Generation Squeeze

When we as a Board, were asked for some names to speak at the SHARE Family Services Annual General Meeting, someone suggested Paul Kershaw and said that his presentation on Generation Squeeze would be interesting and challenging but would fit within our mandate and goals. 

I was a bit sceptical as I was not sure what I as a Boomer could learn from the younger generation. I also thought that what the movement would pit one generation against another as we fight for limited resources. I  was wrong, after the presentation, it was clear to me that it is our children that are the ones being squeezed and we can help them by changing our attitudes and by taking actions. I support the ideas raised by this movement and suggest that you take a look at their website here. 

According to Paul Kershaw, Generation Squeeze is a generation that is squeezed between lower incomes and higher costs for housing, tuition, child care and saving for retirement.  Here are some of his ideas as presented on his website.

High home prices squeeze generations under age 45 with crushing debt, which they must pay with wages that have fallen compared to a generation ago, and in jobs that rarely contribute pensions.

The national response?  Governments spend just $12k on benefits and services per Canadian under 45, compared to nearly $45k for every retiree.

Since two earners barely bring home today what one breadwinner did in the 1970s, we’ve gone from 40 hour work weeks to closer to 80 hours.  The result?  Generations raising young kids are squeezed for time at home.  They are squeezed for income because housing prices are nearly double, even though young people often live in condos, or trade yards for time-consuming commutes.  And they are squeezed for services like child care, which are essential for parents to deal with rising costs, but are in short supply, and cost more than university.

Paul believes that his generation and ours (The boomers) CAN CHANGE THIS.  While the deck may be stacked against us now, we can get “A Better Generational Deal” – one that gives all generations a chance, including Gen Squeeze. Join us to make this Better Deal a reality.

Here is one of his ideas on how to bring about this change:

Restoring better balance between generations begins with incremental change.  We recommend shifting annual spending on each Canadian under 45 from around $12k to $13k, while maintaining spending for retirees around $45k.  Who could object to this?

This small shift could create a $22 billion dollar budget to invest in young people.  We know the policy changes required to Reduce the Squeeze in ways that make family time and services affordable while still leaving room to pay down debt and save for retirement.

But we don’t know all the ingredients for a better generational deal.  You may have other priorities. Tell us.

Problem is, we’re unlikely to achieve any of our priorities for a better generational deal until Canadians across generations actively vocalize that the deal is stacked against younger Canadians today.

So donate your voice to call for a better generational deal.  Here’s how to Get InvolvedNow.

You’ll learn it’s not your fault that incomes are lower, student loans larger, housing costs higher, and financial stability further out of reach.  These problems reflect bad timing more than personal failure.

So change what you know to change how you feel.  The Gen Squeeze campaign is replacing anxiety and even shame among younger Canadians with the confidence to call actively for a new generational deal.

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.

Are you feeling fully satisfied with your life?

Living a more satisfying life is a skill that can be developed at any age, but it requires time, attention, and dedication.

Many of us know people who as they age, claim that they want to be happy, but they live life within the following paradigms

They are as self-absorbed as possible. They try to make sure every situation at work or at home is primarily about their thoughts, their feelings, their welfare.

They see themselves as a victim. Observe that life has conspired against them, view others as the source of their problems and they tell themselves that they are helpless in their particular set of circumstances.

They tend to go over past negative events repeatedly. They dwell on what makes them bitter. They remember how they were hurt in the past and who was responsible. 

People who make these steps a habit are well on their way to a life of dissatisfaction and misery.

So how do you, as you age, not become trapped in a paradigm that robs you of hope and happiness.

First, absorb yourself in your work, friends, family relationships and outside interests.  Move your focus outside. Become absorbed in what you're doing.  Remind yourself what you are trying to achieve. If you don't have personal goals - dreams with deadlines - set some.

See yourself as in control of your destiny. We all have problems and setbacks, but things only begin to turn around when you take ownership of your situation. Then you can begin to move forward.

Focus on what's right with your life. This is a tall order in some cases. Many of us are dealing with unfortunate economic or personal circumstances. Accept that the past is past.  Forgive any transgressors, not for their sake but for yours.  Start imaging how things could improve. Once you can image how things could improve, then you will start to take steps to make it happen.

Will seniors drain the country’s financial resources.

Rob Carrick  posted this  article that argues that we should not rely on inheritance to save us, if we have not saved for our retirement.

An emerging theme in money is that having a lot of seniors in the population will drain the country’s financial resources.

The hardly discussed counter-argument: Seniors could be the lifesaver for many a financially troubled household.

Canada’s baby boomers were born between 1947 and 1966, which means they should be well established financially. The fact that many are heavily indebted, even as they edge toward retirement, suggests seniors must do some hard thinking if they have money to give away.

Should they help a 55-year-old daughter pay off the last of her mortgage and attend to a long-neglected retirement saving plan? Or, should they help a 25-year-old grandchild pay off a student debt and avoid what could easily be a decade-long slog of debt repayment? Consider giving where the need is greatest (that would be the 55-year-old in this example), and don’t hesitate to put conditions on the money where possible.

As for people counting on an inheritance, that’s only one step away, in financial-planning terms, from waiting for a lottery win. Your parents or grandparents may yet bail you out of your financial problems, but it’s kind of pathetic to base everything on this hope.

Back in 2006, the research firm Harris/Decima issued a widely quoted report suggesting that $1-trillion will be passed from Canada’s seniors to their baby boomer kids in the next two decades or so. It all sounds a touch optimistic today as a result of debts being carried into retirement, falling house prices, weak investment returns and longer lifespans. But even if the coming generational wealth transfer is half or one-quarter of what’s predicted, a lot of money will be on the move in the years ahead.

This is fortunate because some families will have trouble getting by without it. For example, there are the baby boomers heading into retirement with credit card debt, drawn down credit lines and mortgages that are still a ways from being repaid. Another example would be the members of Gen Y who are struggling to repay student debt so they can buy homes and start families.

An Investors Group survey from early this year suggests that 53 per cent of Canadians are expecting an inheritance and, of those who think they know how much they’re getting, 57 per cent expect to receive a six-figure amount. But even while anticipating our inheritances, we’re starting to wonder about the cost to the country of our aging population.

Statistics Canada has estimated that roughly one in four people will be 65 or older by 2036, which means the cost of health care and benefits such as Old Age Security will rise sharply. Already, the federal government has announced that the age of OAS eligibility will gradually be pushed back two years to 67 starting in 2023. It’s increasingly common to hear scepticism from people of all ages about whether today’s government benefits will be fully or in part available to younger Canadians when they retire.

The irony here is that today’s seniors represent the last stand of the sensible, old attitudes about money. This old attitude is that debt is abhorrent except when used to buy something tangible and life-enhancing. These purchases would be a home or post-secondary degree, and that saving is the best defence against future uncertainties.

Seniors, you’re not responsible for today’s lax attitudes toward debt and saving. Also, your first financial obligation is to yourselves. Gifts and inheritances are affordable only if you have saved more money than you can reasonably expect to spend on everyday living, medical care and housing, be it the family home or a long-term care facility. It’s worth noting that in the Investors Group survey, 45 per cent of people aged 60 or more said they think they’ll need their savings and won’t have money left over.

If you do have a surplus, consider passing it along now rather than waiting until after you die. Earlier this year

Check it out for some suggestions on how to effectively help grandchildren with a gift of money

Five ways to help the grandkids

1. Contribute to a registered education savings plan (RESP): Note that contribution limits apply in aggregate to all plans set up in a child’s name, not to each plan individually.

2. Set up and contribute to a tax-free savings account (TFSA): A smart and easy option for grandkids aged 18 and older.

3. Help with tuition or books: A way to extend parents’ savings and minimize student debt.

4. Help pay off student loans: It could easily take 10 years for a student to repay substantial borrowings.

5. A cash gift: No tax consequences for grandparents or grandchildren.

Moolala

I was depositing some checks at my local Credit Union the other day and as I was leaving a young lady asked me if I would be interested in sitting in on a seminar the Credit Union was putting on about personal finance. Once she told me it would be a short seminar, I said sure. It was not that I was interested in the seminar but this was one of my first trips out of the house since my knee surgery and I wanted to extend the time out. 

I enjoyed the seminar and the approach that presenter took to engage the participants and to get his message out.  The take away from the seminar for me was that adults need to be reminded how to dream, as we did when we were children, and once we created the dream then we needed a systematic approach to following through on the dream. Many of us as boomer's have forgotten how to dream or we are frozen in time and space when we look ahead to retirement (or our ability to retire). 

Another take away from the seminar was that it is never too late to create the dream, and it is never to late to follow through on the dreams we have. Now those of you who have followed me for a while, know that I retired three times, first in 2006 then in 2010 and again in 2012 because I was/am a work-a-holic and did not know how to slow down and relax. I am learning this and I think that the seminar helped me reinforce some of my  ideas and my dreams.  

Here is some information on the presenter, and my hope is that my Credit Union follows up with using his approach to helping their members achieve their goals. I think it will work.  The seminar covered the following topics

• Step 1: Lay the foundation. Why smart people do dumb things with their money (and what you can do about it).
• Step 2: Determine what you want. Think holistically about your life and formulate goals across a broad range of areas including experiences you want to have, where you want to contribute, your goals for family, career, home and health.
• Step 3: Develop the plan. Identify the key actions you need to take to get what you want.
• Step 4: Take action. Formulate declarations and reminders to help you overcome procrastination and get moving.
• Step 5: Stay engaged. Set your life up so that your personal finances are easy and require little of your time and energy

The seminar was given by a young man name Bruce Sellery who was working with the Credit Union and their financial planners to create a different approach to handling money for members.  Bruce has an extensive history as Business journalist, TV host, Author and Professional speaker. He has written a book called Moolala, available here.   I highly recommend the book as he focuses on helping people create dreams, follow through on their dreams, by helping the individual create a plan and a way to implement and follow up with that plan.

He is also the founder of Moolala, a personal finance training company with a mission to inspire people to get a handle on their money so they can live the life they want. Moolala works in partnership with many different organizations and financial institutions to provide financial education through live events, workshops, consulting and online material. Bruce is also a columnist with Moneysense.ca, a leading personal finance magazine, and is the financial expert and co-host on “Million Dollar Neighbourhood”, a reality TV show that airs on the Oprah Winfrey Network.

The 'Moolala Method' is a 5 step approach to getting a handle on your money that can be applied to anyone. It has been featured in the media across North America, including CNN, MSNBC, CBC Television, CBC Radio, Globe & Mail, Financial Post, Calgary Herald, Vancouver Province, Alberta Venture, and Canadian Business Magazine 

Retirement concerns continue to plague Americans

Despite improvements since 2009. worries about retirement finances still vex many Americans, especially those with less education and low income.

By Chad Brooks  Wed, Oct 24 2012  

Despite the economic improvements made since the end of the Great Recession in 2009, more Americans are worried about their retirement finances today than they were then, new research shows.

The study by the Pew Research Center revealed that nearly 40 percent of adults are not confident they will have income and assets for their retirement, up 13 percentage points from three years ago.

The research shows the decline in confidence is greatest among Americans with less education and those with annual family incomes between $30,000 and $74,999. When examined by race, the study found that Hispanics are slightly more confident than Caucasians and African Americans that they'll have enough money to last through their retirement.

In a shift from previous years, the research found that that concerns about retirement financing are now more heavily concentrated among younger and middle-aged adults than those closer to retirement age.

Specifically, more than half of those surveyed between the ages of 36 and 40 are not confident that their income and assets will last through the end of their working career, while less than 35 percent of those between 60 and 64 feel the same way.

An analysis of Federal Reserve data suggests that a reason that retirement concerns have surged among adults in their late 30s and early 40s is that the average wealth of this group has fallen at a far greater rate than for any other age group over the past 10 years.

Led by declines in the value of their homes, the research found that the median wealth of adults ages 35 to 44 was 56 percent lower (in inflation-adjusted dollars) in 2010 than it had been for their same-aged counterparts in 2001. At the same time, those closer to retirement, between the ages of 55 and 64, saw just a 22 percent drop in wealth.

Also contributing to the loss in wealth among adults in their late 30s and early 40s has been their failure to benefit from the rebound in stock prices that began after the recession. The data shows that a larger share of that age group dropped out of the stock market when things got bad and were on the sidelines as prices began to increase.

The study was based on Pew Research Center surveys of more than 2,500 U.S. adults and the Federal Reserve Board of Governors and the Department of Treasury's triennial Survey of Consumer Finances.

Follow Chad Brooks on Twitter @cbrooks76 

Many in Middle Class ‘Guess’ on Retirement Needs

 

Have you done detailed calculations of your financial needs in retirement, or are you, one of  75%, playing the guessing game?

Three-fourths of middle-class Americans say their estimate of what they’ll need to live on in retirement is based on “some sort of guess,” a new survey finds.

And those guesses often appear off the mark, according to the annual Wells Fargo Retirement Survey.

For instance, middle-class Americans say they believe the median cost of their out-of-pocket health care costs in retirement will be $47,000. But the Center for Retirement Research estimates a typical couple at age 65 can expect to spend $260,000 or more over the rest of their lives.

Further, when asked what percentage of their nest egg they expect to withdraw annually in retirement, the median — or typical — withdrawal predicted by middle-class Americans is 10 percent. But most experts recommend annual withdrawals of 3 to 4 percent.

In addition, middle-class Americans say they’ll need a median of $300,000 to support themselves in retirement — but to date have saved only $25,000.

The survey also found that 34 percent of middle-class Americans estimate that their retirement income will be half their current annual income, or less. The median household income for Americans was roughly $50,000 last year, so that means many are planning on living on $25,000.

“Clearly, the guessing doesn’t work,” said Laurie Nordquist, a director of institutional retirement and trust services at Wells Fargo. The survey findings suggest that many consumers are too focused on paying day-to-day bills to spend more time on retirement planning, she said, even though that’s clearly warranted.

Harris Interactive Inc. conducted the telephone survey of 1,000 middle-class adults from July 9 through Sept. 12. To aim at the middle class, participants fell within specified income and wealth brackets. For example, those between the ages of 30 and 75 had 2011 household income of $50,000 to $99,999, and assets of $25,000 to $99,999 that could be invested.

The above was written  By Ann Carrins on October 24th in the New York Times

Are boomers spending too much?

Are boomers spending too much and hurting their chances at a comfortable retirement?

Yes according to a survey and an article published in Forbes magazine by Halah Touryalai, Forbes Staff

A study by the National Center for Policy Analysis investigates the spending habits of baby boomers who many say are nowhere near ready to retire

The NCPA compared the pre-retirement spending habits of today’s middle-aged workers (45 to 54 years old) and today’s older workers (55 to 64 years old) with the spending habits of those age groups 20 years ago.

The group notes that real incomes for these age groups have not changed much but the portion of disposable income households spent on certain categories of goods and services has increased.

Move up http://i.forbesimg.com t Move down

The results are not all surprising considering the state of economic affairs for many in the country.

For starters, baby boomers are spending a lot more on education. That’s no surprise considering the cost of a college education has grown faster than income for decades. From 1990 to 2010, education expenditures increased the most — by 80% for 45 to 54 year olds and 22 percent for 55 to 64 year olds.

“Today, outstanding student loans amount to more than one trillion dollars.11  A recent analysis by the New York Federal Reserve Bank found that one-third of the nation’s student loan debt is held by individuals over the age of 40,” the report says.

Another rising cost hurting pre-retirees today: Health care. Health care expenditures–including all out-of-pocket expenses and insurance premium expenses–rose 30% for 45 to 54 year olds and 21% for 55 to 64 year olds. Insurance premiums nearly doubled as a share of health care expenditures for both age groups, the study notes, adding that the growing cost of health care has essentially wiped out the gains in median family income over the last 10 years.

Adult children are taking a toll on their boomer parents. Nearly 50% of parents with children between age 18 to 39 were supporting them in various ways including living expenses, transportation costs, spending money, medical bills and help with paying loans like student debt.

Perhaps less surprising rising cost: Mortgage debt.

From 1990 to 2010 the share of expenditures on housing including principal, mortgage interest, taxes, maintenance and insurance for both age groups increased 25%. Interestingly, the 55 to 64 year olds saw half of the increase in the interest portion of housing expenditureseven though mortgage interest rates have dropped over time. From the report:

Are baby boomers buying more home than they can afford or are prices for a basic home simply outpacing income growth?  The median house size has increased from 2,080 square feet in 1990 to 2,392 square feet in 2010. Since the mid-1990s, the Federal Housing Authority allowed more borrowers to qualify for loans with lower down payments. This action began a proliferation of loans that required little or no down payment. Furthermore, after 2000, home price growth outpaced income growth, peaking in 2004 and 2005. Home prices began falling dramatically by the end of 2008, but many households were underwater, owing more on their mortgages than their homes were worth.

Making mortgage debt even further complicated is that the age of first-time homebuyers is up from 28 in 1985 to 35 in 2011.

As the age of the first time homebuyer increases, the probability that a household will carry a mortgage into its pre-retirement years also increases. In addition, due to the availability of home equity loans, many boomers who were previously close to paying off their homes could be refinancing or tapping into home equity. In fact, it is estimated that 15 percent of all baby boomers will not get out of debt in their lifetimes,” the report notes.

What aren’t boomers spending more on? Entertainment. Boomers have not increased their spending on entertainment or dining out and have in fact cut back on some categories from 1990 to 2010:

• Food purchases (including restaurant spending) fell 18 percent for 45 to 54 year olds and 20 percent for 55 to 64 year olds.
• Household furnishings fell nearly one-third for 45 to 54 year olds and one-fourth for 55 to 64 year olds.
• Clothing expenses showed the steepest decline, falling 42 percent for 45 to 54 year olds and 70 percent for 55 to 64 year olds.

“Contrary to the belief that the savings rate has been stagnant, or even declined, retirement accounts appear to be playing a larger role for baby boomers. However, retirement savings is nowhere near the 10 percent that is often recommended as the share of income that should be dedicated to savings,” Pamela Villarreal of NCPA says in the summary of the report

Post-Recession Retirement Planning: Work Until 80

 I found the following article By Adriana Reyneri interesting. It was published in Millionair Corner. For those not familiar with this organziation. This is what they say on their website:

Millionaire Corner is published by Spectrem Group, the premier research and consulting firm in the wealth and retirement industry.

Chicago-based Spectrem Group has been studying investors for the past 20 years. Each year, interviews and surveys are conducted in 25,000 to 30,000 households to discern their financial needs and preferences. These findings are distributed in a series of publications to the financial services industries. The Spectrem Millionaire Investor Confidence Index (SMICI) ℠ and the Spectrem Affluent Investor Confidence Index (SAICI) ® are published monthly and are used by the media and the financial community as barometers to measure the economic health of the nation.

The article:

A growing share of middle class Americans – those with investable assets of less than $100,000 -anticipates working until at least 80 to be able to afford a comfortable retirement, according to the annual Wells Fargo Retirement Survey released today.

Thirty percent of the participants in this year’s study say they would need to work into their 80s to have enough money for retirement, up from 25 percent last year, but octogenarian employment might not be the best retirement planning, according to the survey. Nearly three-fourths of the participants feel their employer would not want them to continue to work this long.

“People say they’ll work longer, but how possible will this be for millions of Americans?” Joe Ready, director of Wells Fargo Institutional Retirement and Trust, said in a statement. “Preparing for retirement can’t be kicked down the road because the other picture that is emerging is how many people will live very close to the poverty line in retirement.”

An impoverished retirement ranks as the greatest financial fear of middle class Americans, according to a monthly poll conducted by Millionaire Corner in May. More than 40 percent of investors with investable assets below $100,000 identified running out of money in retirement as their greatest financial fear.  What is the second greatest financial fear of the middle class? Twenty percent of investors participating in our May survey cited “having to work longer than I planned to be able to comfortably retire.”

What’s the biggest regret of middle class Americans? Our research shows that “not saving enough for retirement” ranks as their biggest financial regret, by far. More than 32 percent of investors with less than $100,000 regret their lack of retirement savings. The second biggest regret, cited by 16 percent of middle class Americans, is having too much credit card debt.  It’s interesting to note that middle class investors feel their best financial decision was buying a home (32 percent) and rank “making consistent investments in a retirement plan” as second (24 percent).

Low levels of financial literacy and a lack of retirement planning contributes to the financial insecurity of middle class retirees, according to the Wells Fargo survey. Three-fourths of the survey participants indicated that their retirement planning is based more on guesses than calculations and only 36 percent has a written retirement plan. Formal retirement planning can help investors stay on track to reach their financial goals.

The aurthor Adriana Reyneri writes news briefs, features and blogs for Millionaire Corner. Before joining the website, Adriana acquired a wide range of editorial experience. She began her career as a daily newspaper reporter and has written for magazines, technical and trade publications. She has served as a marketing and communications specialist for Stevens Institute of Technology in Hoboken, N.J. She obtained a master's degree from the University of Missouri School of Journalism and holds a bachelor's in English from Stanford University

Financial Planning 2

Using conservative assumptions for returns and inflation will give you a better idea if you need to adjust your spending or saving, as you don't want to outlive your portfolio. (What is a conservative assumption about returns, you may ask--I think returns that average 2-3% would be conservative. What is a conservative rate of inflation, you may wonder. I think a conservative rate of inflation would be between 3 and 4 percent a year

Phase 2: Staying Retired: Being that retirement can last 30 or more years, this phase likely requires the most skill and regular reassessment. A requirement to staying retired is to have a good strategy that focuses on ensuring your money lasts at least as long as you do.

Here you need to account for the five types of risk: market, inflation, longevity, withdrawal rate and sequence of returns. Make sure your investments don’t run into trouble with any of the above risks. Working without a crystal ball means you have to depend on yourself and/or a financial professional to navigate you through the twists and turns of the economy and the interest rate environment.

Don’t forget surprise expenses such as extensive health care-related costs. Ignoring potential surprises means you are living a “what if” retirement. Try to wipe out the what-ifs and try to plan for an “as if” retirement. An as-if retirement is to live as if you have no financial worries. That alone may help you live a long life.

Many investors wonder how they will actually get the income they need from their portfolio. This will come in various forms such as dividends and interest. If you have a conservative outlook you may be able to pull between 3 and 5% from portfolios without including any growth potential or dipping into principal. 

If you are retired then you won't have time to make up a big loss in your portfolio. This is why it is important to make sure your advisor uses an exit strategy for your holdings, be they stocks or bonds, should markets turn negative.

The difficulty in Phase 2 over Phase 1 is that you have to account for the unknowns. In Phase 1, you merely need to make sure you have enough income now. Here you have to account for inflation and unpleasant scenarios such as a spouse passing away. What will the surviving spouse do and who will they turn to for guidance?

Phase 3: Planning For After Retirement: No one lives forever, so what happens to your investments when you no longer have a need for them when you’re gone?

One of the biggest concern for many retirees  is having just one spouse manage all investments or being the point of contact for the financial advisor. If something happens to this spouse, then the spouse who doesn't follow the investments can feel very overwhelmed from this new duty. It is important to have a strategy in place for this type of situation to ensure there is minimal decision making and the transition is easier for your spouse

With proper planning, you can help to ensure most or all of your life’s savings goes to your family versus the provincial/state or federal government. However, you must plan in advance while you are still alive. There are a handful of time-tested strategies that exist today that can help you preserve your nest egg for those you love who will live on after you.

What may be more interesting is that certain assets, such as life insurance proceeds, passing to these same beneficiaries are not subject to the inheritance tax. Work with your professional advisers to help steer you in the right direction.

It may be important to you to pass on your wealth to your beneficiaries with the lowest amount of tax possible. There are ways to properly set up your estate to reduce taxes and avoid probate fees and you need to have a talk with your financial advisor about how to do this.

Joel Steele is co-owner of Steele Financial Solutions, recently voted Best of South Jersey. Reach him  www.steelefinancialsolutions.com 

Lori Pinkowski is a portfolio manager and senior vice president, private client group, at Raymond James Ltd., a member Canadian Investor Protection Fund. She can answer any questions at lori.pinkowski@ raymondjames.ca

More on Retirement Planning 1

Some different perspectives on planning. The information below was taken from two articles, one by  Lori Pinkowski and the other by Joel Steele. Information on the two authors is at the end of the post.

There’s an old saying, “A journey of 1,000 miles begins with a single step.” You may find it helpful to break retirement into three phases. They are: Getting to retirement, staying retired and planning for after retirement. Once you break retirement planning into three separate phases, you are likely to have more success each step up the way.

If you break your plans, goals and concerns into individual actions or steps, you are more likely to have success in all three phases while minimizing your anxiety over your financial condition.

Phase 1: Getting to Retirement: Physically retiring is an act, not a phase. Getting to retirement means having the current financial means to support your expenses and lifestyle without any earned income.

The most common question people ask is, "How much do I need for retirement?" There of course is no single right answer. When you meet with a financial planner and  you feel that your information is being put into a template, challenge their procedures. 

How much do you believe you need and this really depends on how much you spend. Some of us are more frugal than others, so it is important to begin evaluating your situation at least three years before your retirement date.  Because very few of us have economic training or even more than just a passing familiarity with budgeting, we tend to  overestimate the amount we may need, therefore it may be valuable to track how much you spend leading up to your retirement.

It is important to have a current financial plan completed, usually this is done at no cost by some financial advisors. However, you need to remember that the financial planner may offer you this service, because they want to sell you their product. I would advise going to a financial advisor that has a fee for the service, you may get more unbiased recommendations arising from the plan. Your plan, completed by both a fee for service or a no cost financial plan, should be the same from each advisor. It is the recommendations arising from the plan that you have to be careful about when you are working with an advisor that gives you "free advice".

Your plan should include all of your assets, liabilities, pension, and incomes, as well as taking taxes and inflation into account to ensure you know the amount needed or are able to withdraw from your portfolio.  In the next post we will examine Phases two and three

Joel Steele is co-owner of Steele Financial Solutions, recently voted Best of South Jersey. Reach him  www.steelefinancialsolutions.com 

Lori Pinkowski is a portfolio manager and senior vice president, private client group, at Raymond James Ltd., a member Canadian Investor Protection Fund. She can answer any questions at lori.pinkowski@ raymondjames.ca
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Start planning retirement by having a plan

Everyone should have some type of legal document that directs where the assets of their estate should go when they die.  This document is most commonly referred to as a last will and testament. Another popular legal document that may be used in the place of a will is a living trust.

A last will and testament does not necessarily control where everything goes.  Certain assets such as retirement accounts, annuities, life insurance, etc. , are controlled by beneficiary designations.  Make sure that these designations are up to date and reflect your current wishes as to where these funds will go.

If you wish that certain sentimental items go to specific individuals, make sure that you designate these as specific gifts in your will.  Otherwise, these items may or may not get to the person that you wish to have them.

Make sure you have enough life insurance.  Life insurance is a powerful tool in estate planning.  It can be used to provide liquid funds to replace lost income, pay off a mortgage, pay for a college education, pay debts, pay taxes or just provide a better life to the beneficiaries.  

Make sure you have a durable power of attorney and health care directives in place.  These documents allow someone to manage your assets and your care should you reach a point that you are unable to.

These are some of the important things to consider when planning for where you want your stuff to go when you die.  Each person’s situation can be somewhat unique and there are other issues that may need to be considered.  Be smart and seek out a qualified professional to consult with about creating your estate plan.  Your loved ones will someday be glad you did.Here are some tips to help you start:

Start the conversation with loved ones. There are many tools to help you, do a Google search for getting started on retirement planning and tools like the following are available to you

Retirement Calculator, RSP Calculator and Planning Tools | TD ...

www.tdretirement.com/retirement-planning-tools.aspx

Our retirement planning tools will help determine your cash flow, calculate your RSP Contribution and plan your retirement strategy. ... Getting Started: More than 10 years to retirement · Nearing Retirement: 10 years or less to retirement ...

TD Waterhouse - Private Investment Advice - Start Planning

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With a clear plan, you can make wise financial decisions and truly measure their results. This retirement planning tool will help you get started on the planning ...

Online Retirement planner, online investment planner, retirement ...

www.bmoinvestorline.com/WhatsNew/AssetAllocator.html

BMO InvestorLine's asset allocator is an online planning tool that will help you ... new house, your child's education or retirement, getting the right asset mix is an ...

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Put Some Muscle Behind Your Retirement Planning - BMO

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your employer-sponsored retirement plan. This special ... wealth of tools available on miretirement.com. ... The following suggestions can help you get started. 1.

A get-started retirement plan - CNN Money

money.cnn.com/2006/07/18/pf/expert/expert.../index.htm

18 Jul 2006 – Get-started retirement plan. Puzzled about what to do now that you've signed up for your 401(k) plan? Our expert has some answers.

Retirement Planning and Taxes | Scotia iTRADE

Formalize your plan. Work with a respected financial professional who may have a better understanding of all the options available, but before you do go online. Here are a few sites that may help you formalize your plan

CHAPTER 8: Formalize Your Investment Plan - Investment Guide

1. investingessentials.blogspot.com/.../chapter-8-formalize-your-i...Share

   Formalize Your Investment Plan with an Investment Policy Statement. You have already .... Here is an example of how a long-term plan for retirement might look: ...
2. Retirement Planning | estimating retirement income needs
   

   www.investingforme.com/ifm-step-by-step-approach

   In the following section we have outlined a number of steps to help you formalize your retirement plan. Some of these steps will involve using facts and figures ...

Commit to your plan.  Committing to a plan enables people to have more choices and be aware of options. Here are some sites to help

Control your financial destiny - BMO

https://www.bmo.com/mybmoretirement/.../09-325-021_BHB...

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BMO Retirement Services is a part of BMO Global Asset Management and a division of the BMO Harris Bank N.A., offering ... Although your retirement planning approach should ... and then commit yourself to reaching it before you retire.

Penad Pension Services Limited – Penad Promise

www.penad.ca/index.php/services/penad-promise/

When you choose Penad, you get a service provider and a partner who is committed to making sure that your pension plan is administered with utmost care.

Planning Your Retirement Cashflow

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When planning for retirement, it makes good sense to commit your budget to writing to get a better handle on your finances and to avoid missing something ...

Why employees choose us

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You can achieve the retirement lifestyle you envision if you take the time to set yourgoals, make a plan and commit to it. Your group retirement plan makes it ...

Sticking to the savings plan | Herald Sun

www.heraldsun.com.au/.../sticking...savings-plan/story-e6frfi...

19 Feb 2011 – SOME people track their spending on a spreadsheet. They tend to have names like Ian and Cheryl, and they bring homemade hummus and ...

Use an Automatic Savings Plan to Build Wealth — Debit versus Credit

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30 Jul 2011 – Let's focus on the big kahuna: creating and sticking to a savings plan. Paying yourself first (meaning putting money away every single paycheck ...

Saving – Achieving your goals with a regular savings plan | Sorted

www.sorted.org.nz › A-Z guides

Sticking to a regular savings plan is a great way to achieve your goals and get your finances sorted. In most cases, it's better to save for things than to go into ...

How to stick to your saving goals

monevator.com/how-to-stick-to-saving-goals/Share

8 Mar 2011 – The tension between trying to stay within the spending limits and the desire to generate a savings surplus creates the drive to stick to the plan.

"Having a plan helps people get a clearer idea of what they'll need later in life and enables them to set attainable goals, track progress and adjust the plan if necessary, however many of us go through life with the Alice in Wonderland approach

"Would you tell me which way I ought to go from here?" asked Alice.
"That depends a good deal on where you want to get," said the Cat.
"I really don't care where" replied Alice.
"Then it doesn't much matter which way you go," said the Cat.
- Lewis Carroll, Alice's Adventures in Wonderland (1865), novelist and poet (1832-1898).

Make a plan and stick to it and you will be surprised how well you can do!

Put your wishes in writing

My brothers and I get together once a year, to reconnect to talk and to share adventures and stories. I have a good relationship with my brothers and their wives and I think with their children. I am bad however at remembering birthdays for nephews and nieces, for which I am trying to make amends.  At our last gathering we talked about hard feelings left when parental wishes were not made clear in the will and the problems that causes for family. 

Having a last will and testaments are a recommended by all retirement and financial experts to make sure your estate goes to who you want it to go to and that your last wishes are respected. However important this is I believe that it is more important to make your wishes clear so that your family can have peace. All we have is family (children, brothers, sisters and grandchildren) and when the family is torn apart because you do not make your wishes clear your legacy is diminished.

Do not leave it to your lawyer, or notary to make your wishes clear, I have had people talk to me about how lawyers have misread statements built into last wishes, because they have only read what the words should have said, not what they actually said. One person told me that when they were acting as the executor of the estate for a family member, she realized that the wording in one part of the will actually removed the beneficiary from the will. Two lawyers read the will and both disagreed with her interpretation until she read the portion out loud to them and they realized that she was correct.  The lawyers then charged the estate too correct the error they had made and overlooked.

If you are not clear on what you want to happen with your estate, the family may interpret your wishes in ways that you do not want and may cause your family to lose their connection to each other. It is up to you but be clear on your last wishes, you owe it to your family.