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.
While most business executives are and should be approaching Financial Independence, there is a little-known threat to their financial well-being: addiction/substance abuse.
In fact, according to the SAMHSA [Substance Abuse and Mental Health Services Administration], around 11.4% of management employees (example business executives and managers) are diagnosed with a Substance Use Disorder every year.
If the addiction is not managed in a timely fashion, abrupt dismissal could torpedo any long-term goals for financial freedom.
As an aspiring business executive or someone who is serious about their financial education, it’s good to be aware of addiction and its possible ramifications.
So in this post, we look at why business execs should take addictions seriously. We also discuss different treatment options available for business executives to overcome SUD.
Help is Available
Anyone can suffer from drug addiction, including those in white-collar, executive positions who juggle a lot of responsibilities. In fact, it could be more difficult for them as they may be tempted to avoid/delay treatment so their career or work doesn’t suffer due to the required time off.
That’s where executive addiction-related treatment centers come in. These treatment centers are equipped with high-end tools, services, and necessary amenities so that patients can maintain active personal and professional lives while also achieving sobriety.
Often the main highlight of these programs is the luxury setting and amenities given to the professionals and a distraction-free comfortable environment.
Addiction Treatments available for Business Executives
Medical Detox
Often the first phase of most recovery programs; medical detox aims at the cessation of drug usage. In the absence of medical aid, the patient may experience myriad unpleasant withdrawal symptoms.
Executive treatment facilities, such as detox centers in California, deploy safe and medical procedures to make the detox process as comfortable and less painful as possible.
Psychotherapy
Often the therapeutic phase of the program begins right after the detox is successfully over. Inpatient rehab centers in Los Angeles for example, use it in individual and group settings. Psychotherapy mainly aims to recognize the psychological reasons that are causing or triggering the drug usage.
After that, it teaches several relapse prevention mechanisms and coping techniques to deal with tough situations without resorting to drugs. Continue Reading…
On Friday, the Hub republished the first part of a two-part Question-and-Answer session between finance professor and author Dr. Moshe Milevsky and Gordon Wiebe of The Capital Partner [TCP]. This is the second and final instalment:
TCP: I wanted to turn to your Book, Longevity Insurance for a Biological Age. Your thesis is that we should be looking at our biological age and using that to calculate and project our income and how much we should be drawing from our savings.
M.M. And, more importantly than that, making decisions in our personal finances, right?
You know, somebody is trying to figure out at what age they should take C.P.P. Should I take it at 60? 65? 70?I don’t think they should use their chronological age to do that.
Trying to figure out when to retire? Stop using your chronological age.
I mean there’s a whole host of decisions that you have to make based on age and I’m saying we’re using the wrong age metric. It should be based on your biological age.
Now, at this point, biological age sounds like this funny number that comes out of some website, but sooner or later we’ll all have it. And, it’s going to be faster than you think. Your watch will tell you your biological age. And, then in a couple of years, people will stop associating themselves with their chronological age.
They will just stop using it.
And you’re going to sit down with your antiquated compliance driven forms that say, “I need to know my client’s age. Oh, you’re 62.”
And, the client says, “Ha, ha. That’s chronological age. We don’t use that anymore, buddy. I use biological age. Sixty-two, that’s not my age.”
It’s about preparing people for the world in which age is not the number of times we circle the sun.
TCP: What metrics do you think we’ll lean towards to measure biological age? Telemeres? Others?
M.M. There’s a whole bunch of bio-markers that can be used. Some people use telomeres or something called “DNA methylation” or epigenetic clocks. There are about fifty of them, but eventually they’ll all coalesce into a number called “biological age.”
There will be a consensus on how to measure it and you’ll go to your doctor and your doctor will say, “your chronological age is 50, but your biological age is 62.” You’re doing something wrong.
Then a financial advisor will use that information differently when you build a retirement plan.
TCP: That makes sense, but trying to achieve a consensus and getting everyone to use the same metrics from a compliance standpoint or trying to get pension plans and policy makers to agree would be a challenge, wouldn’t it?
MM: It would be. In fact, that’s exactly where I’m headed now. I’m giving a speech in Madrid and that’s exactly what regulators from a number of different countries want me to talk about.
They want to know, “is this feasible? We want to implement this in our pension system. We don’t want wealthy people retiring at the age of 65, they’re going to live forever and bankrupt our system. We want people to retire at a biological age.”
TCP: Let’s talk about that a little more. Advisors typically use a 4% draw on savings as a benchmark withdrawal rate. But, if we use our biological age, there would then be a range. I assume somewhere between 3-6%?
Adjusting the 4% Rule
M.M. You’re absolutely right. That’s where I would go with this. You have to use your biological age and the 4% rule has to be adjusted.
But, what I’m saying is more than that. That rule has to change. It’s not just about the number or percentage. It’s how the rule is applied.
I really don’t like the idea of fixing a spending rate today and sticking to it for the rest of your life no matter what happens. Your spending rate has to be adaptable.
What you have to tell people is, “look, this year we can pull out 6.2%. Next year, it really depends on how markets behave. If markets go down, we may have to cut back. If markets go up, we can give you a bit more.”
I think the 4 per cent rule is really what I call a one-dimensional rule. It’s not that four is one dimensional. Any one number is one dimensional: just telling them a per cent.
It’s got to be at least two dimensional. Meaning, this is what it is now, but next year if this is what happens we’ll do that. ..
Three dimensional is to go beyond that is to go beyond that and say let’s take a look at what other income and assets you have.
“Oh! You’ve got a lot more income from guaranteed sources, you can afford more than four per cent, this year.”
TCP: It’s a dynamic scenario, a moving target.
M.M. That’s the key word, dynamic versus static.
The threat of rising Interest Rates
TCP: Canadian investors currently have over two trillion invested in mutual funds. Over half is invested in balanced funds or fixed income and we’re in a horrible position where fixed income is concerned. We’ve had declining rates for the past forty years. At best, bonds will stay flat. At worst, bonds could lose up to thirty per cent of their value.
You talk about the importance of the sequence of returns and how that affects income potential. Have you or your students run scenarios with higher interest rates and the impact it could possibly have?
M.M. I haven’t thought about it beyond what you’re noting. The obvious scenario is as interest rates move up, these things are going to take a big hit.
And, retirees who feel they’ve been playing it safe by putting funds in bonds will suddenly realize there’s nothing safe about bonds in a rising interest rate environment.
I think they’re confusing liquidity and safety with interest rate risk. It’s liquid and its safe. Government is not going to default but boy, can it lose its value.
We’ve become accustomed to this declining pattern. Anybody who is younger than forty doesn’t even understand what higher interest rates means. It’s never happened in their lifetime. They don’t believe it. Understand it. Never felt it. You show them graphs going back to the 1970s. That’s not how to convince them. They’re empiricists. They’ve never lived it themselves, they don’t believe you. Continue Reading…
How to invest for retirement when time is no longer your friend?
Read on in today’s post, including answering a reader email on this very subject.
Time in the market
Cutting to the chase: time in the market, as opposed to timing the market, works because it does not involve short-term predictions or any guesswork at all. This strategy proves that time and patience in the market is better than a quick sale. For example, when a person has a stock or ETF for many years, the power of compounding simply tells us that investment growth will do all the heavy lifting for us. Patient investors will gain larger profits by allowing their investments to grow over time.
“The wonderful magic of compounding returns that is reflected in the long-term productivity of American business, then, is translated into equally wonderful returns in the stock market. But those returns are overwhelmed by the powerful tyranny of compounding the costs of investing. For those who choose to play the game, the odds in favor of the successful achievement of superior returns are terrible. Simply playing the game consigns the average investor to a woeful shortfall to the returns generated by the stock market over the long term.” – John Bogle, founder of Vanguard Group.
John said things better than I did. Most investors should consider investing as a multi-year long-term endeavour.
The secret sauce therefore is spending time in the market – staying invested – and not diving in and out.
I’ve seen this play out myself, in real time, with my dividend investing journey. See the chart below. Sure, I’ve added new money over the years but going forward, my portfolio will continue to grow and is likely to double every 10 years or so even if I don’t add another five cents.
But it is never too late to right the ship. It’s never too late to learn something new. It’s never too late to get started with investing: you can invest for retirement when time is no longer your friend.
How to invest for retirement when time is no longer your friend – reader question
Here is the reader question, adaptedly slightly for the site for today’s post:
Hi Mark,
I appreciate all that you do. I recently sold a property and I’m starting all over.
I’m newly self-employed. I have a new rental apartment, but starting from scratch. I’m 55 and have an empty TFSA. I would like to max it out with investments that will act as my long-term account. I don’t need to touch that money for probably 15 years. I hope to put any savings, about $77,000 in there next year.
I’ll also be putting another $150,000-$200,000 into my new business. Day trading? Kidding.
Back to my biggest question – most articles and advice I’ve read about is focused on long-term investing that caters to a younger person whose age allows them to exploit compound interest – I know you write about that too. Because I’m not in that category, I thought I’d reach out and see what you can help with. What is possible?
Please accept my request or send me any articles on your site that address investing for someone older, with limited funds like myself for the TFSA.
Thanks so much for your time and consideration.
Thanks for your email and readership.
Well, a few thoughts and I’ll put them in order of what I would consider myself, based on my personal lessons learned as your food for thought.
How not to invest for retirement when time is no longer your friend
I’ll cover how much wealth you can still generate with your TFSA in a bit, but I think it’s important for me to call out that based on market history, because equity markets can be volatile in the short term but rather predictable over the long-term (they rise), an investor who stays invested is probably going to win the race.
Case in point.
Did you predict this massive fall, and rise, in our pandemic-era?
If you’re being totally honest with yourself, I doubt it. I know I didn’t see this comeback coming but I’m sure glad it happened ….
So, whether you invest in stocks, bonds, real estate or more speculative plays like Bitcoin, you should know that you’re mainly rewarded with returns for your exposure to just one thing: risk.
Risk, on the whole, is difficult to define and measure, especially at the personal level but essentially it comes in two main flavours: short-term and long-term.
Short-term risk might be easier to relate to. Stocks, bonds, and other assets can lose money in the short-term. See above!
But investing history consistently tells us for any short-term headaches, by staying invested, “this too shall pass.”This means that an investor who stays in the market (and does not trade) generally speaking has a much higher probability of long-term success than one who tries to pick the perfect time to get in and out.
How not to invest for retirement when time is no longer your friend
Another concept I want to bring up is the fact that at any age, there is one major piranha you need to avoid for successful, more predictable wealth-building: the investment industry itself.
Did I just call out all the entire wealth industry? Only some to a point! Continue Reading…
As an entrepreneur, how have you financed your startup?
To help finance your next startup, we asked business professionals and leaders this question for their insights. From crowdfunding to savings from a full-time job, there are several ways to fund a startup.
Here are 9 ways entrepreneurs finance their startups:
Look into Commerce Authority Programs
Partner with Others
Finance with Commercial Bridge Loans
Connect with Local Non-Profits and Support Networks
Raise from Crowdfunding
Apply for Small Business Grants
Pitch to Potential Investors
Ask for Support from Family and Friends
Save Your Full-Time Salary
Look into Commerce Authority Programs
I’ve bootstrapped the financing of our company for 10 years, but programs from a local commerce authority can certainly help support and fund new initiatives. For example, the Arizona Commerce Authority offers programs such as the Small Business Capital Investment Incentive Program, where the ACA may certify up to $2.5M [US$] in tax credits each fiscal year, or the Rapid Employment Job Training Grant, a reimbursement for training and development expenses. Look into the programs at your local commerce authority, as many small businesses and startups may discover funding and grant incentives designed just for them. — Brett Farmiloe, Markitors
Partner with Others
Financing your business with partners to fund your growth in exchange for special access to your product, staff, distribution rights, ultimate sale, or some combination of those items using strategic partner financing is the best strategy to finance your startup. I’ve noticed that this option is often neglected. Strategic investments are similar to venture capitalism in that it is typically a stock sale (rather than a loan), yet it can also be royalty-based, in which the partner receives a portion of every sale, in my opinion. Partner financing is a great option because the firm you partner with is likely to be a huge corporation, and it may even be in a similar industry or one that has a stake in your company. — Carey Wilbur, Charter Capital
Finance with Commercial Bridge Loans
We like to overcome the obstacle of financing small businesses by bringing innovative solutions to the table. One such solution is our commercial bridge loans, which are flexible short-term financing options for commercial real estate properties. This might be a great option for fast growing businesses as they continue to grow and scale their operations.
As loan experts, we commit to truly helping clients as advisors. If you’re just starting a business, consider consulting a lending expert. Make sure your needs are heard and that you are provided with affordable options to choose from. — Allan J. Switalski, AVANA Capital
Connect with local Non-Profits and Support Networks
In addition to bootstrapping, local not-for-profit organizations and networks that support female entrepreneurs are some great ways to fund your startup. You can find funding and investors through these kinds of organizations like we did when we found Beam. One of the other great things about organizations like Beam is that you will become part of a network you can lean on for support and can also find mentorship from business professionals in your area. This mentorship can make a huge difference in helping you grow your business. Also, there’s a lot of grants out there that support female-founded businesses which require a little extra upfront research and work but another great avenue to fund the business.
Crowdfunding may be an alternative if you have a hot idea and are good at social media. When crowdfunding platforms like Kickstarter and Indiegogo were launched, there were a lot of enterprises that had significant success raising funds through their reach.
What’s the disadvantage? Because many businesses seek funding through crowdfunding, you must build a lot of buzz in order to cut through the total signal noise. Unfortunately, it’s also easy to overextend yourself and irritate backers, which can lead to a lot of resentment before your firm even gets off the ground. — Veronica Miller, VPNOverview
Apply for Small Business Grants
I usually advise startups to consult small business grant administrators to fund your startups. Especially, when your new company is a pioneer and investing in innovative technologies and techniques, more funding opportunities arise. What’s more, small businesses founded by women, minorities, or veterans are often eligible for grants from the Small Business Administration (SBA) and other organizations that promote entrepreneurship. If you fall into one of these categories, you should contact your local SBA branch or chamber of commerce to see if there is any local grant money available. — Spiros Skolarikis, Comidor
Pitch to potential Investors
We joined an accelerator program that connected us to investors. In turn, they take a share in the company in exchange for capital. The ownership-to-capital ratios are variable and are usually determined by a company’s valuation. I believe this is a wonderful option for companies who don’t have physical collateral to serve as a lien on a bank’s loan. However, it is only a good fit when there is a proven high growth potential as well as a competitive advantage of some sort, such as a patent or a captive consumer. Another advantage of working with investors is that they may give you a wealth of information, industry connections, and a clear path for your company. — Guy Katabi, Lightkey
Ask for support from Family and Friends
Borrowing money from friends and family is a traditional method of starting a business. While it may be more difficult to persuade investors or banks of the excellence of your idea, your family and friends will typically trust in your ambition.
They might be more willing to contribute to the funding of your company. If you do seek loans from friends and family, make sure that each of you has appropriate legal guidance, especially if the money is taken as a loan. However, what about the disadvantages? Borrowing money is an easy way to alienate friends and ruin family relationships. If you decide to go this route, go with caution. — Edward Mellett, Wikijob
Save your full-time Salary
I financed my startup with the salary from my full-time job. I was fortunate to have a good paying job as a software engineer, which enabled me to fuel my startup while it was just a side hustle. I’ve never been a big spender, and I live modestly: this low-cost lifestyle left me with enough money to feed my business while getting it off the ground. I have since quit my job and operate my small business with the money it generates. –– Andy Kolodgie, Cash Home Buyers Georgia
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My latest MoneySense Retired Money column, just published, looks at the commonly held dream of many in the FIRE community (Financial Independence/Retire Early): that of geo-arbitrage and retiring outside Canada to an exotic location with a much lower cost of living. Click on the highlighted text for the full column: Has the Pandemic ended the dream of Retiring Abroad?
As I note in the piece, places like Mexico, the Far East or parts of Europe have such a relatively low cost of living that average Canadians might be able to retire early just on the strength of CPP and OAS. Add in any employer pensions and registered or unregistered savings and that would be gravy.
The column looks in particular at two locations in Mexico that are quite popular with both American and Canadian expatriates seeking nicer weather and a lower cost of living. One is Lake Chapala, the subject of a new edition of a book by regular Hub contributors Akaisha and Billy Kaderli. The book, pictured on the left, is titled The Adventurer’s Guide to Chapala Living.
“Chapala isn’t the only town/city where living in Mexico is wonderful. There are so many from which to choose,’ Akaisha told me via email, “ We believe retiring abroad is still feasible, without a doubt.”
At one point my wife and I seriously considered leaving the Land of Snow and High Taxes (aka our Home and Native Land) for Mexico. We took one trip to Chapala and nearby Ajijc, and a few years later the more inland and mountainous San Miguel de Allende, more on which below.
However, as the years went by and we neared our Findependence Day (i.e. Semi-Retirement), we concluded that there was too much crime in Mexico for our liking and that we are for the most part quite content to live in our current home in Long Branch, Ontario, just steps from Lake Ontario.
Even so, and as the MoneySense column relates in more depth, we do know a couple who actually took the plunge and sold their Toronto home to start a new life in San Miguel de Allende. Five years ago, the Hub recalled that trip and how we ran into a former Financial Post colleague of mine, Dean Cummer, and his partner.
They visited Toronto recently and I got the chance to catch up over lunch with Dean, who became one of the main sources for the MoneySense column: my editor wanted to know whether the dream of Retiring Abroad is still alive in the Covid era. Continue Reading…
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