poverty was a declining trend in both the USA and Canda, however, in about 2008 this trend shifted and now more seniors are living in poverty. The future will not be pretty. As one of the older boomers, I wonder what life in Canada will look like, for my younger brothers, cousins and family.

Elevate Your Physical Activity in Retirement

We are living longer and that is good news. To take advantage of our new longevity we need to keep healthy. To get healthy and to stay healthy we need to elevate our physical activity when we retire. Here are some ideas on how you can do this. Remember, if you have not been active or you are thinking of changing your activity level, always check with your doctor before starting any changes.

Be active. Regular exercise can help relieve stress. Exercise releases endorphins into your system and will give you a natural boost. Endorphins are sometimes called "the happy chemicals" because of their stress-reducing and happiness-inducing properties. Competitive sports such as squash, tennis, badminton and circuit training are excellent examples of physical activities.

Walk or jog regularly. Walking or jogging for 30 minutes each day may help to ease stress and anxiety and improve cardiovascular health.

Relax, or practise relaxation techniques. Listen to some soothing music you like. Soak in a nice warm bath. Simply take a break from your stressful workload and spend the day just goofing around doing the things you love.

Stretch. Take up yoga. Yoga is an ideal form of exercise that melds the body, mind, and spirit. It promotes good health, a positive self-image and teaches relaxation.

Breathe deeply. Inhale through your nose (5 sec), hold (5 sec), exhale slowly (5 sec): repeat 5 times. Deep breathing can relieve anxiety and pressure.

Get a daily dose of sunlight if you can. Lack of exposure to sunlight is responsible for the secretion of the hormone called Melatonin, which could trigger a dispirited mood and/or a lethargic condition. You could go have lunch outside the office for a change or take frequent walks in the early afternoon instead of driving your car over short distances.

Go for acupuncture treatment. By using various pressure points, it is believed to enable a calming effect and promote a healthier emotional balance.

Take up gardening. Work in the garden, watering plants and pulling up weeds; each is calming in its own way.

Play with your grandkids. Take part in activities with family, have an active playtime with your grandkids and make plans with them for what you will do together when you are feeling better.

Get an exercise buddy. Find a partner and sign up for community exercise sessions, Zumba, Yoga etc. Working out in a large group will keep you motivated to keep on going and not give up.

Are we as individuals and communities ready for an ageing population? 3

Baby Boomers (born between 1946 and 1960) are still a force and the last batch is approaching their 60’s and is close to retiring if they haven’t already done this. So, the big question facing us, individually and as a society is

Are we as individuals and communities ready for an ageing population?

To examine this question, the National Council on Ageing (NCOA), UnitedHealthcare and USA TODAY created The United States of Ageing Survey. In its inaugural year, the survey included 2,250 U.S. adults aged 60 and older who shared their perspectives on their own individual readiness for ageing as well as their perceptions of their community’s resources for senior residents. 

I have looked at some of the responses to the question in specific areas and I think we are ready as individuals but I am not sure we are ready as a society/

Health and Wellness

Older Americans are optimistic about their health and say they are healthier than ever.

More than three in four seniors aged 60 to 69 expect their quality of life to stay the same or get better over the next five to 10 years.

Nearly two-quarters of respondents (65 percent) say the past year of their life has been normal or better than normal.

More than eight in 10 agree with the statement, ―I have a strong sense of purpose and passion for my life and my future.

A large majority of older Americans give themselves high marks when it comes to maintaining their physical and mental health.

Ninety-two percent report that they manage their stress levels well.

Eighty-four percent say they are confident that they will be able to do what is needed to maintain their health over the next five to 10 years.

Eighty percent of older Americans are confident in their ability to manage their health conditions on their own, reducing their need to see a doctor.

More than half of respondents (52 percent) exercise or are physically active at least four days per week. A quarter is active one to three days a week, 11 percent are active only a few days per month, and another 11 percent are never physically active.

The vast majority of respondents – 94 percent – are confident of their ability to find a primary care physician in their community, while 60 percent believe they would be able to see a geriatric care physician.

More than nine in 10 seniors (92 percent) report that they communicate well with their doctors regarding their health questions and concerns.

Are we as individuals and communities ready for an ageing population? 2

Baby Boomers (born between 1946 and 1960) are still a force and the last batch is approaching their 60’s and is close to retiring if they haven’t already done this. So, the big question facing us, individually and as a society is

Are we as individuals and communities ready for an ageing population?

To examine this question, the National Council on Ageing (NCOA), UnitedHealthcare and USA TODAY created The United States of Ageing Survey. In its inaugural year, the survey included 2,250 U.S. adults aged 60 and older who shared their perspectives on their own individual readiness for ageing as well as their perceptions of their community’s resources for senior residents. 

Over the next few posts, I will look at some of the responses to that question in specific areas. The question I thought was interesting is what do we prefer to be called. When asked to choose the best word or phrase to describe people their age, a quarter of respondents selected senior citizens. Other leading choices were seniors‖ (18 percent), ―retirees, (15 percent) and older Americans‖ (11 percent).

Ageing in Place

Older Americans are striving to age in place, despite physical and economic difficulties in some cases. Nine in 10 seniors intend to continue living in their current homes over the next five to 10 years. Leading reasons for wanting to stay in their current homes include liking where they currently live (85 percent), having family and friends nearby (66 percent) and not wanting to deal with the hassle of moving (50 percent).

Finances also play a role in this decision: 26 percent of seniors planning to age in place say they cannot afford the cost of moving their belongings, and more than one in five (23 percent) believe their home would not sell in the current market.

The vast majority of all age groups report high levels of confidence that they will be able to stay in their homes without having to make any significant home modifications (85 percent of respondents aged 60 to 64; 82 percent of respondents aged 65 to 69; 86 percent of respondents aged 70 or older).

Nearly one in five baby boomers aged 60 to 64 (18 percent) believe the housing options available to them are unaffordable.

Are we as individuals and communities ready for an ageing population?

Baby Boomers (born between 1946 and 1960) are still a force and the last batch is approaching their 60’s and is close to retiring if they haven’t already done this. So, the big question facing us, individually and as a society is

Are we as individuals and communities ready for an ageing population?

To examine this question, the National Council on Ageing (NCOA), UnitedHealthcare and USA TODAY created The United States of Ageing Survey. In its inaugural year, the survey included 2,250 U.S. adults aged 60 and older who shared their perspectives on their own individual readiness for ageing as well as their perceptions of their community’s resources for senior residents. 

Over the next few posts, I will look at some of the responses to that question in specific areas. The question I thought was interesting is what do we prefer to be called. When asked to choose the best word or phrase to describe people their age, a quarter of respondents selected senior citizens. Other leading choices were seniors‖ (18 percent), ―retirees, (15 percent) and older Americans‖ (11 percent). 

Caregiving

Seniors are not only receiving long-term care – they are providing it, too. Half of older Americans report having someone they consider to be a caregiver in their lives – and close to one-third (28 percent) of seniors say they serve as a caregiver for someone else. According to the survey:

·        Nearly nine in 10 (87 percent) older Americans who have a caregiver say they are receiving care from a family member.

·        More than half of those caregivers (52 percent) live at home with their care recipient.

·        Among those seniors who do not currently have a caregiver, 39 percent believe it is likely that they will need one of their children or grandchildren to serve as their caregiver in the future.

·        Forty-five percent of respondents who serve as a caregiver for someone else report that they would benefit from additional services to support them, such as respite care.

·        While 61 percent of these caregivers are aware that there is a service in their community that they could call to request assistance with everyday needs, only 15 percent report having utilized such services.

·        An additional 22 percent of seniors are unsure if such services exist in their communities.

DB vs DC pension plans 2

2020 is the year many of us will retire or move away from the workforce. So, it is important that we understand the two main types of employee pensions in Canada, defined contribution (DC) and defined benefit (DB). Both are important and help you when you retire, though they both work in different ways.

The DB pension plan

The DB pension is what most people in Canada think of when they think of a pension. This type of pension provides a known future income stream to the employee – in other words, a defined benefit to the employee. For this pension plan, the employer and the employee make contributions to the plan that are invested to provide the future income stream. Depending on the investment performance, this may require more or fewer contributions from the employer.

The end result – a guaranteed income stream – is easy to understand.  To make the plan fair, the government uses a number of different formulas that determine your future benefit. The formulas involve looking at a person yearly maximum pensionable earnings (YMPE), their final average earnings (FAE) and years of service.

Some but not all DB pension have Canada Pension Plan/Old Age Security integration. This is where a bridge payment is made between when the pension commences and age 65. This means that if you decide to collect your pension at say age 60, the plan would pay you an amount (the bridge) until age 65. The bridge is meant to be equal to the amount of Canada Pension and Old Age Security that you are not collecting until you turn 65, Please note, this integration is not perfect as the bridge is often being different than the actual CPP and OAS received.

If the pensioner is married/common-law, then the DB pension will pay out a survivor benefit to the spouse upon the death of the pensioner if the pensioner is collecting from the plan. The default selection is typically 60 percent of the full pension amount, but a higher or lower percentage can be selected by the pensioner. A higher or lower percentage will raise or lower the actual pension payment because the payout is based on mortality rates.

Many Boomers end up getting a divorce around retirement age, so, there is a need to know what the pension worth today?  So, how much money is needed today to pay the employee a pension for the remainder of their life? The main factors that can influence this calculation include:

·       Age at retirement

·       Penalties for early retirement

·       Mortality of the pensioner and, if applicable, the spouse

·       Current age

·       Expected rate of return on the investments (often called the discount rate)

·       Pension indexed or not

·       Rate of inflation

The ability to calculate the value is important because if the employee dies before starting the pension, the surviving spouse does not receive a survivor pension. Instead, they may receive the commuted value of the pension eligible to transfer into their RRSP. This happens without tax implications, much like an RRSP rollover on death.

If you quit or are fired before you retire or die, then one option is to take the commuted value and transfer it into a LIRA in their name. Depending on the length of service, this is a common outcome.

Finally, at retirement, you can choose to take the commuted value instead of taking the pension if your plan allows for this to happen. Some of us want an increased choice about how to deal with this asset. Some of us believe that the commuted value can provide a larger death benefit for the surviving spouse. The full commuted value can provide more value. One only has to look at the collapse of Nortel or, more recently, Sears Canada to see examples of where a DB is not fully secure.

Each pension is different. It is prudent to take a look at what the breakeven rate of return is. In other words, what would the portfolio created from the commuted value have to earn to match the pension payments? If the comparable rate of return is reasonable, the pensioner may consider in their best financial interests to take the lump-sum.

One of the benefits of the DB, pension portfolio is the responsibility of the employer for the savings required and all of the investment risk in building retirement. This takes the decision to save for retirement out of the hands of the employee.

The value of the DB pension, especially if indexed to inflation, of a long-standing the employee will provide a solid base on which to retire. If someone worked 35 years at an employer with a DB plan, they could conceivably replace 70 percent of their pre-retirement salary if they had a pure 2 percent pension formula. Whether it is the more straightforward DC pension or the more complex DB pension, understanding how to maximize the benefits and choose the best options available are important steps on your road to financial independence.

Saving your knees 1

We used to think that with the passage of time, a certain amount of wear and tear on your joints are inevitable. This is not true. Osteoarthritis is a condition once thought to be due simply to wear and tear on the cartilage of a joint. Osteoarthritis is now known to be a complex process that involves an active disease process.

Normal joint surfaces are covered with a smooth layer of cartilage. This cartilage is the surface that is worn thin in a condition called osteoarthritis. The problem that causes osteoarthritis is due to more wearing away (degradation) and less repair of the cartilage surface. There is both a mechanical (wearing away) part of osteoarthritis, and a biologic (abnormal joint biology) part of the disease.

Research over the past decade has focused on finding the underlying causes of osteoarthritis, and how understanding these causes may shape future treatments. The medical community is now aware that patients who have osteoarthritis likely have multiple risk factors that have led to their development of this condition.

It is known that osteoarthritis tends to affect older individuals, but it is not clear why some people develop arthritic changes in their 40s and 50s, while others live long lives with few joint problems.

People once thought that osteoarthritis was simply due to the demands an individual placed on their joints throughout life. Many people attribute their arthritis to the activities of their youth. But it really is not that simple. Many people who run and play competitive sports have no problems with arthritic joints.

It is now understood that osteoarthritis is not an inevitable part of ageing. It seems as though a combination of different factors leads to the development of osteoarthritis in individuals. In different people, different factors may be more important, but it is unusual to have just one underlying problem that causes osteoarthritis.

If you have osteoarthritis physicians must better understand the disease to best find an individual solution. While osteoarthritis was once thought to be confined to the cartilage surface, it is now known that osteoarthritis affects the entire joint causing loss of cartilage, damage to bone, the formation of bone spurs, and inflammation of the soft tissues.

Cartilage undergoes a normal cycle of breakdown and repair, but in the condition of osteoarthritis, the cartilage is not replaced effectively, and ultimately the joint lining wears thin. The fundamental problem of osteoarthritis is thought to be the imbalance between fresh cartilage production, and natural degradation.

As the joint surface wears away, the body attempts to correct the problem. Your body will initiate an inflammatory response to the joint, causing swelling. New bone in the form of bone spurs is created to increase the joint surface area. Unfortunately, your body cannot compensate for the cartilage that is lost, and the painful condition of osteoarthritis is the result.

My generation

Sometimes, instead of a pie, you get a sandwich. There are costs associated with being part of an interdependent, intergenerational family unit. It is not uncommon today for Boomers, also referred to as “The Sandwich Generation,” to be simultaneously providing financial assistance to their grown children, ageing parents and, in some cases, even their grandchildren. One quarter of Canadian Boomers surveyed had one or more parents who require regular assistance, and the majority (59%) of Boomers who had children age 18 and over were still providing financial support to their children. On the other hand, a U.S. survey found that 40% (or 2.5 million) of all grandparents whose grandchildren live with them reported being responsible for most of their basic needs. These added responsibilities not only diminish the Boomers’ inheritances and existing retirement nest-eggs; they may also reduce or eliminate any hopes of inheritance for subsequent generations.

Risk factors such as longevity, the rising cost of living and intergenerational obligations, threaten to consume legacies that would have otherwise been transferred to future generations. But subtle differences in the way each generation views the world and the impact of outside forces beyond their control may also significantly shape the way money is channelled to the next generation.

Both seniors and Boomers agree on the importance of leaving an inheritance. However, seniors are likely to feel more obligated than Boomers to do so. The reason for this distinction may be that seniors grew up with an intimate understanding of deprivation, first surviving the Great Depression, and then fighting in the Second World War. Because they had endured such hardships, some seniors may feel compelled to provide financial assistance to others. In contrast, Boomers were raised in a time of relative peace and affluence, and have generally grown up accustomed to a life of abundance. Socially, they are idealists who value financial self- sufficiency, making the world a better place for all and enjoying a high standard of living. Unlike the seniors, they may consider leaving a legacy as a bonus instead of a requirement. As a result, intergenerational differences in perspectives on inheritance will affect the distribution of wealth.

Factors impacting size of your inheritance

An inheritance can be impacted by:

·       Life expectancy and retirement age

·       Unanticipated events and health care expenses

·       Challenging markets, interest rates and inflation

·       Taxes on death

·       Family size

Life expectancy and retirement age

Thanks to healthier lifestyles and medical advances, we are living longer, almost ten years longer than the average life expectancy five decades ago. This is good news – in terms of retirement dollars, those additional years demand a significant amount of retirement savings – especially if one considers the extra health care needs that typically go hand-in-hand with ageing.

Unanticipated events and health care expenses

Longer lives mean an increased risk of needing costly medical care or daily living assistance within one’s lifetime. While some government funding kicks in for all Canadians, there are limits, and coverage varies across provinces. In 2006, 45% of mature Canadians (50 years and older) reported spending more money on living and medical expenses than they had planned. This is not unexpected, as the charges for basic accommodation in publicly supported long-term care institutions ranged from $540 to $3,960 a month per person. Hence, Canadians can anticipate paying more out of their own pockets to cover medical essentials and long-term care services in the future.

Challenging markets, interest rates and inflation

Seniors, who typically invest more in fixed-income products such as GICs and bonds, are forced to balance a low rate of return with a higher rate of taxation, as compared to capital gains and Canadian dividend income. As a result, many may be forced to use up more of their assets than originally anticipated simply trying to keep up with rising inflation costs, leaving little behind for their successors. Meanwhile, Boomers on the brink of retirement may be faced with smaller nest eggs with which to fund their retirement lifestyles if their portfolio value declined with the stock market. The potential result is an inheritance that could shrink from one generation to another.

Taxes on death

Although there are no estate taxes in Canada, a significant proportion of an inheritance could be consumed by probate fees and capital gains taxes due upon death Not only can taxes and probate fees erode the value of an estate, they could force the sale of assets. For instance, a family cottage or investments may have to be sold as heirs try to come up with the funds to pay the taxes, probate, executor, trustee and legal fees. Being forced to sell assets to cover fees could negatively impact the net value of the estate.

Example: How taxes could reduce an inheritance

Margaret is a widowed mother of three adult children who live in Ontario and has significant assets registered in her name only. Her assets include RRSPs worth $250,000 and investments valued at $100,000 (for which she paid $50,000). Upon her death, the total estate value will be $350,000. However, this is not the amount that will be distributed to her children, because there will be taxes charged on her investments. The estate will need to pay approximately $115,000 in taxes on her RRSPs and $11,500 on her investments (assuming a top marginal rate of 46%15). Assuming she has no other outstanding debts to be settled by her estate, the net value of her estate will be $223,500 which may be further reduced by probate, executor, trustee and legal fees.

Family size – Many ways to split the pie

Boomers represent a large percentage of the world’s population. In Canada, Boomers account for approximately 30% of our population. It stands to reason that any legacy that the Boomers’ parents leave behind is likely to be split between multiple siblings.

But the demand for a slice of the pie does not end there. Children are not the only ones to inherit this wealth. In the recent BMO Retirement Institute Inheritance survey, both seniors and Boomers indicated that they are planning on leaving an inheritance to someone other than their spouse/ partner or child. Moreover, seniors are more likely than Boomers to plan on leaving an inheritance to a grandchild (37% vs. 18% respectively) or to a charitable organization (28% vs. 18% respectively). Ultimately, this may reduce the size of the inheritance that many expect.

Retirement Readiness 2

Today’s generation of workers is losing faith in the current system’s ability to provide retirement income security. Globally, almost half the survey’s respondents (49 percent) believe that future generations of retirees will be worse off than those currently in retirement.

The survey’s findings further illustrate:

1.   With the cost of Social Security becoming a greater concern as people live longer, only seven percent of people globally feel that the government should do nothing because social security provisions will remain perfectly affordable in the future.

2.   Employer-sponsored retirement benefits are vital in helping people financially prepare for retirement. However, only 43 percent of workers say their employer offers a retirement plan that includes an employer contribution and just 27 percent have access to a retirement plan without an employer contribution.

Although the social contract may be in jeopardy, people have a positive mindset about retirement. For many, retirement has become an active stage of life in which people aspire to stay socially connected, participate in their communities and remain economically active. Fifty-seven percent of workers envision some form of transition to retirement in which they continue working as they currently are or work part-time for a while or during their retirement.

Most are planning to do so because they both want and/or need to work. Earning an income later in life provides workers with the opportunity to continue saving and delay drawing down their retirement benefits and savings.

Based on the survey’s findings, many face a financially vulnerable retirement:

1.   Globally, workers expect they will need 68 percent of their current annual income in retirement.

1.   Alarmingly, only a quarter (25 percent) think they will achieve this retirement income and a further 13 percent feel they will achieve around 75 percent of their required income.

2.   Only 13 percent of workers have a written retirement plan while 44 percent say they have a plan, but that it is not written down.

1.   Only 32 percent of workers have a backup plan if they are unable to continue working before their planned retirement age.

3.   Many people are failing to diversify their retirement investments. When asked what financial means, if any, they are currently using or have used to prepare for retirement, people most frequently cite

1.   social security/state provision (46 percent),

2.   savings accounts/money market funds/certificates of deposit (CDs) (38 percent),

3.   a private pension/individual retirement accounts (IRA) (29 percent),

4.   life insurance (24 percent),

5.   investments such as stocks, bonds, mutual funds, etc. (23 percent).

Only 19 percent cite a company-funded defined benefit plan and, even fewer, 16 percent, cite an employee-funded defined contribution plan.

Do you move or do you stay? 1

Yesterday I talked about life as a journey, as part of the journey, no matter how we view it, we need to have somewhere to live. Back in 2014, Merrill-Lynch did a study of what retirees do when they retire to answer the question do, we stay in place or do we move. The Study was called Home in Retirement: More Freedom, New Choices A Merrill Lynch Retirement Study conducted in partnership with Age Wave

The results were interesting, with new freedom to decide where they want to live, many of us make the decision to move to a different home, community, or even to a new part of the country. An estimated 4.2 million retirees moved into a new home in 2013.

Sixty-four percent of us say we are likely to move at least once during retirement, with 37% having already done so and 27% anticipating doing so.

We want to move to lower home expenses, move closer to help if we are encountering health challenges. Divorce or widowhood, and empty-nesting can all be triggers for moving in retirement. However, retirees cite “wanting to be closer to the family” as a top reason for moving.

Many of us assume that once we retire, we will downsize our home. Our children have moved out, we need less space, we don’t want the maintenance hassles of a larger home, and moving to a smaller home might free up cash. In fact, many pre-retirees assume they will downsize to help pay for their retirement. However, those of us who expect to downsize when we retire may be surprised to learn that half of those who did retire did not downsize in their last move. In fact, three in ten upsized into a larger home.

We want to upsize is to have a home that is large and comfortable enough for family members to visit and stay with us. Many of us are empty nesters and our adult children, grandchildren, and other family members may live in disparate parts of the country. Our homes become places for family to come together and reconnect, particularly during holidays or summer vacations.

Many of us also say we upsize so that family members can live with them if needed. According to this study, one in six of us has a “boomerang” adult child who has moved back in. In fact, due in part to adult children returning to their parents’ home, the number of multigenerational family households doubled between 1980 and 2010, from 11% to 22%.

Those of us who have downsized in our last move cite freedom from the financial and maintenance burdens of a larger home as the top reasons to downsize. By reducing expenses and releasing equity tied up in a larger home, downsizing can help make retirement more financially secure.

According to this study, just 7% of retirees have moved into age-restricted retirement communities. However, there is a growing diversity of retirement communities designed to meet the needs and aspirations of new generations of retirees. Today, approximately 100 retirement communities have ties to universities, affording opportunities for continued learning and connections with both students and alumni. Other retirement communities have been created around niche interests and affinities, such as religion and spirituality, art and theatre, and hobbies

While roughly two-thirds of us are likely to move at least once in retirement, the other one-third anticipates staying where they are throughout their retirement years. The reasons many retirees don’t move reveal the deep emotional connection we have with our home. Retirees who don’t plan to move cite, “I love my home” as a top reason for remaining where they are.

Our homes are both a financial asset and also an important emotional asset – representing memories with family and treasured life experiences. Prior to age 55, most of us say the financial value of our home outweighs its emotional value. As we age, however, we are far more likely to say their home’s emotional value is more important than its financial value

Overwhelmingly, we say our top preference for receiving extended care, if needed, is to age in place in our own home. With new technologies (such as telemedicine and remote diagnostics)-, growing numbers of home care providers and services, and renovations to make homes more ageing-ready, it is increasingly possible for those of us with health challenges to continue living independently at home.

In fact, there has been a significant shift in where people are receiving care. The number of nursing home residents have declined in the past, while at the same time the number of people receiving care at home has increased

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As we enter our later retirement years and the need for all types of long-term care increases, new services, technologies, and options will continue to develop to enable us to receive care how and we most desire