Look after your health in retirement

 Many of us do our best during our youth to look as best we can and take care of our bodies. However, people often stop exercising and taking good care of their health when they reach a certain age. The statistics on this are not good. Worldwide people will need on average 1.8 to 2.4 years of personal care before they die. Those who look after their health and keep in shape as best they can after they retire are better off than those who do not look after their health.

This is one of the worst mistakes you can make since health is a major issue during retirement. Most retirees spend over a quarter million dollars on healthcare during retirement, not including long-term care. While you can offset most or all of these expenses by buying long-term health insurance, the best way to avoid these expenses altogether is to keep as healthy as possible, in particular during your pre-retirement years.

Some of the mistakes people make before they retire include spending their savings. To have a healthy and enjoyable retirement, it’s important to budget before you retire to know how much money is going in and out of your account.

You should also be mindful not to neglect your health since this will impact the amount of money spent on healthcare during retirement.

 

Downsizing after retirement

As we move into 2022 the annual home assessment came in the mail. In my area, it is impossible for young people to be able to buy a house as property prices rise. I thought prices were holding steady, but I was wrong. My property values increased by three times what I thought they would.

I know that many seniors think about downsizing and my wife, and I have talked about it. However, this may not be the best choice. Timing is very important when it comes to selling your home, and so is assessing the real estate market in your area before deciding. You don’t want to sell your house when the housing market is going down since it could mean losing thousands of dollars you wouldn’t lose if you just waited. If the market is going up then finding another home will be a problem

Additionally, there are other good reasons to wait. A big home can generate plenty of income if you rent it out. You can then use this income to rent a new place in your target retirement community before actually buying. This will allow you to experience what living in the community is like before committing, plus you’ll probably be paying less rent than what you’re earning from your home, so you’ll also end up generating extra income that will beef up your retirement fund if you save it.

Retirement reinvent yourself

 I have been retired since 2014, I actually quit work and went back from 2006 until 2014, which took me on an interesting journey. For many people, retirement is the end of their working life. My wife retired and did not go back or miss work. My mother-in-law retired from one job and started a different career which she worked in very successfully until she was in her 80’s. In reality, retirement is or can be a time to reinvent yourself and do what you’ve always wanted to do.

But changing a career or chasing a dream is not for the faint-hearted nor is it for those who do not have savings or a pension. One of the mistakes you can make before retiring is using up all your savings or your emergency fund in a spending spree. I know some people who wanted to live the dream of being a gypsy, so they sold their house bought a Motorhome and travelled until their savings ran out. They now live in a trailer park in their motor home, living on the government pensions. But I also know another couple who rented a motorhome and followed their dream of travelling for about six months and returned home with their savings in tacked and a house to live in. The one thing people who are about to retire need is a good financial safety net that will provide for their livelihood during retirement, so withdrawing early to spend on something that’s not necessary may end up costing you down the line.

When I first retired, my Financial Advisor and I were at odds, she said that as a person nears retirement, they can’t afford to make investments that could jeopardize what will provide your main source of income during retirement. She thought I should ditch my risky investments and buy more conservative investments similar to what my wife held in her portfolio. It took about 12 years for me to agree and that was because my risky investments lost big time in mid-2000 but regained what they lost by 2016 so I changed at that point. I was lucky I had the time for my portfolio to recover, some don’t have that luxury. So if you have an advisor, listen to them and you may not have as many sleepless nights as I did during that time.

Retiring early

 If asked at what age do you want to retire, the most common answer is sixty. One in four (25 percent) people planning to celebrate this milestone by leaving work behind, according to research from Aviva. This is a great goal, but it is one that is different from reality.

The effective age of retirement is well below the normal for receiving a full old-age pension in most countries. Japan and Korea are notable exceptions where the effective age of retirement is close to 70 for men despite a normal retirement age of 60. In other countries, men on average are still in the workforce at age 65 in Denmark, Iceland, Ireland, Portugal and Switzerland, but have left work by their 60th birthday in Austria, Belgium, France, Hungary, Luxembourg and the Slovak Republic. Women retire around one to two years earlier than men.

We define the average effective age of retirement as the average age of exit from the labour force during a 5-year period. The normal retirement age is the age at which an individual can retire with no reduction to their pension, having had a full career from age 22.          

In almost all OECD countries, the effective retirement age has declined substantially since 1970. But this trend has changed recently. Over the past decade, most countries have either experienced a flattening out of the trend or a small upturn. But apart from Japan and Korea, the effective retirement age remains well below the levels of the 1960s and 1970s. These changes over time in the effective retirement age have mostly occurred in parallel fashion for both men and women, despite the trend increase in female participation rates.

According to https://tradingeconomics.com/, the age of retirement for women and men has moved from 66 to 66.17 years in the US. The OECD reports that even though the normal retirement age is 66 in the USA, the effective age of retirement is 70. This means that although people retire at 66.17 years, they actually quit working four years later. This trend appears to be moving up rather than down.

In Canada, our normal age of retirement for both men and women according to the OECD is 65 and the effective age of retirement is 65, so although our American friends appear to work four years past retirement, most Canadians do not.

 The turbulent times we’re living through have given many people pause for thought to consider their work-life balance and think more seriously about what makes them happy, so more are thinking of retiring. If you aspire to retire early, it’s vital you plan your finances to be sustainable for the long term, and remember that if you retire early, you are in a minority.

Women were especially likely to feel the negative financial impact of retiring early, with 50 percent feeling a financial strain compared to 44 percent of men, although only 22 percent of savers across all genders felt they benefitted financially from their decision.o retire early.