Longevity & Aging

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.

Using annuities to create your own personal Pension In Retirement

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The reason why retirement planning is so difficult is because the one variable we need to know – how long we have to live – is impossible to predict. Sure, we have mortality tables and family history to help guide us, but statistically speaking, half the population will outlive their median life expectancy.

That makes longevity risk – the risk of running out of money before you die – a very real threat to your retirement. And yet many Canadians ignore this threat by not saving enough during their working years; retiring before they’re financially ready, taking Canada Pension Plan benefits too early, withdrawing too much from their RRSPs, and so on.

Nearly half of Canadians are worried they won’t have enough money to live a full lifestyle in retirement, according to a recent survey by RBC Insurance. They interviewed 1,000 Canadians aged 55 to 75 about their retirement readiness and came out with some interesting findings.

The retirees, or soon-to-be-retirees seem to want it all, according to the poll, yet many will lack the savings to do so:

  • 80 per cent want to live at home for as long as they can
  • 72 per cent said it’s important to own a car.
  • 68 per cent said it’s important for them to be able to travel at least once a year
  • 53 per cent want to go out for lunch or dinner a few times a week

Having enough money to support their desired lifestyle is a real concern, highlighted by the fact that 62 per cent of those surveyed are worried about outliving their retirement savings.

The one retirement income tool that didn’t appear on the radar was an annuity. Just 12 per cent said they are using or plan to use one in retirement.

How Annuities Can Help In Retirement

An annuity provides a predictable income stream for life – much like how a defined benefit pension, CPP, and OAS pays benefits for as long as you live. Nothing protects you from longevity risk quite like a guaranteed lifetime income.

It’s puzzling why more Canadians don’t choose to turn even a portion of their savings into an annuity – to pensionize their nest egg, to borrow a phrase coined by financial authors Moshe Milevsky and Alexandra Macqueen.

Lack of knowledge around annuities definitely plays a role. While nine in 10 Canadians polled by RBC know they don’t need to invest their entire retirement savings into an annuity, just 28 per cent know that an annuity doesn’t have to be managed once it has been purchased. Continue Reading…

Retired Money: Finally, a “Tontine” proposal for true Longevity Insurance

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Even if they’ve saved a million dollars, retiring baby boomers lacking Defined Benefit plans and their inherent longevity insurance justly fear outliving their money. It’s been said some fear this more than death itself.

The latest instalment of my MoneySense Retired Money column looks at an intriguing proposal made this week by the CD Howe Institute. Click on this highlighted text for the full link: An annuity that pays off — if you live long enough.

CD Howe has proposed the creation of a “pooled risk insurance” scheme called LIFE, which has all the hallmarks of a 17th century concept known as the tontine.

Moshe Milevsky has long suggested tontines as one remedy for outliving our money

Annuity expert Moshe Milevsky — also a finance professor at the Schulich School of Business and author of books like Pensionize Your Nest Egg — says LIFE is a “great idea.” He actually made the case for the resurrection of “tontine thinking” three years ago in a book I reviewed at the time also at MoneySense: Tontine: Retirement Plan of the Future? 

The CD Howe paper (Headed for the Poor House) authored by Bonnie-Jeanne MacDonald doesn’t actually come out and call LIFE a tontine scheme but it certainly appears to contain the DNA of one.

LIFE stands for Living Income for the Elderly. The idea is that by sharing mortality risk, those who make it to age 85 start to receive monthly payouts for as long as they live, funded in part by the less fortunate members who die between 65 and 84. Apart from normal investment returns, the lucky survivors would enjoy the “added return” of the mortality premium.

Continue Reading…

How annuities can help fund a full lifestyle in retirement

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By Jean Salvadore, Director, Wealth Insurance, RBC Insurance

(Sponsored Content)

Summary: While Canadians want to live a full lifestyle in their retirement, a majority (62 per cent) are worried about outliving their retirement savings. The majority are missing annuities in their portfolio that can help guarantee an income stream in their retirement. 

If you’re like most Canadians, your vision for retirement includes a full roster of activities such as travel, dining out and shopping for the things you want. But while many of us look to our retirement years as a time to enjoy life to the fullest, having enough money to support that lifestyle is a real concern. Canadians are living longer than ever before and, according to a recent survey by Ipsos for RBC Insurance, the majority (62 per cent) are worried that they’ll outlive their retirement savings.

In fact, even with various financial tools in place such as RRSPs and TFSAs, almost half of Canadians are still not confident that they will be able to afford the lifestyle they want. And perhaps not surprisingly, what’s most important to that lifestyle is keeping a sense of independence. Among those between the ages of 55 to 75, eight out of ten want to live at home for as long as they can and 72 per cent say it’s important to own a car. On top of that, almost three-quarters (68 per cent) would like to be able to travel at least once a year, shop for the things they want (62 per cent), and go out for lunch or dinner a few times a week (53 per cent). Continue Reading…

Becoming Retirement Ready

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The Dream Stage

The most common way to start retirement planning is to determine how much money we will need. But, there is no magic number for everyone. Each person, or couple, is unique. A happy, fulfilling retirement means different things to different people. The amount you need depends on your lifestyle choices, so you won’t know exactly until you decide on what you want to do.

Retirement is not a one-time event. It’s an ongoing process that can last thirty years or more. It begins with focusing on what’s truly important to you and defining your hopes for the future. You probably have some idea of how you’d like to spend your retirement. But for now, don’t focus on the budget. Focus on ideas. Start listing all the things you want to do. What activities will you continue, and what new ones do you want to try? These activities could include travel, socializing, being with grandchildren and other family members (how much time? every weekend or just special occasions), playing sports, volunteering, reading, gardening, or crafts.

This doesn’t have to be a bucket list – just things that will give you pleasure. Get out your notebook and be as specific as you can. Don’t just write “travel,” write “take a round-the-world cruise,” or “see the African savannah by hot air balloon.”  

Retiring Couples 

Just because you’re married doesn’t mean you’re at the same place in your careers. Although you may be ready to focus on your flute playing, your spouse might still want to head to the office every day. Sometimes people aren’t quite ready to give up working yet for whatever reason. But at some point you will be retired together, and before that time you need to have a serious discussion with your spouse. Partners often have dramatically different ideas about what retirement will look like. One RBC retirement poll discovered that nearly 70% of pre-retired Canadians aged 50 and older have yet to discuss their hopes for their post-career lives with their spouse or partner.

Communication is key. You and your spouse need to be on the same page. Often people have very different visions of retirement. You may want to buy a motor home and barrel across the country, whereas your spouse may want to spend more time with the grandkids, or volunteer for a favourite non-profit. For decades you’ve spent most of your day apart.

Spending 24/7 together can require some adjustments. So you’re not continuously in each other’s pocket, find a balance between the amount of together time and time you spend apart pursuing individual interests.

Prioritize

Once you’ve decided on what you want to do, start doing your homework. If a Mediterranean cruise is the first thing on your agenda, start researching cruise lines, look at prices and schedules, and so on.

Marie Engen is the “Boomer” half of Boomer & Echo. In addition to being co-author of the website, Marie is a fee-only financial planner based in Kelowna, B.C. This article originally ran at the Boomer & Echo site on January 9 and is republished here with permission.

3 predictions for the future Retirement landscape

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By Sia Hasan

Special to the Financial Independence Hub

Retirement should be a time everyone looks forward to embracing. Theoretically, everything becomes easier in time. A retiree doesn’t need to deal with all the pressures of a stressful full-time job. Days can be spent doing more of the things the retiree enjoys. Such imagery, however, may only reflect the most idealized version of retirement years. Relaxation in retirement remains heavily dependent on how much money has been saved for those golden years.

Saving for retirement has to be about more than just putting a set percentage of income away. Careful thinking and planning are required to make sure retirement assets become adequate enough to cover leisure and necessary expenses. The changing future landscape of retirement further necessitates better planning.

Longer Life Spans and Retirement Savings

Increased life spans definitely impact the way people save for retirement. Thanks to insights into healthier living and great strides in healthcare, a larger percentage of people live much longer. Living to the age of 100 may even be possible for a significant number of people. Better retirement planning definitely works to the benefit of someone who lives a very long life.

Working during early Retirement years

Upon retiring at age 70, maybe it would be wise to look for another job. Working a full-time job might not be necessary, but earning a small stream of income from a part-time job could prove very helpful. $10,000 earned from a part-time job covers $10,000 worth of expenses. Working a part-time job until age 75 leads to $50,000 in income. Earning additional money eliminates the need withdrawing an equitable amount of funds from a savings account or social security deposits.

Money saved may draw more interest and be set aside for use during very elder years. After looking at things from this perspective, making plans for a retirement job becomes an important priority.

Examine Annuity Income

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