No doubt about it: at some point we’re neither semi-retired, findependent or fully retired. We’re out there in a retirement community or retirement home, and maybe for a few years near the end of this incarnation, some time to reflect on it all in a nursing home. Our Longevity & Aging category features our own unique blog posts, as well as blog feeds from Mark Venning’s ChangeRangers.com and other experts.
Since being restructured out of my 14-plus-year, rather comfortable position with a global insurance company, I’ve been asked one question more than any other.
Did you see it coming? The answer in my case is yes. I suspect that’s true for most 50- or 60-somethings who’ve found themselves accepting an invitation to “the touchpoint” from their boss, only to find that it’s been moved from their office to HR at the last moment.
Of course, if you’re anything like me (which is to say that you go to work every day like a Jimmy Stewart character in a Hitchcock movie) then nothing comes as a surprise.
I had two thoughts in quick succession when I received my summons. First, what day is it? Tuesday. Dreaded dead-man-walking Tuesday.
Second, how many documents can I email home between now and zero hour? (Nothing sensitive of course, for the record.)
It’s at this point that things began to turn a bit darkly comic. On my walk to HR, I’m stopped to commiserate with a colleague about the dumb email she just got from her boss. Smile and nod.
Young HR person hands me “The Package”
Turn the corner and my fears are realized. The boss is sitting with a too-young member of the HR team, both sporting the kind of sympathetic look that makes you wish you’d forgotten your glasses. I’m told I’ve “had a good run,” which makes me feel a good deal older than my 52 years. Continue Reading…
When to take CPP/OAS? My latest MoneySense Retired Money column passes on a fresh perspective on the old topic of whether you should take CPP or OAS early or late. You can find the full piece by clicking on the highlighted text here: Why aggressive stock investors should consider taking CPP early.
When he recently turned 60, Rempel opted himself to take CPP himself because of course he considers himself primarily a “stock” when it comes to investing (using the concept from Moshe Milevsky’s book, Are you a stock or a bond?). He figures he can get good enough returns by investing the early CPP benefits that he will more than make up for the higher payouts CPP makes available for waiting till 65 or 70. Same with OAS, which he figures even balanced investors should take as soon as it’s on offer at age 65.
The corollary of this is that if you consider yourself primarily a fixed-income investor, then you should probably take CPP and perhaps OAS too closer to age 70. Compared to taking CPP at 65, taking it at 70 results in 42% more payments, while OAS is sweeter by 36% by delaying the full five years.
The MoneySense piece also quotes retired financial advisor Warren Baldwin, who chose to take CPP himself by age 66. Like Rempel and most financial advisors, Baldwin has a healthy exposure to equities. But he also cites a couple of other reasons for his decision. Baldwin, (formerly with T. E. Wealth), figures the value of the CPP fund to pay you the pension at age 65 is at least $250,000: more if you factor in its inflation indexing. The latter is an important consideration, especially for those (like Yours Truly), whose Defined Benefit pensions are not indexed to inflation.
Baldwin took his own CPP at 66, a year after his final year of full-time employment income. He did so “mainly for the cash flow and portfolio maintenance.” But Baldwin has other reasons too. “I do not want to leave the CPP too long into the future in case the government changes the terms on it or the rate of income tax might rise … Look at how many changes they have made in the last 20 years.”
If a retiree’s marginal tax bracket jumped from 35% to 45%, Baldwin says deferred CPP would face a heavier tax load, while if benefits are taken earlier they would be taxed at more modest rates. And if retirees also have significant sums accumulated in RRSPs and RRIFs, the extra income might push up their Marginal Tax Bracket.
CPP survivor benefits also need to be considered
Warren Baldwin
Finally, Baldwin considers the “estate value” of CPP. “If two spouses have the maximum CPP and one dies, the survivor will not get much from the ‘survivor-ship’ aspect of CPP … So, if the ‘value’ of the CPP at 65 is in the range of $300,000, then if you die before you collect, there is quite a loss. Continue Reading…
Nothing has worked more effectively for the financial industry to justify asset accumulation or AUM (Assets Under Management) than the theoretical underpinnings of the 4% “rule” or “guideline.”
There are innumerable articles on how individuals will require one million dollars or more for retirement based on this dubious principle.
Certainly it is crucial to save but to focus on any particular threshold misses the point that what counts in retirement is a regular, dependable stream of income for a lifetime.
There are two factors in retirement to balance: lifestyle and longevity. Any 4% or otherwise rule is irrelevant if longevity is uncertain. Most people want to maintain a certain quality of life in retirement as well as living healthy.
Here is a hypothetical question: would you take Social Security if it were offered as a lump sum or continue to collect it monthly for the rest of your life (with the bonus of inflation adjusted payouts)? Continue Reading…
Billy and Akaisha take in the view from their hostel in Zacatecas, Mexico
By Akaisha Kaderli
Special to the Financial Independence Hub
We understand that not everyone likes to travel. No doubt it can be challenging, but there are significant benefits if you choose to enliven your routine with a little excursion.
Traveling makes you smarter
From the beginning of choosing a location, packing your suitcases and figuring out the logistics of who will water your plants or sit with your pet, traveling takes you out of your routine. Anything new and different like this that engages your brain causes new neurological pathways to grow.
Learning a new language, taking a cooking or painting class while on your trip and meeting new people all place you in unique situations, and your brain strengthens.
Traveling is healthy for you!
Traveling makes you strong
For some people, all these new patterns outside the everyday routine can be perceived as a hassle. Yes, and that’s good! We learn flexibility, creativity and self-reliance. Those are great attributes to have and they are useful to daily living.
Flexibility of mind, finding new solutions to new challenges and our sense of who we are and how we cope all get stronger.
Traveling helps you become an interesting story teller
When things don’t go according to plan, those seemingly challenging circumstances make for the best stories!
If everything goes perfectly on your trip or vacation, and people ask “How did you enjoy yourselves? How was your trip?” then all you can say is “Great!” Continue Reading…
My latest MoneySense Retired Money column looks at a financial planning software platform called Viviplan. You can find the full article by clicking on the highlighted text: What I learned by putting Viviplan to the test.
Viviplan is the third retirement planning package I’ve tested this year, perhaps — as the MoneySense article reveals — the topic is getting all too real for me now that my wife, Ruth, has told her employer she plans to retire when she turns 65 next summer. I’m a year older and have been somewhere between self-employed and semi-retired for most of my 60s.
All these packages deserve consideration and work in more or less similar fashion. To do the job justice, you need to have handy — or at least summary information — such documents as your latest tax returns, brokerage statements, Service Canada CPP and/or OAS projections, as well as having a good grasp of your regular and occasional monthly expenses.
Having most recently performed this exercise with Viviplan — and as one of the users we interviewed for MoneySense relates — it can be a bit scary to see in black and white just how expensive daily living can be. The package won’t let you forget any tiny expense, from pet food to boarding your pet when you’re on vacation (or arranging to hire a neighbour’s teenager, which is what we do if we go away and must leave our cat behind.)
Viviplan calls itself a Robo Planner
Viviplan — which has been dubbed “Canada’s Robo Planner” — is the brainchild of financial planner Rona Birenbaum. Birenbaum also runs a separate fee-for-service financial planning firm called Caring for Clients. I have consulted her for various pieces in the past, particularly about annuities.
Indeed, when I was putting Viviplan through its paces, one of the big questions I had was whether there was a need for us to partly annuitize, seeing as Ruth has no employer-provided Defined Benefit pension at all (just a hefty RRSP), and I have only two modest DB pensions that are not inflation-indexed.
Viviplan’s Morgan Ulmer
Our main question was whether to make up for this lack of employer pensions by at least partially annuitizing, or what Moshe Milevsky and Alexandra McQueen call in the title of their book Pensionize Your Nest Egg. Another author, Fred Vettese in Retirement Income for Life, was in a similar situation when he reached 65 (the same month as I did) and had suggested annuitizing 30% of his nest egg at 65 and doing another 30% at age 75 (assuming CPP at 70). Our question for Viviplan was whether this would make sense for us too, or just for Ruth.
We went back and forth with Calgary-based certified financial planner and product manager Morgan Ulmer (pictured to the right). As she relates in the MoneySense piece, “it’s certainly not necessary,” since at today’s interest rates, Viviplan told her that for us a pure GIC portfolio could get us to where we want to go, with the virtue of more financial flexibility and higher final estate value. Like the other programs, Viviplan recommends delaying CPP till 70 and OAS too if possible.
Annuitize? No wrong decisions and no rush
Partial annuitization for Ruth along the lines of what Vettese suggests would result in a slightly lower estate for our daughter. “With annuities, you are making a choice between legacy and flexibility versus security and longevity protection,” Ulmer said in the plan’s written recommendations, “There are no wrong decisions here, and there is also no rush.” Continue Reading…
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By Kevin Press
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