More Retirement Planning ideas

By Jason Heath, Financial Post

There are five main variables that individuals have a degree of control over in their retirement planning: life expectancy, assets, liabilities, income and expenses.

Mike Baldwin did a great retirement planning cartoon about life expectancy. A man is sitting with his financial planner, who is typing away on her computer. She looks up and says, "If you're alive this time next week, you'll be living beyond your means." OK, so there's not much you can do about your life expectancy. You can try to increase the return on your assets and this is commonly the primary focus of the financial industry.

Typically, increased returns can only be earned over the long run by taking on greater risk, though other strategies like tax planning or wise investment decisions can also help increase returns. Liabilities are a drag on retirement planning and reducing interest charges by restructuring debt (or avoiding it as much as possible) can help in retirement planning.

Increasing income is easier said than done. Most employees are limited in terms of salary increases or bonus potential, but they can always get a part-time job or start a side business. The self-employed can always work more to increase their income. Last but not least, pre-retirees (or everyone, for that matter) have a strong degree of control over their expenses. In fact, expenses are probably the variable people have the most control over. It can be a lot more empowering to choose to cut your expenses in advance of retirement rather than being forced to do so in response to a shortfall while in retirement.

And surprisingly, small changes make a big difference. In fact, consider two small changes that most people could easily make to their budget: their home phone and eating out. The base monthly cost of one national home phone provider is $58.61, including 13% HST. That's more than $700 per year and seems unnecessary given most of us also have cellphones.

What about eating out? Assuming someone spends $7.50 a day for lunch from Monday to Friday and they take four weeks a year of vacation, that's $1,800 a year. If they brown-bagged their lunch, they could probably keep their costs around $2.50 a day or $600 a year. That's another $1,200 of potential savings.

What impact would these two small changes have for a 45-year-old? Assuming they make the two notional changes and put those savings towards either paying down a debt at 6% interest or investing them at a 6% return (ignoring tax refunds from RRSP contributions), they will enter retirement at 65 with a net worth $84,356 higher.

What does this mean in the long run? That retiree will be able to spend an extra $6,207 a year for 20 years (indexed to inflation). That's the equivalent of about $4,177 in today's dollars, which could be a significant increase in one's retirement budget. Retirement planning is all about costs and benefits.

People have to weigh today's costs in order to place a value on tomorrow's benefits.

Jason Heath is a fee-only Certified Financial Planner and income tax professional for Objective Financial Partners Inc. in Toronto.

$1,800 Annual cost of buying lunch instead of making it based on five lunches a week at $7.50 per meal and one month of holiday

$48,476 The increased net worth on retirement of a person who had been brown-bagging lunches for 20 years

Read more: http://www.timescolonist.com/health/Brown+bagged+lunches+could+fund+your+retirement/6855637/story.html#ixzz1z7j7Xc8l

Five Tips for Effective Retirement Planning

As people start thinking about the Spring and planning for taxes, those within five years of retiring or younger should consider the advice given here.

Planning for retirement can be a time of great anticipation as well as great anxiety.  And, given the current economic climate, many individuals have changed their plans for retirement by either pushing back their retirement date or have considered working part time during their retirement to supplement their fixed incomes.  This, according to Jim Cantrell, Certified Financial Planner Professional, Owner and President of Financial Strategies, Inc., a wealth advisory firm in Brookfield, Wisconsin.

While some people close to retirement have changed their goals or approach, others simply don't know what to do.  Cantrell, who is also a National Association of Personal Financial Advisors' (NAPFA) Registered Advisor and current NAPFA Board President of the Midwest Region, says, "Daunting uncertainties can creep into your plans and threaten to burst your bubble before it is even fully inflated.  While the current economic climate should be cause for caution and concern, careful planning will help you enjoy your retirement the way you had envisioned before the economic turndown."  He provides the following five tips to help you create a solid financial plan that will get you back on track and allow you to enjoy the fruits of your labor.

Tip Number 1 – Know what you are going to do

Jim Cantrell offers that "This may seem like a strange tip, however, many people do not plan past the idea of no longer working.  They don't think about what will occupy their time once they retire.  Your future plans will help you create a better financial plan for your retirement."  If you have grandiose thoughts of spending months in exotic destinations, you will need to put a bit more into your retirement fund than if your goal is to do volunteer work and stay close to home.  One of the best ways to ensure that your future plans are appropriate for you is to get involved in activities that are of interest before you retire.  For example, if you plan to spend your time volunteering, consider giving a few hours a week before retirement to see if this will work with your future plans.  Additionally, if relocation is part of your retirement goal, spend time vacationing in the areas you could potential call your future home.

Tip Number 2 – Know your benefits

"Once you retire, there is a good chance you will not receive the same benefits you did when you were employed," states Cantrell.  It is important to talk to your organization's human resources department well before you plan to retire.  Consider items such as health insurance, pension and stock options.  Each of these things could have a big impact on your finances once you are retired.

Tip Number 3 – Diversify your stock options

As you approach retirement, it is important to ensure that you do not have an over concentration of stock positions.  Sometimes senior management and upper level executives have a lot of their portfolio tied up in their company; however, once they retire they will not have the same level of control in the direction the company takes.  Having all your eggs in one basket (or a lot of them) is never a good idea, this is why it is important to consider diversifying your investment portfolio.

Tip Number 4 – Move to stable investments

As you approach retirement, (at some point say five to seven years prior) consider shifting your investment portfolio from a higher percentage of equities to less riskier, fixed or stable investments.  This will make your portfolio a much safer place to go and get your money when you need it. 

Tip Number 5 – Have a solid plan

"In order to enjoy a comfortable retirement, it is important to have a clear understanding of what it will take to retire," Cantrell offers as a final tip.  How much will you need to put away to live the lifestyle you currently enjoy, or what things do you plan to cut out?  Know what you currently have available and what you will need and put it all down in a solid and workable plan.  One of the best ways to ensure that you have a solid plan is to meet with a certified financial planning practitioner (we recommend a fee-only advisor) to create a program that meets all your future needs. 

"Retirement should be a time of great joy and relaxation.  Planning for this time in life is vital to ensure that the goals you have set will be attainable.  Don't let the uncertainty of the current economic climate stop you from planning your retirement," Cantrell concludes.  For more information on planning for your retirement, visit the National Association of Personal Financial Advisors' (NAPFA) website at www.napfa.org or Jim Cantrell at Jim@retirementandwealth.com.  They can offer you important tips and advice and help you find a reputable fee-only advisor who can help you put your plans in place.

About Jim Cantrell and Financial Strategies, Inc.

Jim Cantrell, Certified Financial Planner, is Owner and Founder of Financial Strategies, Inc. (FSI).  FSI is a Fee-Only wealth advisory firm.  Jim is also a National Association of Personal Financial Advisors (NAPFA) Registered Financial Advisor and NAPFA Board President of the Midwest Region, serving North Dakota, South Dakota, Nebraska, Kansas, Minnesota, Iowa, Missouri, Illinois, Wisconsin, Michigan, Indiana and Ohio.  He has over 22 years of experience in financial planning and investment advising to top-level executives and other investment savvy individuals and retirees, as well as their families. 

For more information on Financial Strategies, Inc, please visit, http://www.retirementandwealth.com/ .  

Life Lessons

1. Keep trying

It is important not to give up on the first try when attempting something new. You may have to try something more than three or four maybe five times before you get it right. The 10,000 hour rule states that if you want to be expert in anything, you have to practice it/perform it do it for 10,000 hours. At the beginning of the journey to be an expert, you will most likely get it wrong. Persistence and creativity by trying different approaches work even with the most difficult things.  If you keep trying, you’ll eventually get where you’re going.

2. You know the answer to the question if you look deep inside yourself.

As a teacher I found students rarely asked me direct questions. I learned that it was easier for me to teach the student how to ask the questions rather than give them the answer. Usually I found that the answer was known to the student. A Chinese proverb said, “Teachers open the door, but you must enter by yourself.”

There is an old Taoist saying, “In making a four corner table, the teacher shows the student how to make one corner. It’s the student’s job to figure out how to make the other three.”

In life, the world doesn’t give us all the answers. The greatest teacher is inside of us.

3. Real wisdom in life comes from doing something, failing and learning from the failure.

I am leaning to meditate and I am running into several problems. One of which is staying focused for more than a few minutes, so rather than giving up; I am staying focused for a few minute and then adding time each day. When we struggle, we learn about ourselves and what we need to do to become stronger. In the words of Thomas Edison “I have not failed. I’ve just found 10,000 ways that won’t work.”

 4. Recognize the egotistical mindset is dangerous to your health

Everything in the ego’s world is the result of comparing. When we are consistently making these comparisons we may get dejected and we give up. Separate from the part of yourselves that dwells on comparisons, and start learning to live a life that isn’t driven by egos.

5. We must be both compassionate and resilient.

When students ask me to do something, that they tell me is important to them, I usually don’t do it the first time or I will give them a task to do that shows me they are truly interested in achieving a result. If the student asks again or completes the task then I will consider working to help them achieve their goal. Many people want you to take responsibility when they should be taking the first steps. There’s a Taoist proverb that says, “Cotton on the outside, steel on the inside.” It reminds us to be compassionate, but not weak.

6. Patience is a virtue. Patience is the gift of inner calm. I need not know the entire journey in order to take one step

7. Understand your ego

It’s the enemy within that causes most of our fears, worries, and insecurities. If you come to terms with this enemy within, it will impact every area of your life. It’s the identification with the insecurity and fears that we refuse to acknowledge that causes some of our  problems.

How many times do we not go for something because of fear? Think about all the fears that we have conjured up in our minds that stop us from being truly happy. If you can conquer the enemy within yourself, you won’t have an enemy outside yourself.

8. Happiness come from within, and also comes from outside.

If we cultivate happiness from within, and work to spread it around to everyone we interact with we will be happier I believe that  everyone has a purpose or a mission in life. We have to find happiness within, so we can find our purpose for being.

Thank you!

I have written 1,000 posts for this blog and I have enjoyed my time putting the ideas collected forward. I have written on politics, retirement, work, elder abuse, relationships, self awareness, self confidence, children, grandchildren and family, spiritualism and religion and other humourous things.

What has kept me going, (besides ego :-) is the fact that I have had over 43,000 people have read my writing and many have left me comments that I have enjoyed reading, have challenged me or set me off in new direction.

Thank you for your support and I look forward to writing another 1,000 posts. So has you enjoy this wonderful February day remember that:

"It is literally true that you can succeed best and quickest by helping others to succeed."