Do we raise the age of retirement?

We are living longer and as a result, providing for seniors who have stopped work is becoming a major problem in many countries. One of the ways that many countries are trying to deal with this issue is to increase the mandatory retirement age or to give incentives to people to collect government pensions later rather than earlier. 

The government of Ireland is the latest to struggle with this issue. Longstanding plans to increase Ireland's statutory retirement age and the knock-on effects on pension payments have become an unexpected issue ahead of the Feb. 8 election, putting the government on the back foot.
Prime Minister Leo Varadkar called the election last week, but a pitch putting his diplomatic successes on Brexit at the center of the campaign has fallen flat with an electorate more concerned about deficits in housing and healthcare.

The issue of pensions has dominated the campaign in recent days amid anger from some private-sector workers over being forced to retire at 65 but having to sign up for unemployment benefit until their state pension kicks in aged 66. 
According to a news report by KFGO radio, Ireland raised the retirement age to 66 in 2014 but it is the long laid-out plan to raise it again to 67 from next year that has exercised older voters. The threshold is due to increase again to 68 in 2028.
"It's the pension, stupid. That's what's going to win the election," Eugene, a 65-year-old caller to national broadcaster RTE's Liveline phone-in talk show, said on Wednesday.

"It's a bridge too far (moving the age to 67), and they thought they'd get away with it."

The pension age has dominated Liveline, the second most listened-to radio program in the country, in recent days.
Sinn Fein, Ireland's third-largest party which an opinion poll on Monday put just two points behind Varadkar's Fine Gael and four shy of the main opposition Fianna Fail, may have struck a chord with voters by calling for the retirement age to be brought back to 65.

The issue is important to seniors who actually turn out and vote, so it will be interesting to see how Irish politicians face the issue and what they do when they are elected.

Thoughts on our legacy

I have talked about the idea of commitment and starting because as I posted a while back, "the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred". So as you move into retirement, I want to do more than think about your legacies. My friend asked me the other day about why I did what I did. He wanted to know what motivated me. A good question, I thought about his question and I said to him, what motivates you, you are still working, coaching, being active in the work community contributing to our profession? He said, no don’t evade the question why are you doing all this stuff?

When I retired, I thought my life would be very different, but opportunities are everywhere and a number of them were of interest to me and so I started and one thing leads to another. For those who don’t know I wear a number of hats, I am on the Council of Advisors for the Senior Advocate in my province, I am on the Mayor’s Roundtable for my municipality, I am a Workshop trainer, presenter and writer for a seniors health and wellness group, which operates province-wide, I am President of my local Senior Center Advisory Association and I am on a local non-profit team looking at the issues of isolation and loneliness in my community, in addition, I write this blog. By the way, I do know how to say "no" and have turned down many other very interesting opportunities.

So, what motivates me, well in one word, my grandson, I want him to understand that we can all make a difference, no matter how small, to make life better for others. My hope is that one day, when he is old enough all the little things I did today, will be scrutinized, literally moment by moment, by him and perhaps by a future me, and future friends, as well as anyone else interested.

My hope is that all those who know me or who will come to know me, would all be looking at a number of qualities, especially patience, kindness, and love, that I hope I act on, during this game of games and tests of tests called life. Now when you think about how you will be viewed now or in the future; does it make you consider how you might treat the very next person, you see?

Winners in Training

We were watching our local football team, lose the game and my buddy said to me, “They are such losers.” I replied, “No, I think they are just winners in training.” We both laughed and we continued to watch the game, cheer and finally with seconds left and an interception killing our final chance of winning we left. Maybe next year.

Life is funny, we win at some things and we lose at others. When we talk about winners we focus on the difference between winners and losers, maybe we should also focus on the differences between winners and gracious winners. 

Some of us have learned to be gracious winners, some of us have learned to be winners. There is a difference between a gracious winner and a winner, just like there is a difference between a loser and a sore loser. I like to think that we are all “winners in training”. Every loss we face is helping us to understand our limitations and to test ourselves so we can do better next time. The biggest difference between a winner and a gracious winner is the conditioning of our subconscious mind.

A winner conditions their subconscious mind effectively toward their goals using positive thinking mixed with the powerful emotion of faith in self or faith in others. Many philosophers believe that we are the master of our own earthly destiny. We may become the master of ourselves, and of our environment because we have the power to influence our subconscious mind.

Persistent efforts will help you reach your goals, even if temporary failure comes your way, you will carry on with the same zeal and enthusiasm. A gracious winner, when faced with a temporary failure will try harder and when they win, give credit to those around them who helped them succeed. A winner thinks they did it on their own. 

Research suggests that certain healthy competitive environments help us perform better. But while a winner's high offers performance incentive, there's a risk that your self-esteem can become dependent on beating others.

Fierce or negative opposition causes anxiety that makes it hard for us to do our best. The key is to point out there can be fierce but positive competition.

If we want to become more gracious competitors and winners than the keys are cooperation and respect. Support and respect for each other all that is required.

To avoid some of the passive aggression that comes with winning, consider these tips for how to win gracefully at work.

·       Foster Collaboration. There's a reason collaboration has endured for so long.

·       Stay Humble.

·       Take the Me out of winning and put in the We  

·       Recognize Your Colleagues.

·       Keep Setting Goals as a team

·       Share the Wealth.

DB vs DC pension plans 2

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

The DB pension plan

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

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

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

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

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

·       Age at retirement

·       Penalties for early retirement

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

·       Current age

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

·       Pension indexed or not

·       Rate of inflation

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

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

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

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

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

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