More thoughts on planning for retirement

I was talking to my accountant about planning for retirement and he mentioned that there is one thing that young people and my people age do not plan for. He mentioned that people including sonic boomers have roughly $3,000 to $6,000 in medical bills not covered by any plan. He also said that many of his clients who are living on just Old Age Security and the supplement are sitting on homes that are paid for, and if sold would help the person have a better quality of life. He said that when he mentions this his clients respond with this sentiment: I would love that but if I do, what would I leave my children?" 


So poor planning and misguided sentiment (in my mind) leave people living in poverty or near poverty. I am sure that people understand the need to save, I am not sure why they don't save. That is why I found the ideas expressed by Olivia and Stephan interesting, I hope you do as well.


What might explain this apparent inability to plan properly for retirement? People try to save for retirement, but they too often not able to execute intentions. In a sense, saving for retirement requires behavior similar to those undertaken in other behavior modification programs such as exercising, dieting, quitting smoking, or following through on New Year’s resolutions. In other words, a key obstacle to saving more is not necessarily lack of awareness, but rather the ability to take action on the knowledge.  Here are some reasons why this happens.

People understand their inability to act even when they have good intentions and often seek to protect themselves through the use of commitment devices, or mechanisms that help foster desirable changes in behavior.

“Pay yourself first” is one of a number of standard commitment device used by financial planners and others who want to encourage disciplined saving and budgeting. Other commitment devices include tax refunds and Christmas or other Clubs, where individuals engage in economic activity that on the face of it are not economically sound (e.g. loaning money to the government or to their local banks at below-market rates). What the individual gets in exchange is a disciplined approach for accumulating savings. Another commitment device that is used by the government is to impose high penalties and withdrawal restrictions on retirement plans. The idea is that once the money is allocated to these plans, a psychological and financial hurdle is imposed on the individual accessing the money, which will help to counteract lapses in personal willpower.

People can be easily influenced by decision framing. In traditional economic theory it is assumed that rational economic agents (individuals) would not be expected to vary their responses to a question based on how it is asked. We know this is not the case. The simple rephrasing of the saving question elicits a different response in plan participation rates. Researchers have shown that when workers whenA faced with the option that requires them to sign up for a savings plan then they do nothing. If the employer institutes an automatic enrollment plan (that you can opt out of at any time) with a saving rate specified by the employer or the union more people save at the rate specified by the employer. This behaviour is explained by the idea that when confronted with difficult decisions, individuals tend to adopt shortcuts that simplify the complex problems they face. One simple shortcut is to accept the available default option—i.e., rather than making an active choice, accept the choice made by others. For one large US firm, plan participation rates jumped from 37 percent to 86 percent for new hires after automatic enrollment was introduced.

Evidence reveals another anomaly about individuals and their saving behavior: the important impact that inertia or procrastination plays on decision-making.  Researchers have concluded that, many of us follow “the path of least resistance” in our decision-making. We make the easiest, rather than the best, decision. This passive approach to decision-making is indicative of individuals being somewhat imperfect rational economic agents in their retirement and savings decisions, especially when there is a great amount of choice.

Offering workers many investment choices can produce choice overload; faced with complex investment choices, some participants may elect to simplify the decision by following their default plan, i.e., don’t decide, don’t join the plan, or find out what friends at work are doing. Many of our saving decisions can be strongly influenced by peers.

Just as our saving choices can be affected by framing, so too can our investment decisions be influenced, sometimes strongly, by framing effects.

Musings on why people don't plan for retirement

The following three days of posts are from Lessons from Behavioral Finance for Retirement Plan Design by Olivia Mitchell and Stephen Utkus


There is a movement worldwide to the idea of the individual become more responsible for his/her own retirement funding/planning. This is being done by moving away from the traditional pension plan that defines a benefit for an employee when the employee’s retires. (This is called a defined benefit [DB] plan) toward a participant-directed defined contribution (DC) plan. 


These plans are rapidly becoming the cornerstone of the private sector retirement system around the world.

Participant-managed DC plans are the main feature of national pension reforms already implemented in many Latin American nations, as well as in Germany, Sweden, Russia, Australia and most recently, Canada

Underlying this movement is an implicit assumption about behavior. The assumption is that the individual is well-informed and understands economic theory and who also acts rationally to maximize her/his self-interest. To this end, it is assumed that he/she can interpret and weigh information presented regarding options offered by employers and governments, appropriately evaluate and balance these choices, and then make an informed decision based on weighing the alternatives

There are a number of problems with this assumption.

1.  There are certain types of decisions and problems that may be simply too complex for individuals to master on their own.

2.  Individuals may have the right intentions or beliefs, but they may lack the willpower to carry out the appropriate changes in behavior

3.  Many people do seek to maximize their personal welfare, yet they prove far more cooperative and altruistic than traditional economic theory predicts they will be.

Neoclassical economic theory states that people will examine the trade-off between current and future consumption. People who hold this theory believe people are able to compare the benefit gained from consuming their income today, with the benefits of deferring some of that income to the future. Those who believe in this theory think this is what drives contributions to individual retirement plans, with the goal of the individual being to save for retirement.

There is another theory of savings (the life-cycle theory), which states that individuals are rational planners of their consumption and saving needs over their lifetimes, taking into account the interests of their heirs. Therefore, during their younger years, workers tend to be net dissavers, borrowing now to boost their current consumption; middle-aged individuals become net savers and purchasers of financial assets and enter “accumulation” phase, during which they stockpile assets for the final, retired phase of life. On balance, the life-cycle theory is thought by business, government and economists to do a reasonable job of explaining patterns of household saving and spending behavior.

If middle age (defined by the US Census as between 35 to 54) is when individuals begin to plan for retirement at 65 what happens when we move the retirement age to 67? How long before they implement a change should the government give its people. Our government is talking about the changes affecting those who are just turning 58. Maybe they should move the timelines back so those who are just turning 35 have time to prepare properly.

The problem is that being good at retirement savings requires accurate estimates of uncertain future processes including lifetime earnings, asset returns, tax rates, family and health status, and longevity. In order to solve this problem, the human brain as a calculating machine would need to have the capacity to solve much decades-long time value of money problems, with massive uncertainties as to stochastic cash flows and their timing.

In fact, survey and empirical research suggests that individuals are not particularly good at retirement savings. Furthermore, the empirical evidence suggests that failing to save enough also has serious negative consequences

Important to begin with feeling

Think about the last time you began something important. Are you thinking about it?

Good - now ask yourself how you began it.

Did you make small, tentative first steps? Or did you jump in with gusto?

Promise yourself that the next time you kick off something important in your life, you'll start with a ceremony where you declare your feelings.

The reason to do this is simple, we need a certain amount of ceremony in our lives to mark important occasions. Our societies and groups that we belong to have the usual ceremonies that are standard practice for new beginnings or endings (Christenings, Graduations, Weddings, Funerals, etc.).

We, however, can and should, create our own ceremonies to mark the beginning of a new chapter in our life. These may be very private ceremonies or they may be very public, but we do or should hold them.

I am a big believer in public declaration so that those for whom we care, are able to support us as we move forward. What is your ceremony to celebrate the new in your life?

Make a difference.

How would doing this support your vision for your life and your world?

There are hundreds of ways, in all shapes and sizes, to make the world, your community, your neighborhood a better place. The collective wisdom, talent, and passion of those over fifty is astonishing. The world needs us. So, why not start a foundation, join an animal rescue team, mentor a child, teach a class, run for mayor, or revitalize your town square.

Let me tell you about Amy. She knits every spare minute in her day. She obviously loves knitting and is very specific about what she knits, which are tiny caps. Twice a year Amy donates the caps she’s knitted to her local hospital’s neo-natal unit. She knows her caps make a difference to the babies and their families and she feels great about it.

What organization, human issue, community project or problem speaks to your heart?

Given your talents and skills and time, what type of commitment would be a great fit?

Be still and listen to what your heart says.

 Today lets look at the words "should and shouldn’t”.

The idea of looking at what is right in your world is made harder by the stereotypes that we impose on others and ourselves.  As we try to move forward, we may be faced with those who will give us advice. The advice is well meant, but comes down to people trying to dictate to you what you should or shouldn't do with your life.

We have a  position available where I work as a result of the person who was in the position moving to a new location. The young person who is now in the position is very good at the job. We need someone, she has the skill sets, but not the training for the position. To keep the position, she has to take further training. Human Resources is putting a great deal of pressure on her to take the training, however she is resisting because the timing is not right for her now.  I suggest that she should listen to her heart and make her decisions .

When you are deciding to do or not do something, one of the process that may occur is that at first you might hear a faint or not so faint voice in your head saying: “you’re too old,” or “that’s too risky” or “you can’t do that.”


Trust me: this is not your heart speaking!


Don’t be swayed by what others think your life is supposed to look like. Don’t think for a moment that this stage of your life has to be lived by anyone else’s standards.


Be wary of any internal or external advice that begins with: “You should” or “You shouldn't"


Be brave enough and confident enough to listen to your heart. You may or may not have regrets later, but you will have another story to pass on to your grandchildren.

Focus on what is right in your life.

There has been a lot of negative news lately, Pensions are under attack, in its rush to serve Chinas need for oil, our environment in BC is under threat by our Federal government, the unemployment rate has just gone up, and the amount of new jobs created was under the estimates of the economists.

The governments claim to that they are the best hope Canadians have for economic stability seems to be in question. Phew, too much negativity so with all of the negatives swirling around us at this time, I want to focus on the positives in our life.

We all know of people in our lives that embody the power of focusing on what is right. Let me tell you about Jennifer. Her life was pretty normal, with her share of ups and downs, that is--until a few years ago. Jennifer quit her job, moved to another Province, completed her college education and was just ready to launch a new career when she was diagnosed with MS. Shocked by the news, she took immediate action with determination not to let it stop her. She took the next step, got professional license, and started a new career.

After a couple of years, the MS was compromising her ability to walk, so she opted for surgery, with the hopeful intention that the surgery would allow her to keep walking. Something went wrong and the surgery left her paralyzed from the chest down. As you might imagine, Jennifer got very depressed.

Within the next year something shifted within Jennifer. She decided she was going to have a life worth living regardless of the obstacles. Today, she is a strong presence within the MS community. Her generosity and talents make a difference for others. And her attitude and commitment make a big difference for herself.

Here is a way to start to focus on the positives in your life:

Commit to asking yourself at least twice a day: What’s going right? Write down what is going right and then share it with someone else. Do this for at least 30 days and see what happens.

Ask others what is going right in their life. Notice what happens when you ask others what’s going right for them. You may have a surprisingly different conversation.

Begin now training your thoughts to focus on what is right about your life. Start by answering these questions, and then everyday for the next month focus on one or more of these questions. You may be surprised how your outlook on life changes over the next month.

What are 3 things going right in my work?

What are 3 things going right in my relationships?

What are 3 things going right in my spiritual life?

What 3 things are going right with my financial life?

What 3 things are going right with my health?

What 3 things are going right with my social life?

 

Remember that Happiness IS an inside job.

Take charge of your life.

In order to live your second adulthood (or childhood in my case:-) with freedom purpose and passion, stop and take a look at yourself as well as your physical, emotional, and spiritual environment.

This checklist may help serve as a guide to get you started. It is not exhaustive but is meant to be a beginning point.

Do you have a will? Do you have detailed instructions about what arrangements you want when you die?

Do you have a living will and a designated person as medical power of attorney?

Are your important documents such as your driver’s license, passport, will, up to date? Do you have copies of each of these stored in a safe place?

Do you have a secure place to store important documents?

Does at least one other person know where this is and have access to them?

How is your health? When was your last physical and eye examination? What do you need to start doing to either improve your health or maintain good health?

Is your living space cluttered? Ask yourself: is this item really important to me? Do I use it or enjoy it regularly?

Clear out, clean out and make space for the life you are living now.

Is your vehicle in good running order? Do you have emergency road side service, a working spare tire, thermal blanket, bottled water, jumper cables, snow chains, first aide kit?

Do you have adequate health, home, and life insurance?

If you’ve put off taking care of any important aspect of your life—now is the time to take action! Make a plan and get started—one step at a time. Don’t leave the important things to chance. Unfortunately, we’ve all heard stories of people who waited too long to see their doctor, to make an amend, or record their family history.

What are you putting off accomplishing that you know is important and would increase your peace of mind and overall well-being?

Commit to being happy

John worked in a large corporation for thirty years and took early retirement at age 54. For a few years he enjoyed traveling. Then John decided to fulfill a long held dream of turning his hobby of furniture crafting into a business. He expanded his home workshop and started his second career. However, his business was successful but John was not  happy. He liked creating and his sense of accomplishment but the isolation was depressing.

What John wanted was to learn how to love his situation. He was grateful for the opportunity to have his own successful business and felt somewhat guilty for not being happy. John was missing the balance that is important to life. When he was younger he threw himself into his work, and he was successful, but he was not happy. When he retired, John found he loved creating and building, and created a successful business doing just that. Yet he was not happy.

Commit to being happy, but to do that self reflection is needed, as well as self understanding. John did not know himself as well as he thought. John needed to share his passion. Once John realized this he was able to take the time to rekindle his love for his partner and to bring that person into the emotional side of his life. Understanding your own needs, then reaching out to those you love is one of the first steps to a commitment to being happy.

Money, Happiness, and a Fulfilling Retirement

The following was posted in an email list serve that I belong to and I thought it was worth sharing.

From: Rick Reis Subject: TP Msg. #1132 November 3, 2011

Shortly after I retired, I listened to a lecture by my former internist, now a gerontologist. He underscored what he termed the "two keys to a long life." The first was, "Use it or lose it." The word "it," made infamous by former president Clinton, refers in this case to the mind and the body.

Check out the Tomorrow's Professor Blog at:  http://derekbruff.com/site/tomprof/

Folks:  Money, Happiness, and a Fulfilling Retirement You can't buy happiness.

With age 95 looming far into our future, most of us worry more about outliving our nest eggs than about leading a happy, fulfilling life. Now ten years into my retirement, I realize that focusing solely on financial planning is myopic. If you manage to save a lot of money for retirement, you may later discover that money can't buy happiness or a fulfilling life unless you have planned for it. Achieving happiness and a fulfilling life in retirement isn't easy. I know because I didn't plan for it, and I have only been partially successful.  

Use It or Lose It

Shortly after I retired, I listened to a lecture by my former internist, now a gerontologist. He underscored what he termed the "two keys to a long life." The first was, "Use it or lose it." The word "it," made infamous by former president Clinton, refers in this case to the mind and the body. According to Dr. Walter Bortz, research suggests that watching television is not the way to use your mind. Studies of brain waves show that TV viewing produces the same brain wave activity as staring at a blank wall. Unfortunately, I watch more TV than is mentally healthy because I enjoy watching movies, sporting events, and the news. Breaking this viewing habit remains a challenge for me.

For mental stimulation, I solve puzzles, read about politics and investing, and write books. In my first year of retirement, I wrote a memoir which I titled, "Looking in the Rearview Mirror." Wishing that I had known more about the lives of my father and mother, I thought my children and grandchildren would appreciate learning about mine. After my daughter read a draft, her only comment was, "Dad, it's all about you." Maybe, just maybe, she and her three brothers will some day come to appreciate that it was all about me. My next writing project focused on retirement planning and investing, topics that I thought might be beneficial to my children, grandchildren, and friends. Reading and trying to learn about topics that were foreign to me proved challenging and stimulating. My third book, A Problem-based Approach to Management Education, was written with a former student, Philip Hallinger, and built upon our previous work. I haven't yet decided on my next writing project.

To keep physically fit, I walk daily?usually 30-40 minutes, sometimes longer. Most of the time my companion is a Sony Walkman tuned to National Public Radio (NPR). Several years ago my wife and I hiked a lot, but her arthritis and bad feet limit her physical activity. Occasionally, I walk with a friend or a former student. Although I enjoy listening to NPR, I find it more enjoyable to walk and talk with someone else. Recently, I began to supplement my walking with a 25-minute exercise program Sit and Be Fit, which I recorded on my digital video recorder. Together, the walking and additional exercise have improved my emotional and physical well-being.

There are countless ways in which one can use it rather than lose it. I chose activities that I enjoy. To live a fulfilling life to 95, choose activities that you enjoy and provide a workout for your mind and your body. Spending all day in front of a TV screen does not fit the bill.

Make Yourself Useful, or What's the Job Description for the Rest of Your Life?

To drive home the second key to a long, fulfilling life, Dr. Bortz recounted an experience he had as a young lad. His grandfather owned a grocery store in rural Pennsylvania. From time to time young Walter visited the store and stood around hoping for some candy from his beloved grandfather. One day his grandfather looked at him and said, "Walter, make yourself useful." That comment stuck with him and has become a mantra for living his life.

To make yourself useful, consider volunteering. There is ample research evidence demonstrating the value of volunteering in promoting happiness, health, and longevity (see Harris & Thoresen, 2005). Serving others brings meaning to your life and rewards you with the "Helper's High." You can serve others through formal or informal volunteering. Apparently greater benefits occur to those who volunteer formally rather than informally. If this is the case, several of my friends have an edge on me. They are formal volunteers, whereas I am an informal one. A friend of mine grew up on a farm and developed a useful set of carpentry skills. When he retired from his professorship, he volunteered to build homes for Habitat for Humanity. Each year he supervises the construction of six to eight homes for the less fortunate. Another friend runs a men's group at his church and pursues his academic interests in health and psychology at a local university. A third is a retired college presiden  t who chaired a national campaign to raise money for cystic fibrosis, a  disease that afflicted his two granddaughters. He also chairs the board  of an art institute.

As for me, I never developed the habit of becoming a formal volunteer. For much of my life, I devoted my time to work and family. When I was 36, my concern for family heightened during a taxicab ride from O'Hare airport in Chicago. I engaged the cab driver in a conversation. He talked about his life. I learned that he had worked three jobs so that he could buy a home on Lake Michigan and cars for his wife and children. As a result, he spent little time with his family. In the end he was estranged from his kids, and his wife divorced him. His final comment had a profound effect on me, "I lost what I had, and what I had was more important than what I wanted." From that moment on I decided to devote even more time to my family. Consequently, I have a reasonably good relationship with my four children and have been happily married for more than 55 years. As my wife said on our Golden Wedding Anniversary, "We like as well as love each other." By emphasizing work and family, I negl  ected those activities that might have stood me in good stead as a  retiree, namely, volunteering and becoming active in social and church  groups.

My sense of usefulness derives mainly from helping former colleagues, friends, and my children with financial decisions that face them. Occasionally I speak to a group about retirement planning and work with individuals who are contemplating retirement. Though I feel reasonably competent to help others in making decisions about investments and retirement, I have discovered that many are reluctant to discuss their financial affairs with someone whom they know. From time to time former students come by my home and seek advice as they cope with a range of problems. Others phone me from distant places and use me as an executive coach. Still others drop by to talk and share what is going on in their lives. These activities nourish my spirit and afford me a taste of the "Helper's High."

If formal volunteering appeals to you, I suggest you develop the habit years before you retire. The transition to retirement will be easier. According to what I have learned, your skills and wisdom will more likely be welcomed if you have cemented yourself in the volunteer organization before you retire. Three good starting points for finding volunteer opportunities are listed below:

Administration on Aging http://www.aoa.gov (202) 619-0724. (Help older people in need.)

The National Retiree Volunteer Coalition (800) 899-0089 ext. 5091 (Work with universities and local governments.)   Senior Corps (800) 424-8867 (Helps seniors find opportunities in their local community.)

Additional Keys

My former internist overlooked two additional keys to living a happy, fulfilling, and long life in retirement: being socially connected and religiously involved. Putting all of your emotional eggs in one basket can be dangerous to your physical and mental well-being (Coontz, 2006). Retirees especially need to broaden their social connections, people whom they enjoy and in whom they confide. If your spouse is the only one with whom you discuss important matters, you will become socially isolated when that person dies or becomes incapacitated. That happened to a friend of mine's father; having no one else can be devastating. It is important to establish close social and emotional ties beyond your nuclear family. I am fortunate that I have several friends with whom I share my fears, concerns, and matters of personal import. Though I believe in God and try to lead a Christian life, I do not attend church regularly. Some of my friends have an edge on me because they attend church   regularly, and regular churchgoers tend to live longer than those who do  not.

As you think about retirement, factor into your thinking the need to plan for a long, happy, and fulfilling life. If your financial house is in order, you could benefit from adopting the philosophy of Milton W. Garland, an active centenarian and inventor. He said, "Live like you're going to live forever, not like you're going to die tomorrow."

TIP!

If you want to learn more about how to live a happy, fulfilling life, read Get a Life: You Don't Need a Million to Retire Well by Ralph Warner (2004). It will help you prepare for retirement better than any book that I have read.

Pension envy grows as boomers retire

I found this article By Jonathan Chevreau, Wealthy Boomer; Financial PostOctober 29, 2011, interesting.

There were several signs this week that pension envy - or pension apartheid - is alive and well in Canada and likely to intensify as Baby Boomers start retiring, or try to retire.

The great divide is between the lucky 20% in cushy public-sector defined-benefit pensions and the rest hoping to retire on fluctuating RRSPs or defined-contribution pensions.

On Wednesday, pension consultants Tower Watson said those with DC pensions can expect a pension freedom age approaching age 67 - two years beyond the traditional retirement age. And Statistics Canada reported 50-year-old Canadian workers can expect to work 16 more years, three years longer than in the 1990s.

The conspicuous exception to this trend is the minority who live in the protected "Bell Jar," to use a term from a new book from Wiley Canada, Pension Ponzi. It reports the average public-sector retirement age is a spry 59.

To match public-sector DB pensions, the rest of us would need $2million RRSPs, which is why the CD Howe Institute this week urged a lifetime contribution limit of just that figure.

The book's co-authors, Lee Fairbanks and Bill Tufts of the Fair Pensions for All blog, recap how Canada's public-sector unions won their members huge salaries "that far outstrip anything comparable in the private sector and incredibly generous pensions." The beneficiaries all rate chapters in the book: government workers and politicians, teachers, firefighters, police officers and the armed forces.

Rather than bring the 80% up to their level, Fairbanks and Tufts would make the Bell Jar less cushy. They liken the status quo to a "pension Ponzi scheme" that will eventually collapse. Despite the complacency of the 20%, Canada is a small country with a large ($1-trillion) public debt. The authors expect the chickens to come home to roost, as they have in Ireland and Greece.

It's true some non-unionized private-sector workers still have DB pensions but these are rarely the Cadillac inflation-indexed plans unions negotiated for the public sector. And the trend for large corporate employers is to close DB plans to new hires, switching to DC pensions, which - like RRSPs - lack the "defined" promise of a guaranteed monthly income in retirement.

While DC plans and RRSPs may do well in protracted bull markets the reality of the past decade has been the opposite. The result is what Towers Watson terms a "double whammy" for those not in DB plans.

You could argue all workers qualify for a public DB pension in the form of the Canada Pension Plan (CPP). But average annual CPP benefits are $5,919, compared to $42,900 enjoyed by the Ontario Teachers' Pension Plan (OTPP), a difference of seven times.

When I cast my envious eye at contemporaries retired in their fifties, invariably they joined DB pensions early in their careers and stuck it out. One couple has TWO teacher pensions.

But it's by no means certain these pensions can meet their obligations. The OTPP is $35-billion short. (The author may intend to imply the OTPP is in big trouble, read the next paragraphs for another perspective)

The following is from Sue at Boomer Bucks which has a different perspective than the previous statement

The envied defined benefit Ontario Teachers Pension Plan posted record income in 2010 above its target benchmarks during the year, but this was not enough to stop its funding deficit from growing to $17.2-billion from $17.1-billion, as liabilities outpaced assets.

Further impacting this plan, not only is the Boomer demographic now beginning to influence the liabilities but on average in 1990, retiring teachers received benefits for 25 years after working 29 years. Now, members draw a pension for 30 years, after working 26 years.

With low interest rates and a staggering and uncertain stock market, it will be impossible to eliminate shortfalls through investment returns alone and the retirement demographic is blooming with Boomers.

While this Ontario Teachers Pension Plan is solid for now, and can pay benefits for years, there will need to be a plan to ensure funding to pay pensions to the younger teachers decades from now.

Look no further than Greece to see how countries can default on public-sector paycheques and break pension promises

My thoughts and some others are this,  here we go again. Instead of acknowledging how unfairly to varying degrees workers in the private sector are frequently treated by their employers, how exploited they are in the name of profit since they are the most vulnerable component in the production process, these writers, like so many on the right spectrum of economics, once again choose to resent the just achievements of collective bargaining in both the private and public sector. Teachers, firefighters, police officers, armed forces, government workers: our esteemed authors - probably graduates of the CD Howe Institute of Right of Centre Economics - are saying they do not deserve their defined benefits pensions. Why? Because most of the private sector employees don't get the same sort of benefits. What bunk!

Okay, all you folks in the private sector without DB plans who feel that way do something about it by confronting your employers instead of resenting the negotiated achievements of collective bargaining. I know that's a tough thing to do when almost everyone in the private sector is in effect a just-in-time worker living in fear, who can be axed at any moment. You are instantly replaceable, and you know it. You feel powerless and your are, caught in the vicious web of capitalism. So join the occupy movement, wear a mask if you have to, and check out senior mangement's paycheck if you still want to feel envious and resentful.

Top 10 places to retire overseas

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For sale Set in four acres, with stunning views of the Pyrenees and surrounding countryside, this impressive 18th-century house in the southern Gers embodies French charm. There is even a separate pigeon-house, awaiting renovation. £877,700 with Savills (020 7016 3740 begin_of_the_skype_highlighting 020 7016 3740 end_of_the_skype_highlighting; www.savills.co.uk)

Where do you want to retire, this interesting blog was published in the Telegraph paper  by  By Max Davidson on  21 Oct 2010. You may want to go to the blog and read the comments as some of them agree but others disagree with his thoughts.

Different people picture their retirement in different ways. Some home owners never fall out of love with Britain, while others prefer to move abroad for their golden years. Here are 10 locations that offer a mixture of good value for money and an attractive lifestyle.

1 South-west France

For Britons unfazed by language barriers, the south of France remains the perfect retirement location. It has a warm climate, a wonderfully lazy lifestyle and easy access from Britain. Property-buyers for whom money is no object will probably still head for the Côte d'Azur, but there is better value – and, arguably, more charming scenery – in the Languedoc and Gascony, where you can buy farmhouses for under £500,000.

2 Florida
You would not wish retirement in some parts of Florida on your worst enemy, but it is an enormous state, with some classy enclaves, particularly on the Gulf of Mexico. Weather-wise, the Sunshine State is as good as its word. And, while the cost of medical care in the US is higher than in Britain, it is more than offset by the lower cost of living.

3 Le Marche, Italy
Not as awash with tourists as some other parts of Italy, the Le Marche region on the Adriatic Coast has everything from snow-capped mountains to sandy beaches and sun-kissed vineyards. Everything we love about Italy in miniature. Property is far cheaper than in the neighbouring region of Tuscany.

4 Australia
You will probably have to keep your head below the parapet when the Ashes are being contested, but very few English-speaking countries offer such a relaxed lifestyle. Getting the relevant retirement visa can be tough, and you will need to clear a number of hurdles, in terms of both your income and capital assets, but you won't regret it. Look to buy in Victoria or New South Wales rather than the brasher Gold Coast.

5 Thailand
Tropical temperatures, gorgeous beaches, low living costs, gentle people and food that is also incredibly healthy. What's not to like? Avoid Bangkok like the plague. It is so polluted it will take years off your life. But keep looking and you could well find the retirement home of your dreams. The island of Koh Samui and mountain city of Chiang Mai are equally charming.

6 Antigua
Half as expensive as Barbados, Antigua is one of the most enchanting islands in the English-speaking Caribbean. It offers life in the slow lane at its best. Nelson's old dockyard will make Brits feel at home and with more than 300 beaches to choose from, there is no danger of monotony setting in as you down your umpteenth rum punch. Spicy local food is another of the treats in store for the émigré from the land of fish and chips.

7 The Canary Islands
Now that the Spanish Costas have lost their innocence as a retirement destination, don't rule out the Canaries. They have all the climatic advantages of the mainland, but only a fraction of the development. Steer clear of the tourist towns, unless your idea of retirement is propping up an ersatz English pub, but expect plenty of good buys elsewhere. Lanzarote and Fuerteventura are probably the most interesting islands.

8 Cyprus
They love a British face in Cyprus, where there is a Welcome mat in terms of tax concessions for Britons who choose to retire there. Hot summers and mild winters can be taken for granted, but there is far more to Cyprus than reliable weather. And if you do not wish to retire to the seaside, the Troodos mountains offer an alternative.

9 Ecuador
It is off the beaten track, but nobody familiar with this South American country would have been surprised to find it topping a recent global retirement index in International Living magazine. There is an extraordinary geographic range, from sandy beaches to villages in the Andes. And the cost of living is very low. In the colonial town of Cuenca, a couple can live for an estimated £1,100 a month, including a maid.

10 Morocco
Now that Morocco is accessible by low-cost airline, it ticks many of the boxes that Spain ticked 30 years ago. There is year-round sun and low living costs, with the possibility of returning to Britain on a regular basis. A generous tax regime for overseas residents and a minimum of red tape when it comes to buying property are other pluses, which explains its popularity as a retirement destination.

Transition to Retirement

As many of the Boomers move to think about retirement, it is good to know that many unions in Canada have negotiated help for their members. This web site at Human Resources Canada shows what can and has been done in this area. It is interesting reading

In January 1998, clauses pertaining to counselling services appeared in 13.4% of major Canadian collective agreements covering 19.2% of employees (431,601). It should be noted that not all counselling services necessarily provide help specifically linked to retirement. There are nevertheless programs offering help to workers nearing retirement in areas such as health care, financial planning, housing arrangements, life adjustments, legal matters, organization of leisure time and job-finding skills for a second career. These may help older workers prepare for new challenges while alleviating possible anxiety.
Contract clauses offering a pre-retirement counselling program or seminar are relatively short and provide few details. In almost all cases, however, these provisions stipulate that this service will be financed and, whenever possible, provided by the employer.
Irving Paper and Communications, Energy and Paperworkers Union of Canada, Local 601 (1999-2005): "The company agrees to provide, at no cost to the employee, a pre-retirement counselling program."
Canadian Forest Products Limited and Pulp, Paper and Woodworkers of Canada (1997-2003): "The Company will provide a pre-retirement counselling program. The Company will involve the Union in the design of the program."
General Electric Canada Inc. and Communications, Energy and Paperworkers Union of Canada (2001-2004): "The Company undertakes to provide within a six- (6) month period a pre-retirement information program for employees aged 55 or older. In the event that the program is not delivered as part of a group program, the Company shall then, with prior approval, reimburse the employee and/or his/her spouse for the registration fees charged for such a program offered by a public body (…)" [translation]
Some agreements specifically state the nature of the counselling service to be offered (e.g., financial).
Concordia University and Concordia University Faculty Association (1998-2002): "Members who retire in accordance with the retirement plans in Article 42 [Retirement] shall be provided with financial counselling."
Government of Nova Scotia and Nova Scotia Government Employees’ Union (1997-2000): "The Employer will arrange financial counselling for employees who express interest in accepting an Early Departure Incentive Plan (EDIP) severance payment. This counselling will be arranged as soon as reasonably possible. The cost of the financial counselling shall be borne by the Employer, payable to an approved service provider."

Many Boomers do not want to start full retirement, so an alternative is phased retirement.

Phased retirement is broadly defined as any program allowing for gradual decreases in working time and workload instead of an abrupt move from full-time employment to retirement.
Phased retirement may take one of two forms: a pre-retirement gradual reduction in hours (or days) of work or post-retirement part-time work for pensioners who wish to remain employed.
From the employers’ point of view, phased retirement programs can be useful to retain skilled older employees who would otherwise retire (especially in sectors where there is a shortage of entry-level job applicants), to reduce labour costs, or to arrange the training of replacement employees by older workers. They also allow employers to plan attrition and, to a certain extent, to maintain employee morale when a company restructures its operations.
Phased retirement can also be beneficial for older workers. It helps them to gradually ease into retirement while maintaining a higher income than they would receive if they relied on their pension alone.
So if you are a boomer and thinking about retirement and your collective agreement does not have retirement counselling, or you work in a nonunion environment, then perhaps phased retirement is something your employer may consider

Some thoughts on Financial Literacy and Boomers

I am currently reading the task force report on Financial Literacy that was published in Feb 2011. I find the report interesting but I am sure that many of my generation may not want to read it so over the next few weeks I will be highlighting aspects of the report and how I think it affects us.
I was struck by the fact that we are much better off then we think, according to the report:

"Canada’s retirement income system is designed to ensure universal coverage and to protect the incomes of particularly vulnerable groups (for instance, individuals with interrupted labour force participation or those with low incomes) and performs well relative to those of its peers in this regard (Whitehouse, 2009). Characterizing the precise level of income adequacy in retirement is a complex empirical undertaking, but general indicators of retirement living standards show that, on average, Canada’s retirees are relatively secure (Mintz, 2009; Whitehouse, 2009; Baker and Milligan, 2009). Poverty rates among elderly Canadians are low relative to international standards. Over the period of 2000-2009, the rate of poverty among elderly Canadians was, at 4.4 per cent, approximately one-third of the OECD average and one-sixth of the comparable figure in the United States" Page 6 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,arch paper prepared f

I am sure that this is a surprise to most seniors but if  you are one of the 4.4% I don't think it is helpful to know you are not as worse of as our American neigbours.

 "Using Canada Revenue Agency data from 2006, Horner (2009) estimated that, for almost 70 per cent of Canadian households, savings in retirement plans would be sufficient to fully maintain consumption levels in retirement, while almost 80 per cent would be able to achieve a 90 per cent replacement rate." Page 7 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,


What I found interesting is that in spite of the "strong safet net many of us are still nervous about retirement funding and some of us may have to sell our homes to meet ends meet in retirement.  "... the proportion of retirement income from private sources is also among the highest in the OECD and is characterized by a relatively small but increasing share of defined-contribution plans (OECD, 2009). In the 2009 CFCS, over 80 per cent of labour force participants indicated that they expect to draw savings from RRSPs, while 26 per cent expected to do so from the sale of other financial holdings, and 16 per cent from other non-financial assets such as homes or other tangible assets (Schellenberg and Ostrovsky, 2010). The insolvency of several major defined-benefit plans, coupled with significant losses in the value of private pension funds overall, have intensified concerns with respect to moderate-income households about retirement savings adequacy; these concerns pre-date the financial crisis of 2008 (Mintz, 2009)". Page 8 Retirement Preparedness and Individual Decision-Making Implications for Canada by Joanne Yoong, RAND Corporation,

The question I have is how do we make the decisions about what we will sell or do to make ends meet in retirement.  Morris Altman has some ideas in his report for the committee called: Behavioural Economics Perspectives. In his report Altman shows the different approaches to Economic Decision making that Economists believe people use. These ideas are important because they are used to shape government policies for the left and right of center parties. I have highlighted ideas I will talk about in upcoming blogs

Conventional  economic theory

•  Individuals make intelligent decisions, and they do not regret them. Their choices reveal informed and well-considered preferences
• An ideal decision-making environment is assumed.
• Education and training (referred to as human capital formation) are regarded  as important means of enhancing productivity. But no clear theoretical mechanism is specified linking improvements in the quantity and quality of education and improvements in decision making. Human capital formation provides important theoretical space for explaining errors or less than ideal decisions, a space well-taken by behavioural economics.
• Financial decision-making is assumed to be best-practice unless distorted by government interventions in the market and in decision making

 

Behavioural economics: Kahneman-Tversky, Errors and Biases Approach

• Individuals tend to make irrational, error-prone decisions, which they  eventually regret.

• Errors and biases in decision making are wired into the brain architecture.

• It is possible for the decision-making environment to be less than ideal.

• Individuals often do not know what is in their own best interest.

• The benchmark for rationality in decision making is based on conventional  economics and focuses upon calculating behaviour.

• Decision-making shortcuts are regarded as typically error-prone.

• Individuals are easily fooled and deceived by how questions are framed and  often reverse their preferred decisions with inconsequential changes in how  questions or options are framed.

• Education can sometimes improve decision making.

• Government intervention in decision making is often thought to be the best practice  route to take for ideal choices to be made.

• Financial decision-making will be biased and error-prone without government  intervention in choice behaviour.

• Some success predicted for improvements in the decision-making  environment, less for the improvements to financial education.

Behavioural economics: Simon, Bounded Rationality, Rational Individuals

Approach)

•      Individuals are assumed to make rational decisions as a result of how the brain  is wired and the decision-making environment.

•      Conventional benchmarks for rational or intelligent decisions are often  rejected.

•      Decision-making shortcuts are rational more often than not, even when they  contravene conventional economic benchmarks.

•      Individuals are not easily fooled, but they can be misled.

•      Individuals can make decision-making errors and these can lead to decisions  that are subject to regret.

•      A major source of decision-making errors is a less than ideal institutional  environment.

•      Education can have important effects on decision making.

•      Government plays an important role by establishing an ideal institutional  environment and by providing the education required for ideal choices to be  executed.

•      Government should not intervene in individual choices unless these choices  can be shown to cause harm to others.

•      Financial decision-making can be improved by improving the decision-making  environment and through improvement to financial education.

•      Government intervention in choice behaviour is not considered to be best practice  if individuals make decisions in an ideal decision-making environment  and with appropriate levels of financial education

Moving On

I am into may  last few weeks of teaching. I have been working as a teacher for 37 years. I retired in 2006 and came back two days later,  as a teacher on call to satisfy the requirements of the University of Phoenix and myself. Part of what make the UOP a great university is the requirement that if you are working at the UOP as faculty you need to be employed in the field you were teaching.  I also love teaching and in 2008 when I was given the opportunity to come back full time I jumped at the opportunity and I have enjoyed the past two years very much.  In the meantime life moves on and I have to move with it.

I had decided, in Sept that I probably would not finish another year, so I took the opportunity to lay back and let the system take care of me and I became a Priority teacher, teaching on call. This meant I have a new assignment every day without the commitment to students, school or admin. The best of teaching as I can work with students and not worry about the politics of teaching or the burden of assessment, evaluation and reporting. However, I am a young teacher according to my new contract with only three years experience so I have no right to ask for long term leave, (which I found out, when I applied for it) as that right is reserved for senior teachers. I no longer have a need to work, as the UOP has closed their Vancouver Campus and my desire for teaching in the schools has declined. I knew that when I was told I did not qualify for leave, I felt annoyed, not upset. January 31,2011 will be last day as a teacher in the Surrey School District.

The District is a good place to work, the teachers are dedicated, the admin is competent and focused on the children and the school board is well managed.  I am looking forward to life's next adventure and have not regretted any of my time as a teacher.

Seniors to outnumber children by 2021?

The national statistics agency said seniors would account for between 23 per cent to 25 per cent of the overall population by 2036, nearly double the 13.9 per cent recorded in 2009. As well, the proportion of the population aged 15 to 64 – the traditional work force – would decline from about 70 per cent to 60 per cent.


Big hello, this information is not new, we as a society have known this since the 1960's, David Foot wrote about this in his book "Boom, Bust, Echo".

The issue is that the Baby Boomers rule, and our influence will be felt by society as we age. I suggest that delivery on Pensions and Health Care Reform better be high on the agenda of the political parties or they  will be out in the cold.

Stats Can may be correct that the traditional work force may be reduced, but Boomers will not retire in the numbers that people assume they will. Many of my friends are retired, but are working harder than they did when they were younger. Many are working in a volunteer capacity, many are working at hobbies, many have gone back to work part time and full time.

We, as a group are aware that the government has not done enough to prepare for our aging, and I suspect as the early boomers take stock and the other boomers watch, we will start to demand and get the changes we need to grow and continue to prosper in our Boomer years. Boomers rock the free world!