Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Old Age Security (OAS) explained

Old Age Security (OAS) was originally intended to be a universal program to provide income support payments to Canadian seniors. It is one of the cornerstones of Canada’s retirement income system.

It is not a pension plan. You don’t make contributions. OAS is a government benefit program that is financed out of general revenue.

Related: Is our Old Age Security Program Sustainable?

Employment history is not a factor in determining eligibility. You can receive OAS benefits even if you have never worked, or are still working.

Residency requirements have to be met. The amount you receive is determined by how long you have lived in Canada after the age of 18.

Everyone who has been a resident of Canada for at least ten years (after age 18) is eligible to collect OAS starting at age sixty-five. Normally, you qualify for the full amount only if you have been a resident for at least forty years after turning 18.

You may still qualify for full or partial payments if you meet certain other requirements.

Up to September 2017, the maximum monthly benefit is $583.74. This rate is reviewed four times a year and may be adjusted based on the cost of living measured by the Consumer Price Index. OAS is taxable income.

OAS for low income seniors

Anyone who receives OAS and whose income falls below a certain level may be eligible to receive additional non-taxable monthly payments.

  • The Guaranteed Income Supplement provides a monthly benefit to low income OAS recipients. It is an income tested benefit. This means your total income from the previous year (combined income for couples) is used to determine your eligibility.
  • Allowance is available to 60-64-year-old spouses/common-law partners of OAS recipients who also receive GIS.
  • If you are sixty to sixty-four years old and are widowed, you may be eligible to receive the Allowance for the Survivor.

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Retirement projections have the answers

Much has been written about the level of retirement readiness and capital needs required to fund that long-term family objective. I submit that the retirement projections have the answers.

I am, however, puzzled by this key observation: “None of the potential clients I’ve met for the first time in the past five years had a recent retirement projection.”

There is much talk and little walk of the talk around this subject. Even though retirement is a top priority for investors and their families.

You are wise to start crafting your personal retirement projection. The sooner the better, then revisiting it every three to five years.

This is something I encourage everyone to mull over. “How do you assess whether your retirement prospects are on target if you have no personal retirement target in mind?”

I summarise three more observations from meetings with potential retirees:

  • Most have not come to grips with the possibility of retirement lasting 25 to 30 years, maybe longer.
  • Most have not thought about the implications of their portfolios receiving little or no saving capacity after retirement.
  • Most are not prepared for escalating costs of health care, say a retirement home facility, even if for only one spouse.

Planning three decades of dependable retirement income is the new money management challenge. Especially, during times of continued low returns.

Very few investors now retired, or nearly retired, have a “retirement projection.” I liken it to building a home without the blueprint.

I don’t know of anyone who builds homes this way. However, there is no shortage of investors who continually try to assemble and guide their retirement nest egg without a personal plan of action. They just buy stuff for the investment shelves.

Retirement surveys keep popping up frequently with similar messages. Typically about how investors are not fully prepared for the long retirement journey.

Some may have accumulated too much debt or too few assets. Others may have incurred too much risk. Perhaps, many may not be saving enough.

Reasons aside, it is rare to meet someone who has a grasp of the capital ballpark required to fund retirement. The main ingredient is the “retirement projection,” also known as the “capital needs” analysis.

The basic step of preparing a retirement projection is a very informative process. I favour constructing one for every client well before retirement and updating it periodically.

The retirement projection is the starting point for everyone considering retirement or actually now retired. It is a ballpark indication of what the family capital needs look like for the long run.

My projection covers several key retirement aspects, such as:

  • Providing long-term retirement income goals, possible health costs and inflation factors.
  • Reviewing the family’s total expenses and cash requirements for projects and purchases.
  • Inclusion of income sources, like employment, pension benefits, real estate, CPP and OAS.
  • Assumptions for possible home downsizing, longevity, special needs and pension funding.

The analysis brings to light these important facts:

  • Capital estimate of funds required to achieve your retirement goals and desires.
  • Periodic saving capacity required by your investment plan.
  • Annual return estimates to reach and maintain your desired retirement lifestyle.
  • Whether your retirement goals are achievable or in need of periodic adjustments.

A retirement projection allows the design of a customised investing road map tailored to each client. It also ensures that what the client seeks is reasonable and suitable vis-à-vis family goals.

Most investors do not feel comfortable navigating their retirement math. A solution is to engage a professional who is well versed with retirement projections.

You are wise to start crafting your personal retirement projection. The sooner the better, then revisiting it every three to five years.

Clearly, up-to-date retirement projections have the answers. It’s time for action if yours is missing in action.

 Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA  started in the investment and financial advisory profession in 1972. He graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971,  then attended the University of British Columbia, graduating with the MBA in 1972. This blog is republished here with permission from Adrian’s new website, where it originally appeared on May 23rd

Six tips to make Travelling easier

Billy & Akaisha Kaderli

By Billy and Akaisha Kaderli

Special to the Financial Independence Hub

Travelling is challenging enough with all one has to think about: getting the best price on airline tickets, arranging for lodging reservations, and being sure your passport is up-to-date with no expiration in the next six months. Who will watch your home, pets and garden while you are away?

Then there’s packing.

Are you one of those people who packs everything just in case you might need it? Or you pack something because you like it, even if it’s not seasonally appropriate and goes with nothing else in your bag?

The following tips can help you bring order to packing chaos.

1.) Days before you leave, make a list of what you essentially need for your trip and add to that list as you think of items. Then when you pack, you can confidently check off your list instead of relying on memory and being anxious about forgetting something.

2.) When you travel, wear heavy clothes like your jacket on the plane, including your heaviest shoes. Pack lighter footwear in your luggage. Shoes are the heaviest items, so pack fewer of them and make do. Continue Reading…

100 Kilometers per Hour to Full Stop!

By Heather Compton 

Special to the Financial Independence Hub

You’re busy!  You’ve been diligently advancing your career, paying bills, raising kids and saving for retirement.  Lots of your available life hours spent grooming for, travelling to or toiling away at work.

Now fast forward to your first day of retirement — nowhere to be; no need to get out of your bathrobe or into the car.  For some that sounds like nirvana; for others, their worst nightmare. Even nirvana wears thin if it’s a steady diet with no variety.

The shift from active work-life to part-time work or full-time retirement is one of the important tasks of mid-and-later life.  Psychologists speak of it as a transition, and like other life transitions it brings both bumps and bonuses. Imagine adjusting, as one of my clients put it, to “twice as much husband on half as much income!”

What’s Next?

What comes next? You may need to reclaim or rediscover yourself.  You’ve defined yourself as parent, partner and businessperson and now you’re “out of work” on two fronts – kids grown plus the job has flown.  Where does your routine, sense of purpose, identity and social engagement come from?

A rockin’ retirement isn’t a given, it’s an intention.  A rich life is a goal worth meeting, but it takes focus that goes far beyond your net worth statement.

A Life with Style

At the core of virtually all measures of life-satisfaction is your state of health.  Now you are driving an older vehicle, one where replacement parts don’t function as well as the factory originals. Creating a vehicle-maintenance schedule becomes your new job.

The World Health Organization describes health as, “a state of physical, mental and social well-being.” That requires a focus on all aspects of your health – financial, physical, emotional, mental and spiritual well-being.

Begin Again

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4 books to prepare for Your Victory Lap

Image result for retire wild happy and freeImage result for the essential retirement guideImage result for your retirement income blueprintImage result for it's your time by donna mccaw

A question that frequently comes up is what books we would recommend people read to help prepare themselves for a successful VL (Victory Lap). I think this happens because many of our talks are held at libraries and people there are accustomed to doing their own research. There are a lot of good books out there, including Victory Lap Retirement, but the following four will do the job getting you both mentally and financially prepared to launch your own VL.

1)   How To Retire Happy, Wild, and Free, by Ernie Zelinski.

This is the book that helped convince me it was ok to leave my stressful banking job. If you are in a similar position, you know it is hard to leave a well-paying job late in your career. However it is just as hard staying in a job that makes you miserable just to save some extra money for a retirement that you have no idea what it will look like. When you are in a job you hate, something has to give and I hope it’s not your health. If you lose your health,  does it really matter how much money you have? You might want to think about that one a little before it’s too late.

We give out a copy of Ernie’s book at our presentations, as there is usually at least one person in attendance who is willing to admit they are struggling with the “should I stay or should I go?”  decision.

Having been there myself I feel for them and know Ernie’s book will help them, just like it helped me.

2)    The Essential Retirement Guide, by Frederick Vettese

I like to sleep at night and after reading this book I was able to sleep a lot better. Most of us are stressed out about the possibility of running out of money in retirement. I can’t speak for any of you but I worried about money, making the mortgage payment, getting the kids through school for most of my life and I’ll be damned if I’m going to waste any more of my life worrying about money during my Victory Lap. Life is too short for that and I have better things to do with my time.

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