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.

Sun has set on the Golden Days of DB pensions: How to survive the New Retirement

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My latest Financial Post column can be found online, by clicking on the highlighted headline: Sun has set on the Golden Days: How to survive the ‘New’ Retirement. It can also be found on page B8 of the Friday paper under the headline Senior Investing Gets Critical.

The piece is based on a half-day conference held in Toronto on Wednesday sponsored by Franklin Templeton Investments. The third annual Retirement Innovation Summit was an equal mix of sessions on Retirement readiness and updates by Franklin Templeton executives on the current state of the markets.

The big theme was the well-established (two decades now) shift from the guaranteed-for-life Defined Benefit pensions earlier generations enjoyed, to market-variable alternatives like Defined Contribution pensions. As a result, longevity risk and market risk has been gradually shifting from the shoulders of employers to those of their workers/employees. And that in turn has meant that would-be retirees have to devote a lot more attention to the markets and investing than older generations that enjoyed what seems in retrospect to be a “golden age” of retirement income security.

Retirement is a gradual process, not a cliff

As for Retirement Readiness, one speaker described how Retirement itself has become more tentative. Instead of moving abruptly from 100% work mode to 100% leisure the moment you reach the traditional retirement age of 65, workers are experimenting with retirement and more often than not returning to the workforce, only to rinse and repeat.

Since the US financial crisis, the numbers of people aged 65 or more who are still working full-time has been on the rise. Of those still working after 65, only one in five did so because they felt they had to because of shaky personal finances. For the other four in five, it’s “because they want to or truth to tell, their spouse wants them out of the house,” the speaker said.

Furthermore, among both full- and part-time workers in that age category, 40% reported they had retired twice already: they had quit the working world, returned a few months or years later, then quit again and then returned to work again.”

Taking a Retirement Victory Lap

So much for the so-called “Retirement Cliff.” This of course is a major theme of the book I co-authored with Mike Drak: Victory Lap Retirement. We basically argue that retirement is a long process that involves slowly moving into. After all, you never see an airplane land by suddenly putting on the brakes in mid-air and dropping vertically: there is a gradual “glide path” to a smooth landing.

So it is with Retirement in our view: call it Semi-Retirement or an encore career or a legacy career but in essence it’s about moving gradually over five or ten years from 100% full-time work to perhaps 80%, 50%, 30% and so on, so that by the time you’re fully retired (perhaps in your 70s), the shock to your system is much less severe.

 

WealthBar Q&A: How one Robo-advisor handles Retirement Income Planning

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WealthBar CEO Tea Nicola

What follows is a sponsored Q&A session between Hub CFO Jonathan Chevreau and Tea Nicola, Co-Founder and CEO of WealthBar, a robo-adviser.

WealthBar provides financial planning with low-fee ETF portfolios and actively managed Private Investment Portfolios.

Through their financial advisers, easy-to-use online dashboard and financial tools, they are making investing more accessible for Canadians from coast to coast.

 

 

 

Jon Chevreau

Jon Chevreau: Welcome, Tea. While many so-called robo-advisers seem to focus on young people building wealth, what about the end game? How do you handle the shift for older investors from accumulation into spending your savings in retirement? 

Tea Nicola: Once a client who is accumulating assets decides that retirement is on the horizon and they let us know, we lead them into the retirement transition process. At this stage, they probably have a pretty good idea as to what they would like to spend after taxes. Their goal is to understand now if their savings and all their sources of income will be enough to fund their retirement years.

The conventional wisdom is to collect all the sources of income that the client will have and analyze it year by year. This step is essential to make sure that the goals are met. That includes the monthly cash flow for basic expenses, the annual travel budgets and one-off purchases as well as any legacies that they may desire.

We then make sure their savings can meet all those goals. If there are shortfalls, we adjust the savings rate to meet the goals by the time they want to stop working. Then, we iterate this every six months or so, both before and after the retirement date. We do this to make sure the transition is smooth and that routines are appropriately established.

Jon: You’re talking about managing expectations?

Tea: I would call it being realistic about expectations. For instance, we need to be careful about talking about a monthly income when it comes to drawing down on retirement savings.

What we typically see is an uneven drawdown, with extra spending in the first few years of retirement. The client is in a rush to do all the things they held off on while working. So, they go on world tour, get a golf membership, enjoy some fine dining, or generally treat themselves to something special. But after a few years, their spending habits ‘normalize.’ The initial exuberance declines and their expenses follow suit. You get cases like one client in her 90s, who is literally worth millions, who now has monthly expenses of about $2,000 a month.

With that in mind, our financial plans help clients to achieve the goals they want to achieve, without necessarily boxing them into a lifestyle category that doesn’t really apply for most of their retirement. This involves very realistic, practical planning that I would say goes into a bit more depth than other robo-advisers, or even many traditional wealth management firms.

Jon: Sometimes you’ll hear a kind of magic number bandied about for how much people need to retire. $1 million. $2 million … Is there a guideline that really makes sense?

Tea: It depends on the person, which is why financial planning needs to be tailored for each individual. Just like with salaries, we know that someone making $75,000 can feel like they’ve got as much money as they could possibly need. Continue Reading…

In Victory Lap it’s not about “more money”

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One of Steve Nease’s cartoons from Victory Lap Retirement

My view about money changed once I left the corporate world. “Why?,” I wondered.

Early in my life I was lead to believe money was the most important measure, the one thing that matters on a personal scorecard. I became wired to succeed, earn promotions and win awards. All in the pursuit of “more money,” money for the family, money for more stuff.

This pursuit came at a cost; pressure to produce personal results in a competitive environment doesn’t come without hard work, long hours and time away from the family.

We end up spending more time at work or thinking about work when we are out of the office. We sacrifice time with our families and time pursuing our passions. All that time working in a corporate environment causes you to conform; to become the corporate person somewhere along the way you lose the freedom to be the real you. We trade our true personality in exchange for economic security: a security which in today’s environment is not even guaranteed.

My relationship with money changed when I finally began to feel financially secure late in my career. My priorities changed and I was able to step back and realize that my career was only providing financial security, but little else.

I learned that the worst thing you can do is to spend time working at a job that does not provide fulfillment, all for a little more money. Living, maybe existing is a better word, causes you to lose yourself a little bit each day. You find yourself sitting at work, glancing now and then at your pension statement, trying to hang on for a retirement which if not planned gets you away from work, but still may not be fulfilling.  Sure, you can save a little more for a retirement, but you really have no idea how you will spend your time. The paradox is that for many of us our financial situation is at an all-time high, but the quality of life is at an all-time low.

I was lucky to be “retired” by the Corp.

In hindsight I was lucky to be “retired” by the corp.; it freed me to pursue what Maslow calls self-actualization. Continue Reading…

What financial help is available to American seniors?

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Photo by Alexandre Debiève on Unsplash

By Jessica Walter

Special to the Financial Independence Hub

As we approach retirement, we hope financial strains will be a thing of the past and that we’ll be able to enjoy our senior years by focusing on the things that make us happiest. However, the reality for many of us in North America is quite different.

According to SeniorLiving, nine out of ten Americans who are 65 and older, receive Social Security and the average senior citizen, aged 65-74, has an income of just $36,320 [all figures $US]; a figure that drops to $25,417 for those aged 74 and over. As confirmed by the most recent U.S. Census Bureau, 9.3% of Americans aged 65 and older are living in poverty; an increase from 4.2 million to 4.6 million between 2015 and 2016.

With such worrying circumstances to contend with, many senior citizens will want to find out what kind of financial assistance is available to them in order to better plan for the years ahead.

Housing

Meeting mortgage payments or having enough money to cover rising rental costs can be one of the most pressing financial concerns for senior Americans. The U.S. Department for Housing and Urban Development (HUD) offers financial assistance and resources related to reverse mortgages, federal housing programs, affordable rents and units for the elderly.

Healthcare

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How Millennials can learn from the seniors in Grace & Frankie

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Lily Tomlin, Sam Waterston, Jane Fonda at the Grace & Frankie Season 2 Premiere Screening in Los Angeles.

Can Millennials learn life lessons from seniors? I think so, or at least from TV depictions of them.

As an avid watcher of anything Netflix is showing, I came across Grace and Frankie when the first season came out in 2015.

I wouldn’t usually choose this show for myself, seeing as all the main characters are over 70, I figured I wasn’t exactly in the target market. This was a show geared toward people my parents’ age or more, and what could I possibly gain from watching something made for old people!?

However, it was a slow weekend, and I’d already caught up on Orange Is the New Black, so what did I have to lose? If it was good, I’d find a new show to watch, and if it was too far out of my wheelhouse, I’d email my parents and pass on the ‘new show you’d like’ info to them.

I think a lot of the time people my age tend to take for granted that most media is aimed at us, with characters from all walks of life but generally in the same age range. This has the unfortunate consequence of leading us to believe that:

a) we’re the only generation that matters and

b) we will continue to be young and adventurous and the only generation that matters.

If you haven’t yet marathon-ed Grace & Frankie, allow me to break it down for you. Grace Hanson and Frankie Bernstein’s husbands are law partners, and, as it turns out, life partners. The husbands — played by two veteran actors who are 75 or older, Martin Sheen and Sam Waterston — have decided after 20 years of hiding their love that it’s time they get on with it, which leaves the wives in quite an unfortunate predicament. ‘Grace & Frankie’ revolves around these two women — played by Jane Fonda (79 years young) and Lily Tomlin (77) respectively — rebuilding their lives and learning to live their ‘new normal’.

One of the most important lessons millennials should take away from this show is that no matter how much we plan for our financial futures, nothing is set in stone. It is always important to plan for the un-plan-able. We are not invincible, and we are not immune to hardship.

A Victory Lap for both the 70-ish actors and the characters they play 

Though both the lead characters had successful careers in their pasts, what I find most inspiring about these women is that they aren’t allowing themselves to feel obsolete. They find new relationships, new hobbies, and most interestingly, a new business venture that they’re passionate about pursuing.
Continue Reading…