Funding your retirement

A recent Equifax study that found seniors’ debt levels increased 6.1 percent in 2016 versus the national average of 3.1 percent, adding the average senior now carries about $16,000 in debt.

We have a different mentality when we compared retiring to today to the experience of past generations. To that end, a lot of seniors — and, for that matter, folks saving for retirement — could use the help.

It used to be that if you had a house, it was paid off before going into retirement, but today it’s becoming more common for people to have a mortgage or line of credit going into retirement.

Natixis Global Asset Management, one of the largest wealth management firms in the world, conducts an annual survey of investors. Here’s the snapshot of its findings for Canadian investors.

·  Personal savings and investments are most important retirement funding source:

·  97 percent indicated personal savings and investments were important.

·  77 percent indicated family sources would be important, too, including inheritance, their spouse, and even their children.

·  74 percent said government programs would be important.

·  54 percent would rely on the sale of their home or business.

Planning for retirement:

·  77 percent have a general figure in mind for how much they will need to save for retirement.

·  60 percent know how much income they need annually to fund their desired lifestyle in retirement.

·  Most Canadians feel it is increasingly their responsibility to fund their own retirement:

·  78 percent feel funding retirement is increasingly their responsibility.

·  32 percent don’t believe government benefits will still be available when they retire.

Not saving enough is the biggest threat:

·  30 percent indicated they worried about not saving enough.

·  18 per cent worried about long-term and health-care costs.

·  14 per cent worried about inflation.

·  13 per cent concerned government pension wouldn’t cover their expenses.

·  12 per cent feared to outlive assets.

·  Seven per cent worried about investment returns not measuring up.

·  Five per cent worried about the death of a spouse.

Canadians are feeling increasingly on their own when it comes to saving for retirement and then managing their money once retired. Only six in 10 had a clear picture of how much they need annually to fund their desired lifestyle in retirement.

Already many seniors are struggling it is a growing problem; the financial health of seniors is not getting better. It’s getting worse. A recent Equifax study that found seniors’ debt levels increased 6.1 percent in 2016 versus the national average of 3.1 percent, adding the average senior now carries about $16,000 in debt.The recent World Economic Forum report on the pension gap globally in which the world’s six largest pension-saving nations, Canada included, face a $224-trillion retirement income shortfall (that is funding retirement to about 70 per cent of income while working) by 2050, dwarfing global GDP.

So, while the seniors of today are facing challenges making their money last, the problems are only going to get worse for generations that follow.

Equally worrying is the potentially costly and difficult-to-predict late stages of retirement, which can have steep health-care costs or require specialized living arrangements.

Retirees could face fewer choices when facing major life changes as a result of failing health if they have outlived their savings and can only rely on Old Age Security or Canada Pension. While long-term care and home care are insured services in Canada, additional savings are critical if individuals want additional care beyond the basic coverage provided by the public system, which will be increasingly stressed by the growing number of senior’s relative to the rest of the population.

Preparing for all outcomes — good and bad — is essential. Holistic retirement planning is especially critical for generations still saving for retirement because of the lack of job security, decreased access to workplace pensions and growing financial complexity they generally face. Ultimately, we’re responsible for our own financial destiny, so we need to make plans now.

What today's work world looked like from 1978

What experts in 1978 thought the 21st-century workforce would look like written By Bob Lind. This is a bit of fun, to see what our experts believed the world would look like, and it shows that even experts sometimes get it wrong.

I have highlighted some of the interesting bits from the article. For the full article go here In 1978, the Associated Press out of Washington, D.C., came up with a story about what was predicted in the 21st Century

"By the year 2000," the article said, "job conditions will reflect basic trends in the workforce: an older, more self-assured group than today. More women will be active in dual-career families where the working father will share housekeeping responsibilities.

Millions will find themselves in the thick of these trends:

·         The work week will shrink. The U.S. Chamber of Commerce says employers should expect the four-day, 32-hour work week for most workers by 2000. Increases in vacation and holiday time also will sustain the growth in leisure time.

·         A continued increase in the percentage of women, especially young mothers, who hold paying jobs.

·         With more than one breadwinner at home, fewer job holders will feel trapped in undesirable jobs.

·         Worker wanderlust will grow to epidemic proportions. Experts say American workers will shift jobs eight or nine times, and many will change careers two, even three times, before retirement.

·         Retirement will be a gradual process, rather than the abrupt dismissal at 65 that marked recent decades, with phased-retirement plans and post-retirement careers.

In the 21^st work will only take up 14% of our time. The work ethic, it seems is slipping as the article concludes, "Hard work leads to affluence; affluence leads to new lifestyles; new lifestyles diminish the work ethic”.

Moderate Alcohol consumption may cause decline in brain health

A new study concludes that even moderate alcohol consumption is linked to a raised risk of faster decline in brain health and mental function. Compared with people who did not drink, people who drank moderately showed three times higher risk of brain decline.

The researchers also found that, compared with abstinence, light drinking (defined as no more than 7 units per week) - offered no protective effect against brain decline.

The researchers explained that a link between heavy drinking and adverse brain health - including dementia and degeneration of brain tissue - has already been well established. However, fewer studies have examined the relationship between moderate drinking and brain health, and their evidence was largely inconsistent.

The researchers say that their findings support the United Kingdom's recent tightening of guidance on alcohol and question the limits given in the United States guidelines. Individuals will make their own judgments as to risks they are willing to accept from alcohol, whether to drink alcohol and how much and how often to drink. These guidelines should help people to make informed choices.

Three independent groups of experts met over a 2½ year period to consider the evidence on the health effects of alcohol; and whether this could form the basis of new advice to the public

The UK Chief Medical Officers considered and accepted the advice of the expert group and agreed on 3 main recommendations:

• A weekly guideline on regular drinking;

• Advice on single episodes of drinking; and

• A guideline on pregnancy and drinking.

New weekly guideline [this applies for people who drink regularly or frequently i.e. most weeks]. The Chief Medical Officers’ guideline for both men and women is that:

•       You are safest not to drink regularly more than 14 units per week, to keep health risks from drinking alcohol to a low level.

•       If you do drink as much as 14 units per week, it is best to spread this evenly over 3 days or more. If you have one or two heavy drinking sessions, you increase your risks of death from long-term illnesses and from accidents and injuries.

•       The risk of developing a range of illnesses (including, for example, cancers of the mouth, throat, and breast) increases with any amount you drink on a regular basis.

•       • If you wish to cut down the amount you’re drinking, a good way to help achieve this is to have several drink-free days each week.

The image below shows what is a standard unit:

The newest evidence (available since the previous guidelines were published in 1995) suggests:

•       Benefits for heart health of drinking alcohol are less and apply to a smaller group of the population than previously thought.

o   The only group with potential to have an overall significant reduction in risk of death in the UK is women over the age of 55 (especially if drinking around 5 units a week or less)

•       There are adverse effects from drinking alcohol on a range of cancers

o   This was not fully understood in 1995 – and these risks start from any level of regular drinking and then rise with the amounts of alcohol being drunk

On single drinking episodes [this applies for drinking on any single occasion). The Chief Medical Officers advise men and women who wish to keep their short-term health risks from a single drinking occasion to a low level that they can reduce these risks by:

•       Limiting the total amount of alcohol, you drink on any occasion

•       Drinking more slowly, drinking with food, and alternating with water

•       Avoiding risky places and activities, making sure you have people you know around

•       Ensuring you can get home safely

Some groups of people are likely to be affected more by alcohol and should be more careful of their level of drinking on any one occasion:

•       Young adults

•       Older people

•       Those with low body weight

•       Those with other health problems

•       Those on medicines or other drugs

As well as the risk of accident and injury, drinking alcohol regularly is linked to long-term risks such as heart disease, cancer, liver disease, and epilepsy.

The researchers say in their study that “Our findings support the recent reduction in UK safe limits and call into question the current US guidelines, which suggest that up to 24.5 units a week is safe for men, as we found increased odds of hippocampal atrophy at just 14-21 units a week, and we found no support for a protective effect of light consumption on brain structure. Alcohol might represent a modifiable risk factor for cognitive impairment, and primary prevention interventions targeted to later life could be too late.”

What is already known on the issue of drinking

•       Heavy drinking is associated with Korsakoff’s syndrome, dementia, and widespread brain atrophy

•       While smaller amounts of alcohol have been linked to protection against cognitive impairment, few studies have examined the effects of moderate alcohol on the brain

•       Previous studies have methodological limitations especially regarding the lack of prospective alcohol data, have been conflicting, and have failed to provide a convincing neural correlate

What this study adds

•       Compared with abstinence, moderate alcohol intake is associated with increased risk of adverse brain outcomes and steeper cognitive decline in lexical fluency

•       The hippocampus is particularly vulnerable, which has not been previously linked negatively with moderate alcohol use

•       No protective effect was found for small amounts of alcohol over abstinence, and previous reports claiming a protective effect of light drinking might have been subject to confounding by associations between increased alcohol and higher social class or IQ

Retirement planning concerns of boomers in 2017

As Boomers, we are faced with a new reality, our retirement could last for 30 years. Yet, a 2017 study by the Royal Bank of Canada (RBC) found that three of our top retirement concerns are. longevity-related

a.    Maintaining our standard of living (39 percent)

b.    Having enough savings (37 percent)

c.     Covering health care costs (34 percent) –

only one third (33 per cent) indicate they’ll adjust their retirement lifestyle plans to prepare for three decades after they retire.

“Thirty years in retirement should be a huge gift of time when you can do what you want when you want – but you need to connect the dots between living longer in retirement and preparing for those additional years,” advised Yasmin Musani, Director – Retirement Client Strategies, RBC. “If you’re in your 50s and haven’t considered all of your retirement options – and yes, making adjustments – it’s not too late to plan how to get the most out of all of your retirement years.”

The  RBC Financial Independence in Retirement Poll also found that almost half (46 per cent) of Canadians aged 55+ felt they were financial “somewhat short/nowhere close” to where they anticipated they would be at this point, in terms of their retirement savings.

Their #1 question: “Will I have enough money in retirement?” When you ask this question of yourself, the answer should be: What do you want to do when you retire and once you decide this, then take a look at how much money that will take.   Think about your goals in retirement and talk to your significant others about retirement lifestyle before you focus on the finances, and remember there’s no ‘one size fits all’.

Start your retirement conversation by asking themselves a few questions:

·       Where will you want to live?

·       Do you have any travel plans in mind?

·       Will you be providing any assistance to younger or aging family members?

·       Have you discussed your plans with people close to you and with a financial advisor?

Like me, you may find that your priorities, change or shift as you approach and then enter retirement. That’s why it’s so important to have a conversation about your retirement thoughts with the key people in your life and then to sit down with a financial planner, to ensure you’re taking all your options into consideration. Retirement plans need to be fluid, to adjust as you approach retirement – and flexible enough to support the lifestyle you lead once you are retired.

According to the RBC survey, the top 6 retirement questions on the minds of Canadians 55 plus are:

46%: Will I have enough money in retirement

26%: How do I make the most of the money I have saved

20%: How will I deal with inflation in retirement

19%: What lifestyle changes should I expect in retirement

15%: How will I manage debt in retirement/How will I earn income while I’m retired

13%: Should I downsize/sell my home

According to the same survey here are the top 6 activities retired Canadians are doing in retirement

62%: Taking time for myself

45%: Spending more time with my spouse/partner

43%: Getting more rest

42%: Travelling

38%: Improving my health

32%: Spending more time with my family (other than my spouse /partner)

These are some of the findings of the 27th Annual RBC RRSP Poll conducted by Ipsos from November 25 to 30, 2016 on behalf of RBC Financial Planning, through a national survey of 2,033 Canadians ages 18+ who completed their surveys online