Income and spending in retirement?

When you retire, will your spending increase, decrease or stay the same? My spending decreased but different people will answer this question differently.

For most people, retirement means less income than they had while they were working.  As a result, most people assume they have to “cut back” on spending in retirement.  The big question is “will cutting back still mean retirement will be the best years of your life?”

Gross income is different than net income, Gross income is what you receive from your employer or your retirement income before taxes and other deductions are taken off your pay. What is left over is called your Net Income.

Although most people retire to less gross income, remember that less gross income may not actually mean the same drop in net income.

Remember that net income as a percentage of gross income is greater before retirement than in retirement because there are more deductions off pay while working.  It’s not just tax that is taken off your paychecks   There’s Canada Pension Plan, Employment Insurance, benefits, pensions, Registered Retirement Savings Program contributions, union dues, etc.  A friend of mine who was doing some planning for their retirement was surprised that their gross income while working turned out to be the same net income retirement.

Does spending decrease the older you get?

The first 5 to 15 years of retirement tends to represent the golden years or what I call the “Go-go” years.  This is a time when you may choose to travel more and have more fun because you physically have the ability to do so.

As you age and health tends to deteriorate, there tends to be less spending on discretionary lifestyle spending.  In the “Slow-go” years, you tend to travel less, drive less, and even eat less. You may not play golf or tennis as much and expenses related to socialization tends to drop as well.  Overall, many retirees (but not all) find that their spending in retirement actually decreases the older they get.

Spending on healthcare increases the older you get
Some people argue that as spending on discretionary lifestyle decreases over time, spending on healthcare tends to increase over time.  I can’t really disagree with that statement but the real question becomes which is bigger?  The drop in lifestyle spending or the increase in healthcare spending?

There is no question that healthcare expenses is a big concern for retirees.  In fact, many studies suggest it is the biggest concern that retirees have.  Right now, Canada still has a highly subsidized healthcare system and the financial burden is not as severe as other countries with alternative health care systems.

Believe me, I am not trying to minimize the concerns of the rising cost of healthcare but I do want people to think about their spending and expenses when planning for retirement to be as detailed and realistic as possible.

Most of us tend to see a decrease in spending as we move from the go-go years to the slow-go years into the no-go years.   It certainly does not always work this way but I find most people tend to limit their spending because they fear the worst.  They always worry that spending in retirement will increase due to healthcare but they don’t account for the decrease in lifestyle expenses as you get older.

Planning is personal
Be careful about over generalization, averages and rules of thumb.  The best retirement plan is the personal one that accounts for your individual needs and circumstances.

Some retirees are  impacted significantly by higher inflation and increased costs as they age.  But many retirees get to a point where their spending decreases to a point where they can’t spend all their income.  Some people get hit hard with healthcare costs but also others where healthcare expenses in retirement were well below expectation.

It’s impossible to accurately predict what will happen to spending in retirement but it’s still important to reflect on this issue and determine the impact increasing or decreasing expenses in retirement can have on your overall retirement plan. 

Thanks to Jim for the ideas

Ever heard the saying "retire and die" its not true!

We have all heard the saying known as ''retirre and die'' - the belief that men who retire early die sooner. And it is said to be backed by evidence. In one often-cited but rarely seen study the Shell Corporation is said to have found employees who retired at 55 were nearly twice as likely to die in the next decade as those who kept working.

However, the age one retires makes no difference to when a person dies, an Australian and Norwegian study has found. The results, based on 20 years of population-level data, suggest politicians grappling with the challenges of an ageing population can extend people's  careers, without hastening their death.

But evidence of a solid link has been hard to find, in part because ill-health is one of the reasons people retire early.

Now Australia's Centre of Excellence in Population Aging Research believes it has cracked the puzzle.

In new research released in September, it says there is no such effect. Men who retire early are no more likely to die at any age than those who stay working

The lead Australian author John Piggott had to get around what he called ''confounding influences''.

''Some people retire early because they are ill. Six months later they die. But they didn't die because they retired early,'' he says.

''Some people retire early because their firm has shut down. They are demoralised and depressed, they face financial stress and their social networks break down. But they didn't necessarily die early because they retired early, it might have been because of the way it happened.''

Professor Piggott and researchers from Norway took advantage of a ''natural experiment''.

In 1989 Norway introduced an early retirement program that covered some firms and not others. About half its private sector employers steadily cut the minimum age for access to retirement benefits from 67 to 62. The others did not. Years on, the data shows no statistically significant difference in death rates up to the age of 70.

''It means you can leave work without worrying about losing years; do whatever works for you,'' Professor Piggott says.

Since retiring at 55, former English teacher Ena Hall has spent three decades travelling and studying. Her 88-year-old husband, John, has become absorbed by painting. Now 83, Mrs Hall agrees the couple's early retirement has been salubrious but attributes this mainly to a change in mindset.

''Being a teacher for 35 years, you're moving when the bell goes and you live to a heavy routine,'' she said. ''I think it's about shelving responsibilities.'' 

For the government the implications are that it, too, need not worry about hastening death by encouraging people to work longer.

''If it were firmly established that working longer led to an earlier death, policy makers would feel kind of mean,'' Professor Piggott says. He supports delaying the age at which people can access tax-free superannuation.

''Many people retire at 60, get $400,000 tax-free and then three years down the track have only $160,000 and need to get back into the workforce … I would lift the age for access to tax-free super in line with increases in the age for access to the pension,'' he said.

Read more:

Longevity Calculator Feedback

I recently did a post on longevity and when I went back over my notes I realized that I had done a survey on the Internet about how long I could live. The results were interesting, but not as much as the advice given to me about how I could add years. The notes below are specifically for me, but I am sure that all could benefit from using some of the advice. Always check with your Dr. before acting on any advice you find on the Internet.

Here is how you can add years to your life expectancy:

	+ 0.5	Cutting back on your hours at work, approaching, if you can, 40 or fewer hours, could add half a year to your longevity
	+ 1.0	Going from 6 days of work per week to 5 days a week could add one year of life to your longevity
	+ 0.5	Minimizing or cutting out your caffeinated coffee consumption completely could provide you with about half a year more in life expectancy
	+ 1.0	If it is ok with your doctor, taking an 81 mg aspirin every day improves your heart and brain health and could help you delay or escape a heart attack or stroke. It is best to take the aspirin every day rather than your occasional habit of taking aspirin. Taking an aspirin each day, preferably in the evening, could add another year to your life expectancy.
	+ 1.0	There is a clear link between the inflammation of gum disease and heart disease. Do a good job of flossing daily and you could add a year to your life expectancy.
	+ 1.0	The more you can get fast foods out of your diet the better. While you are already doing a pretty good job of doing so, completely removing fast oods from your diet could add a year to your life expectancy
	+ 1.0	Red meat is the primary source of potentially life-shortening iron. Cutting back your read meat consumption to 1-2 days per week or less could add 1 year to your life expectancy
	+ 1.0	Iron is likely an age-accelerator and increases risk for age-related diseases. Stopping your iron supplement could add a year to your life expectancy
	+ 1.0	Examining yourself for cancer or getting a screening for cancer could add a year to your life expectancy
	+ 0.25	It is wise to keep a record of your laboratory tests and other health data that might be hard for you to remember. Doing so could add a quarter of a year.
	+ 1.0	Decreasing your systolic blood pressure (the first of the two numbers) to 120 or even lower could add 1 year to your life expectancy
	+ 0.5	Getting your blood sugar checked could add half a year to your life expectancy

Gender

Men, compared to women, need to be more diligent about good health habits. If they develop heart attack or stroke, men tend to do so about ten years earlier than women. Why women have this advantage is unclear. One possibility is that women make much more estrogen than men and this hormone might be associated with some protective effect, though this has in no way been proven. Another possibility is that chronic iron deficiency (due to menstruation) gives a woman her advantage. Iron is critical to our cells' ability to produce age-accelerating free radicals that also predispose to heart disease, stroke, Alzheimer's disease and cancer.

Men can "menstruate" every eight weeks by donating a pint of blood at their local hospital or other blood bank center. Eight weeks is the recommended period (no pun intended) of time between donations. Donating blood has certainly not been proven to decrease cardiovascular risk, though the downside of performing this good deed would seem to be minimal.

Each year, with your health care provider, be sure to discuss the following:

• Medical history and physical exam
• Tobacco use
• Diet and exercise counseling
• Alcohol and substance abuse
• Sex-related concerns
• Vision screen and hearing test
• Depression screen
• Self-examination counseling (e.g. skin exam)
• Driver safety counseling (e.g. seatbelt use, assessment of driving safety record) 

 Have the following checked by physical examination and/or laboratory evaluation annually:

• Obesity screening and counseling (body mass index and waist size)
• Blood pressure
• Prostate exam and serum prostatic specific antigen (PSA). Note that the following are increased risk factors for prostate cancer: obesity, if there is a family history of prostate cancer, African-American descent, consumption of a high-fat diet, and possibly vasectomy
• Stool for any blood (this requires a special test to detect trace, invisible amounts)
• Total blood cholesterol (specifically HDL and LDL cholesterol and triglyceride levels)
• Blood glucose (for diabetes)
• Electrocardiogram (ECG) particularly if you are at increased risk for heart disease. Increased risk includes two or more of the following: a family history of heart attack, elevated cholesterol, high blood pressure, diabetes, or history of smoking

 Be sure that the following is performed regularly at the recommended intervals:

• Colorectal cancer screening
• Flexible sigmoidoscopy, every five years
• Complete colon examination by colonoscopy, every 10 years. (There is no need to perform sigmoidoscopy in the tenth year when colonoscopy also examines the sigmoid colon)
• Tuberculin skin test (PPD) every 1-3 years, depending upon your risk of exposure to tuberculosis
• Tetanus vaccination every five years
• Exercise treadmill test (ETT) if at increased risk for heart disease, or if warranted according to your healthcare provider 

Retirement saving realistic or idealistic ?

Planning for retirement can be overwhelming.  An RBC study reports that only 52% of Canadian boomers actually put a plan on paper despite understanding its importance. 

According to a recent Investors Group survey, financial concerns affect 32% of Canadian couples and 60% of them put retirement savings worries at the top of the list.

For many Canadians, a sense of futility comes from thinking "I'll never be able to save enough money." They might be influenced by the  rule of thumb that suggests 70% of pre-retirement income is needed to maintain a current standard of living.

Determining the figure that is right for you starts with analysis. The idea of doing Cash flow models is scary to most folks who do not want to think about their own mortality or cash flow analysis, investment returns clawback on Canada Pension, converting RRSP's to RRIF'S or Annuities.

For those who want to start on this analysis the government of Canada has created an excellent Canadian Retirement Income Calculator that takes into account such things as CPP, pensions, RRSPs and other sources of income like annuities.

Sit down with your significant other and try to determine your  income goals, once these have been set, an analysis should be done to determine the income sources. 

For most people, a substantial portion will be drawn from CPP and OAS and some of you may have some investment portfolios. As retirement nears, these portfolios should be prepared for the transition and structured to replace employment income. If you have an investment portfolio, talk to your adviser about how to make the transition from growth to income. This generally means a more significant weighting in fixed income as well as other investments that provide a regular income stream, such as high quality dividend-paying investments.

Good retirement income plans will also make use of guaranteed income sources that guard against volatile markets and inflation erosion. These include government benefits, available pension income and annuities.

Proper retirement planning goes beyond the management of the retirement portfolio. Estate planning also enters the picture, both from the perspective of how the money will be distributed to heirs but also to more sensitive personal issues. 

We all want to retire with sufficient income to carry us through and, hopefully, with enough to leave something for their children. For some of this is important, for some of us the slogan "I am spending my children's inheritance" is the way we want to go.   However, if you allow themselves to be overwhelmed  by he complexity of the planning you may never be motivated to begin saving. Determining the right number takes time, but the time is well spent.

Thanks to Kim for the idea.

Retirement age around the world

China is thinking of raising its retirement age and there is a reaction as expected. Here is some information about the changes and the reaction to the proposed changes.

An overwhelming majority of those questioned in an online survey expressed opposition to a proposal pushing back the retirement age.

Nearly 95 percent of some 25,300 polled citizens said they were against the prospect of the retirement age being increased, according to the survey jointly conducted by the Beijing-based China Youth Daily and Sohu, a leading news portal.

The retirement age in China is 60 for male employees, 55 for female officials and 50 for female workers. Retirees can claim a pension immediately.

Delaying the pension age would relieve the State's financial burden in supporting a rapidly aging population, according to a proposal released by Tsinghua University earlier this month. It suggested that the government should lift the pension age for workers, both men and women, to 65 from 2030.

Yang Yansui, director of the Tsinghua Center for Employment and Social Security and one of the drafters of the proposal, said it is a matter of urgency for China to lift the pension age given the accelerated imbalance between the working-aged population and the number of senior citizens.

Currently, it takes about seven workers to support one pensioner over 65.

If there is no change to the system, in 2035, it will take two workers to support a pensioner and this would place a heavy burden on the economy, Yang said.

However, about 91 percent of respondents said that they were unwilling to work until 65. Most of the surveyed were aged between 24 to 53, according China Youth Daily on Thursday.

Some 60 percent believed they would be physically incapable of working up to 65 and half of them said increasing the retirement age would make it harder for younger people to get work.

There is no one-size-fits-all solution in terms of the retirement age and the government should allow people to have more options, based on health and their attitude, most people agreed that the retirement age for government officials should not be pushed back as this would increase the taxpayers' burden.

Liu Yiran contributed to this story

France is using another strategy which will effectively raise the retirement age without officially doing so. Here is some information about how they are trying to reform their system.

The government's plans to reform France's debt-ridden pension system , to be presented to ministers this month, fail to address the core problems and could spark fresh tensions with Brussels, experts say.

Pension reforms are highly contentious in France - with previous efforts in 1995 and 2010 unleashing mass protests and damaging strikes - and this latest effort could be the biggest test yet for President Francois Hollande.

The government stuck to his promise not to increase the current retirement age of 62 as many other countries have done following Brussels' recommendation.
The reform plan, which will be officially tabled September 18, avoids some of the more controversial proposals floated in recent weeks that included slapping a new tax on French retirees.

Instead, the government proposes that employees as well as businesses pay more every month to France's retirement system, a measure sure to raise eyebrows with the cost of the generous social net already one of the highest in the world.
French businesses had campaigned against a rise in taxes or contributions, fearing the impact they would have have on competitiveness. The French economy is grappling with record unemployment, a high cost of labour and a huge tax burden.

The plan also incrementally raises a French worker's contribution period from the current 41.5 years to 43 years by 2035. This effectively means that most people will have to work beyond 62 to qualify for a full pension.

The government said the measures would save the state's strained retirement system 7.3 billion euros ($9.6 billion) by 2020, with the books balanced by 2040.

Spain is pushing for state pension reforms that would link payments to life expectancy and to economic cycles, without raising the retirement age, employment minister Fatima Banez said.

The proposals, which the government presented to unions, would include de-linking pensions from inflation as of next year, tying them instead to a more complex formula that also takes into account the system's revenue.

Spain is under pressure from Brussels to shake up its pensions system by the end of 2013, to help it fix imbalances in its economy and as soaring unemployment puts an unprecedented strain on social security funds.

Despite recent changes restricting early retirement, an aging population and a low birth rate have also added to Spain's headaches and the ruling People's Party (PP) is now pushing for broader changes to make the pensions system more sustainable.

Banez told a news conference that the government was proposing the introduction of a minimal annual rise of 0.25 percent in pensions, so that they cannot nominally fall, as she defended changes likely to be unpopular with a key part of the electorate.

Live long and Prosper--do the math

The following was published on September 1, 2013 and was written by Dave Lindorff 

Longer Lifespan = Longer Retirement

People are living longer, meaning assets need to last longer, too. In 1970, American men could expect to live to an average of 67.1, women to 74.7, according to the Centers for Disease Control. By 1995, those numbers were 72.5 and 78.9 respectively. In 2010, the numbers were 76 for men, 81 for women.

But those numbers are life expectancy from birth. For those already 65, life expectancy today is actually 17 more years for men and 20 for women, making the average life expectancy for the newly Medicare-eligible 82 for men and 85 for women. And thanks to better health care, lifestyles and living standards, a 65-year-old man today has a 30% chance of living to 90—and a 65-year-old woman has a 40% chance of reaching 90, according to research by Ron Gebhardtsbauer, an associate professor of actuarial science at Penn State University. In addition, a 2011 report by the Census Bureau says that a person at 90 statistically has a further life expectancy of almost five years.

But will all these nonagenarians have any money left? According to the Employee Benefit Research Institute, the average wage earner today will need $900,000 to fund his or her retirement. Michael Greene, senior vice president for business development and group financial planning at Ameriprise Financial Services says that even a couple with $1 million in retirement assets worries about maintaining their lifestyle.

Cut Back
For people who are already close to retirement, there is only so much they can do to address this new planning metric. You can't acquire more money once you are in or near retirement, and you can't dramatically, nor efficiently, increase the rate of return without piling on unacceptable levels of risk. The only way to address the possibility of the blessing of a long, long life is to cut back on spending.

Richard Bone, senior vice president for investments with Raymond James in Chicago, says cutting back on spending can often be the simplest way to make a predictable difference in the sustainability of assets. 

Slow Market/ Higher Expenses

With the Dow repeatedly setting new highs this year, and the S&P up about 19% through July 31, equities might look better than they have in years. But the old investing mantra—create a diversified portfolio and let the "magic of the market" grow one's assets—is losing its mojo. 

Mark Robertson, founder and managing partner at Manifest Investing, using projections from research firm Value Line, predicts an annualized 4% total return for equities markets over the next four years based on market values on August 2, 2103. That's well below the last century's 10%-11% annualized return. In general, analysts also predict increased volatility, with some warning of the potential for another crash.

This new economy means the standard assumption that a 4% annual withdrawal rate could provide for clients through retirement no longer works. Neither does a second crucial assumption, that retirement income should be equal to about 70% of pre-retirement income in order to maintain a client's standard of living.

More Savings/More Risk

For people in their 30s or 40s, preparing for a slow-growth market and a more expensive retirement means stepping up their savings rate.

If you are in or approaching retirement, the new reality means adjustments in investment strategy. Gone are the days of shifting assets into safe, low-risk bonds as retirement arrives. 

"People these days need to be willing to take some increased risk," agrees Raymond James' Reid. "It's not your parents' pension-based retirement anymore." She suggests buying a deferred immediate annuity to provide guaranteed income beginning at age 80.

Carla Masselink, senior vice president for investments with MKS Wealth Advisors of Raymond James in Holland, Mich., agrees with the need for many clients approaching retirement to adjust their risk tolerance upward. 

Morningstar's Benz takes a more cautious view. "People have become allergic to tapping their principal,"I think they need to shift from trying to generate income and to think in terms of total return, where you sell equities that have done well, harvesting your capital gains to add to your income in the good years."

Disappearing Health Care Safety NetTwenty years ago, Medicare covered most bills, and insurance, hospitals and drugs were cheaper, too, with Americans spending an average of $3500 per year on medical care, according to the U.S. Department of Health and Human Services. For a generation of people, many of whom worked for a single company for decades, company-sponsored retirement health insurance plans eliminated much of the worry and planning surrounding retirement medical issues.

Even a decade ago, the cost of a year in a nursing home was just $48,000, a National Institutes of Health study says. Health care is suddenly a top issue in retirement planning. Fidelity Investments estimates the average couple retiring in 2013 will spend about $220,000 on medical care. That $220,000 includes premiums for Medicare Plan B (doctors) and D (prescription drugs), as well as copays, deductibles and non-covered expenses like hearing aids and dentistry. Meanwhile, the HHS estimates 70% of retirees will need to spend an average of three years in long-term care. Costs vary by state, but can easily be double or triple that for assisted-living or tonier homes with private rooms.

Long-Term Care Strategy and Good HealthThe fear of a crippling health care crisis, over and above the staggering costs of health insurance, has made long-term care insurance a popular product. Most people don't spend years in a nursing home, but end up there only at the end of life, and then for less than two years (with up to 100 days of that covered at least partly by Medicare, if it is considered rehab from a hospitalization). Medicare will also pay up to 60 days a year (up to 37.5 hours per week) for in-home "episodic" care, such as speech or physical therapy, or other kinds of skilled care, as long as a doctor certifies a patient is housebound and the care is medically necessary.

Alicia Munnell, director of the Center for Retirement Research at Boston College, says that waiting until 70 to maximize Social Security benefits is "the best single investment a person can make." And reaping that investment is not just for those of meager means.

"Even our high net worth clients are concerned about maximizing Social Security," reports Theresa Fry, manager of IRA and retirement planning at Benjamin F. Edwards & Co. "It's almost like a rite of passage."

The bottom line appears to be that retirement is not a crisis, but it requires care, close periodic consultation, a willingness to pare expenses when markets slump and the ability to take on a bit more portfolio risk than planned. And stay as healthy and as fit as possible.

The worst thing you could do would be to end up at 90 with a huge pile of assets and lots of things that you wanted to do but couldn't afford to do. Instead of trying to eliminate all your risk, try to maximize your happiness.

For more on this story go here

Live Long and Prosper?

The following story got my attention and I thought I would share it. The author is Lee.Anne.Davies and the story was published in Moneysense

The Canadian Institute of Actuaries (CIA) recently modified their pensioner mortality tables to reflect the longer lives of Canadians (see chart below).

Sex	Years to life at Age 60	Years gained
Male	27.3	2.9
Female	29.4	2.7

The update enables pension plan sponsors to better calculate their financial promises to those eligible to receive a pension (or a survivor’s benefit).  Companies with defined-benefit pension (DB) plans, which are guaranteed to their members, need to assess if funding modifications are needed based on these new longevity assumptions to ensure they can meet their pension promises.

Defined-benefit pension plans and your health

Let me be brutally honest on this one…the DB pension plan only cares if you are alive or dead. No other pension plan needs to consider your life expectancy because you hold all the risk—more on this later. Even so, with DB plans there are two degrees of being dead—survivor benefits or none. Your health is not an issue for a DB plan. Regardless of your level of health, the DB plan pays out its obligation. Once you die the obligation may cease if there is no survivor benefit (e.g. it was not needed by you or you opted out), or the obligation continues at a lesser amount for the surviving spouse.

A longer life expectancy does not necessarily mean more healthy years. The pension mortality tables do not need to reflect this reality since defined-benefit payouts happen regardless of your health. However, you need still need to consider the costs and other issues that arise when health deteriorates. 

Statistics Canada estimates average life expectancy as well as average health-adjusted life-expectancy (see chart below). The difference between the two measures is in the quality of the years that are lived. The data indicate that a male will experience 9.4 years on average of poor quality life. For females it is 11.8 years on average of life with disability. Accompanying these years may be additional costs for special care services, potential relocation, medications and other medical aids.

Sex	Life Expectancy	Health Adjusted Life   Expectancy at birth	Difference between the two   measures
Male	78.3	68.9	9.4
Female	83.0	71.2	11.8

Other pension plans such as defined-contribution

Defined-contribution (DC) pensioners (and group RRSP, hybrid plans) hold 100% of the pension risk.  These pension members are responsible for all investment decisions as well as for determining the right retirement payout amount in order to meet their lifestyle needs while also ensuring the money lasts their lifetime. This differs from DB pensioners who receive a payout amount based on a formula, regardless of the investment results. The risk for non-DB pensioners is entirely held by the individual.

Should DB pensioners worry?

A risk does exist for those who are currently contributing to their DB pension.  The plan sponsor will likely want to increase participant contributions to ensure the obligations of the pension promise can be met. Someone needs to pay for those longer-living pensioners. Current DB pension plan contributors are likely to pay more into the plan and therefore experience a decrease in their take-home salary. Some DB pensioners also receive health benefits. Many of these benefits have already been reduced and this trend is likely to continue.

Lee Anne Davies has worked as a consultant for insurance, wealth management, banking and financial education companies. She has a PhD in Aging, Health and Well-being and a Masters of Arts (MA) in Gerontology and Health Studies from the University of Waterloo and an MBA from Athabasca University’s Information Technology Management program. She’s also successfully completed the Canadian Securities Course and the Professional Financial Planning Course. To read more from Davies, visit her blog Agenomics.

Net worth

We recently went to see our financial planner  (We belong to a Credit Union and they have financial planners that are paid by the Credit Union and therefore can offer unbiased advice). We sat down and did some retirement planning reviews. One of the questions we were asked as what is our net worth. After the meeting I felt we were on track to continue to have a relatively secure retirement, but we are not wealthy but we are comfortable.

Are you wealthy? The answer to this question really depends on how you define wealth? Does wealth mean that you have a certain amount of money? Does wealth mean that you drive a fancy car or live in a big house? Does wealth mean that you have achieved financial independence?

One way to determine your situation is to determine your net worth.

The definition of net worth is very simple. Your net worth is equal to all of your assets (what you own) less all of your liabilities (what you owe). It can be complicated depending on what you consider an asset and what you consider a liability. As we did the exercise with our financial planner we had to define what was an asset and what was a liability. I was surprised as to what I could use as an asset for example she did not allow us to use furniture as an asset. (We could have if the furniture was antique or special, she told us, but otherwise it should not be counted)

For the purpose of retirement planning and wealth planning, your financial net worth is slightly different than your total net worth because you only want to consider assets that may be used to help plan your retirement.

In the process of financial or retirement planning, it is very important to have a measuring stick. In the area of health and fitness, we use weight as a benchmark. If we are overweight, we try to lose some by eating better or exercising more.  In financial planning, net worth is one of the most commonly used benchmarks. Your goal in retirement planning should be very simple – While you are in the accumulation phase, your goal should be to increase your net worth every year in order to increase your financial weatlh.

According to Thomas Stanley and William Danko, authors of the best sellers The Millionaire Next Door and Millionaire’s Mind, wealth can be determined by the following formula:

Take your age and multiply it by your gross household income from all sources. Divide by ten (10). This is what your net worth should be.

Most often, when we think of increasing net worth, we think of accumulating assets. There is no question that one of the ways to increase your net worth is simply to accumulate more assets. Forced savings plans are one of the best ways to systematically accumulate assets to add to your net worth. Assets like mutual funds, stocks, real estate, GICs are all assets that help build up the asset side of the net worth equation.

 We had been doing this, but our financial planner pointed out that perhaps we should concentrate on the other side of the equation and as she said, "even though I would love the investment income coming in every month, you would be better off at this point to pay down some of your line of credit. Sometimes the other side of the equation is forgotten when it comes to increasing net worth. It is important to keep in mind that reducing debt will also contribute to your net worth positively. 

Paying down mortgages, lines of credit and credit cards will all reduce liabilities and enhance your net worth. It is also worth mentioning that going into debt is not good for your net worth unless the money is used to enhance your assets. For example, buying real estate is good even though you have to go into debt to do it. However, buying a big screen TV on your credit card would not be considered a positive contribution to your net worth. I know some of you may jokingly disagree but remember your TV is a depreciating asset for personal use. Few experts would consider a TV a solid retirement asset

After we did the exercise with our financial planner we now know our net worth, and according to the above formula we are very near the target given by the formula  Do you know your net worth? 

If you want to have a benchmark for wealth, retirement or financial fitness, make sure your starting point is your net worth. Take a piece of paper and on one side of the page write down all the assets that you think contribute positively to your financial well being. On the other side of the page, list all your debts. At the bottom of the page, take your total assets and subtract your total liabilities and you will have your net worth. Once you have this starting point, every year, you should redo this calculation to see if you are moving in the right direction. Understanding your net worth is the starting point to financial planning and wealth management.  If you have any doubts about how to calculate your net worth, consult a financial adviser for help.

Death Sucks

Death is part of living, and as we get older we start to face the fact that we will die. But when death comes it causes great hardship for the people left behind. Also when death comes a lifetime of experiences, education, wisdom, relationships and consciousness forever vanishes in a split second.

As we look around the world, tensions are high, famine is with us, war is with us, and we see on the news of the death of hundreds and thousands of people. We tend to become more desensitized to such horrors as the numbers mount. Maybe they seem too distant and abstract. Local, current individual tragedies impact us harder, especially when they strike close to home.

People don't seem to consider those same losses as 100,000 "old" people expire every 24 hours. 37 million deaths from aging every year is a big number. Too big for most to be sensitized to it. Too remote unless it's a loved one. And too "natural" to even think of doing anything about it. When I read of a notable person's death, it's more than passing news or a "too bad" reaction to me. It's a never-ending reminder to eliminate life's closing chapter once and for all.

There have been some recent discussions in the life extension community of other reasons behind the lack of funding for research. Most agree that once about 10% of the population understands the possibilities of ending aging as we know it, then we would have reached the tipping point that will trigger the funding needed to finish the job. If we all do just a bit to educate our circles of friends and associates, we'll reach that 10% sooner rather than later.

Retirement and debt

Dr. Stephen Coles said that "The human condition that distinguishes Homo sapiens from other mammalian species is an appreciation of the implications of 'death'.  So far, humans haven't figured out what to do about it, but some day we will, just like we figured out how to fly hot-air balloons, heavier than air craft, or land on the moon after longing for millennia about how birds can fly but we can't." The problem is that we although we have not yet figured out what to do about death, we are living longer and as we live longer we need to manage our financial situation. One way to do that is to reduce debt, before we retire if we can.

 First, get rid of credit cards debt. I paid off my credit card debt and now pay off the cards every month. I use the cards but am very careful about what I use them for, if I cannot afford to buy the item I delay the purchase. I figured that what I couldn't pay for in that month, was either worthless or worth saving for. 

The second thing I did to get out of debt was to start saving. I had made myself a promise that I would save a percentage of my take-home pay, but I never did it. So I talked to my bank and set up a forced saving account, which I recently turned into a Tax Free Savings Account, program from which I  buy stocks. The withdrew  takes a set amount of money from my primary account every month and puts it in another one. That program allowed me to gradually increase my saving from 5 to 10 percent of my income.

If you are spending more than you are making, get rid of your credit cards. To get used to spending less, remind yourself repeatedly that most of the junk you buy (a) becomes unused after a few months and (b) doesn't provide you with much value anyway. Remember that the best things in life - the picnics you have with your family, the walks you take by yourself, the time you spend with your friends - are free, or nearly so. 

Create a separate bank account that you'll use to pay down your debt, or have your debts automatically deducted from the one account you have.  Increase the amount of your take-home that goes into debt payments every month. You might start, for example, with 10 percent and then increase that by 5 percent a month. 

Six months from now, you could be living on half of what you spend now - and I'll bet you will be feeling a lot better about yourself. You'll have less stress, more energy, more confidence, and the beginnings of a lifelong habit of wealth building. 

There are so many ways to save money. You can spend less on just about anything without giving up either the pleasure you take in buying or the quality you get from your purchases. 

Instead of buying new clothes that will be out of style in a year, buy vintage clothing that looks great and distinguishes you. 

Instead of signing a lease for an expensive car, buy something old but still good that has a personality. 

Instead of going out to lunch every day, eat some fish or other protein at your desk. This is one of the things I did.  Instead of plodding along in your same old job, make the decision to earn more money. 

In addition to working extra hard at my primary job, I earned a second income by teaching a class graduate students and undergraduate students part-time at a local university. It wasn't a ton of money, but it helped. 

What I discovered was that working hard when you are motivated is a lot more fun than hardly working when you don't like your job. That was a lesson that made a big difference in my life. If you are in debt and have too little income, it's a lesson you should teach yourself. 

Work more. Save more. Spend less. Waste less. You'll be out of debt and on your way to building real wealth in no time. 

Ageism: Discrimination Against the Elderly

I just found a site that I thought I would share it is http://www.myseniorportal.com/ On the site is an article on Ageism, which is hard to find so I thought I would post it here and include the links to other sites that discuss this issue.

Robert Butler, in the 1960’s, created the term, "Ageism," which he defined as being, "A process of systematic stereotyping of and discrimination against people because they are old, just as racism and sexism accomplish this with skin color and gender. Old people are categorized as senile, rigid in thought and manner, old-fashioned in morality and skills. Ageism allows the younger generations to see older people as different from themselves; thus they subtly cease to identify with their elders as human beings."

We will take an active role in creating an awareness of this issue and become a meaningful voice in eradicating this form of sterotyping an important part of our population. We will catalog pertinent articles and developments in this area to maintain the importance of addressing this form of discrimination.

We invite you to comment by posting on our blog or writing to us at Ageism.

Websites dedicated to a focus on Ageism

Ageism Hurts, which we would like to share with you. While the site is still under development, there are many interesting articles to be found.

This Chair Rocks, pushing back against ageism - which affects everyone.

The Everyday Ageism Project. Research by EURAGE shows that across the European region, ageism is the most commonly experienced from of prejudice.

Articles of interest on the topic of ageism

• The New (Malevolent) Ageism talks about the fact the elderly have never been honored in American society, they have more often been stereotyped, stigmatized and pitied. 
• 
  
• Aging Quiz - Check yourself to see how well you are able to separate fact from fiction for common beliefs held by most individuals in the United States.

• Ageism - A Personal Reflection a personal perspective on how the perception of aging has evolved. 

• Ageism - A Study in Canada an indepth look at some of the issues surrounding ageism 

• Ageism Hinders Some Jobworkers an indepth look at some of the issues surrounding ageism 

• Ageism is More Widespread Than Sexism based on a study in London. 

• Is Ageism Widespread in the Workplace? the perception of vulnerablity for workers in the 55+ category. 

• Think About It: Ageism Addressing the issue of ageism; are jobs only open to the younger generation? 

• The Issue of Ageism in America Today a primer on Ageism. 

• Was Our Country Always So Youth Oriented? a brief history of how the elderly have been stereotyped over time. 

• Yale Study Among Facebook Users finds bias against elderly people. 

• How Do We Get Past Ageism? provides some ideas to overcome the discrimination.

• Ageism: Discrimination Against the Elderly is a type of discrimination that's prevalent, and it has nothing to do with the color of the skin, religion or socio-economic status.

• Age Discrimination Laws and Information covers Federal laws of age discrimination. 

• Henry Cisneros Wants to Design Cities for All Ages where aging in place considerations as well as mixed communities should be planned for the future. 

• Time to End Ageism ageism refers to ideas, attitudes, beliefs and practices on the part of individuals that are biased against persons or groups based on their older age, and needs to come to an end. 

• Researchers chart new path for study of ageism and found the idea that understanding intergenerational tension is key to understanding ageism. Ageism is the one kind of discrimination in which those who are generally doing the discriminating — younger generations — will eventually become part of the targeted demographic. 

• Creative Encounters with Aging 71 percent of Canadians surveyed stated that older people are less valued in society. 60 percent of seniors age 66 and older reported that they had personally experienced age-based discrimination. Worse, 20 percent of those surveyed actually stated that older Canadians constitute a burden on society. Ageism is perhaps the most tolerated form of social prejudice and discrimination in many countries around the world, and in the midst of an ageing global population it is poised to become one of the most significant social problems of the 21st century.