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.

Retiring at home — and how to get the funds to do it

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By Darlene Vilas

Special to the Financial Independence Hub

I’ve spent many years helping a lot of retirees to stay in their home. So, I wasn’t surprised when a survey by HomeEquity Bank and IPSOS revealed that 93% of Canadians aged 65+ are determined to retire at home.

For people with a healthy pension and retirement savings, staying in their home is rarely a problem. However, many Canadians have inadequate retirement savings. According to a report by CIBC, 30% of people have no retirement savings at all, while another 19% have saved less than $50,000. I help people with lower retirement income to understand the financial options available to them, so they can retire comfortably in their home.

Why staying put is so important

According to HomeEquity’s research, maintaining independence is a key reason for retirees wanting to stay in their home, followed by staying close to family, friends and their community.

Many of my older clients find just the idea of moving to be very stressful. They don’t like the thought of downsizing, which means leaving behind loved ones and places they’re familiar with.

I can understand that, so I try to help people stay in their home, whatever their financial situation. Thankfully, for homeowners, there are several options available.

The financial tools that can help you stay at home

Taking out a mortgage or a line of credit can allow you to cash in on some of your home’s equity. However, the mortgage option is becoming increasingly difficult for retirees. With the new mortgage stress test, you have to qualify at a much higher rate than before, which means you can now borrow much less. Plus, taking on mortgage payments for up to 20 years can put a strain on your retirement income. If you miss some payments, you could lose your home.

A home equity line of credit can be a good option if your income qualifies.  They are fully open and can be repaid at any time without penalty. This is a very helpful option for homeowners who would like to access cash easily if they experience unforeseen home expenses such as emergency repairs to the home. Payments are typically interest only, which keeps your monthly obligation at a minimum.   The downside of a home equity line of credit is they are callable at the discretion of the bank.  This means you could be forced to sell your home to repay the line of credit.

With a reverse mortgage, you can borrow up to 55% of your home’s value. You never have to make a mortgage payment and you’ll never be forced to move out. Many of my clients use a reverse mortgage as an efficient way of cashing in some of their home’s equity. Because there are no regular mortgage payments, it can help them to greatly improve their financial situation, boost their disposable income and live the kind of retirement they’d hoped for.

Those people concerned about maintaining their home’s equity can make monthly interest payments, but the nice thing is, they don’t have to. Continue Reading…

How to retire and fill 40 hours a week

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By Tea Nicola

(Sponsor Content)

“Can you believe it, honey? Friday’s my last day at work! Time sure flies. I can’t wait to start spending all of our free time together!”

Did this thought warm your heart, or get your pulse racing in panic? That probably depends on whether you’ve given some good thought to what you’re doing after retirement.

But what do you actually want to do after you stop working? Your retirement income goals will depend much on your answer to that question, as your financial adviser is apt to tell you.

We’re living longer — and that’s a good thing, if you plan for it

‘Retirement’ wasn’t really a thing, until recently. You lived, you worked, you died … and the world kept turning as youth picked up the baton of life’s track meet. That’s partly the reason pension age was set at 65: few were expected to live long enough to claim it! When the USA passed their Social Security Act in 1935, American men were expected to live to about 58.

But with our longer life spans, you could still be shuffling around decades after you’ve stopped working. According to Statistics Canada and the 2016 Census, “there were 5.9 million seniors in Canada, which accounted for 16.9% of the total population. In comparison, there were 2.4 million seniors in 1981, or 10% of the population.”

There are more retirees than ever! So, our question is a practical one: how do you retire and still fill 40 hours a week?

What Canadian retirees are already doing with their time

How to retire and fill 40 hours a week. Time chart

Does this all seem inspiring … or overwhelming? Is the room spinning at the prospect of playing shuffleboard and doing yard work for the next two or three decades? Fortunately, we’ve picked up an important idea from doing retirement income planning with countless clients. Continue Reading…

Seasonal work in Retirement

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By Fritz Gilbert, TheRetirementManifesto.com

Special to the Financial Independence Hub

Have you ever thought about seasonal work in retirement?  My friend, Kirk, recently leveraged seasonal work to experience something for the first time in his life.  He became a cowboy, through a seasonal job at a Dude Ranch.

At Age 58!

You may remember Kirk, he’s visited with us before (including his thru-hike on the Appalachian Trail, his broken foot on the Pacific Crest Trail and the story of breaking his ribs when he Lived Life At The Limits on a mountain bike ride with yours truly).  This Fall, he’s heading to Nepal to do some trekking around Mt. Everest.  Interesting guy, my friend Kirk, and we can all learn something from the way he lives his life in retirement.

Today, he tells us the story of doing seasonal work in retirement at a Dude Ranch, which he did in the Spring of 2018.

The old military and corporate guy became a cowboy.  Well, that may be a bit of an exaggeration, but he did “wrangle horses” for 6 weeks at a Dude Ranch. How cool is that?

Here’s his story…

Working On A Dude Ranch

Kirk. A “FIRE Guy In His Prime”

I promised myself I would write three “potential” blog posts for my friend this year covering what could possibly be my most adventurous year since my retirement began 2 ½ years ago. Caution: I am not the spectacular writer that Fritz is; however, here is my latest adventure …

(Note from Fritz: I don’t know about my writing skills, but I do know that Kirk lives life more “on the edge” than anyone I personally know. Nepal, really? That Kirk guy is nuts!)

When I retired roughly 2 ½ years ago I decided to do away with my “LinkedIn” account. I was cleaning up some old things from my work years and didn’t think I would need a resume in my retirement life. As I started checking off things in my Dump Truck List (Buckets are no longer big enough) I started realizing that I had some skill gaps. Ultimately, I wanted to be a wrangler for a cattle drive in Montana but realized that wasn’t going to happen if I didn’t have some experience handling a horse.

I researched some possible jobs through www.coolworks.com and drafted a list of the qualifications for some of the wrangling jobs which interested me. Much to my surprise, I met them all with one exception:

I had no experience in riding a horse.

Having grown up on a farm really prepared me well for many aspects of the job, but we never had horses. How could I learn to ride a horse, handle the tack, teach the ranch’s customers, etc. if I didn’t know how to handle horses myself? While I suppose I could have paid for the experience — I am FI [Financially Independent], after all — there was something in me that kept gnawing in the deep recesses of my mind.

Thoughts which whispered, and thoughts that led to my decision to pursue seasonal work in retirement:

You have been so frugal all your life to get to FI, is this really how you want to spend your money?
Would you really be able to buy this experience or is this something you have to spend time acquiring skill, talent, and familiarity?
What other experiences do you need now in order to pursue the future adventures of your dreams?

(Note from Fritz: I like how Kirk thinks several moves ahead. Dream for your tomorrow, and identify what you should be doing Today in order to achieve your dreams. Move your life from Good To Great).

After much thought, I decided to venture out to an unknown area for me and listen to the younger crowd who said many of their wonderful experiences were as “Workaway” people.  Workaway is simply a web service that connects people who are looking for experience with people that are looking for help.  The Workaway people generally work 4 – 5 hours per day, 5 days per week in exchange for room/board and experience.  Given that I have plans to travel through Asia in the coming years, this approach could help with some international options as well. I looked into the site http://www.workaway.info and decided to give it a try.

It was somewhat difficult to determine where I would go to gain this experience.  I wasn’t sure how it would all work out, so I decided to minimize my risk by choosing a location that:

  • had good/great reviews by those who participated
  • was close so if it was horrible I could bail
  • had more than just myself as a workaway so I could learn from the experience of others

I ended up selecting a Bed and Breakfast Dude Ranch in upstate NY, only an hour away from where I grew up and where my mother still lives.  If it was a horrible experience I had a solid Plan B. I would simply bail out and stay with my mom, working around her house to complete some things on her “To Do” list.  It would also afford me the opportunity to spend time with some aunts, uncles, and cousins which I had not seen in far too long. Continue Reading…

6 steps to avoiding a bear market near Retirement

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By Fritz Gilbert, TheRetirementManifesto.com

Special to the Financial Independence Hub

Did you know a looming Bear Market Crisis is approaching?!

I just read it on the internet, so it’s got to be true!

To make matters worse, I just retired a month ago.

Uh Oh!  (Am I screwed?)

Today, some reality about Bear Markets, along with 6 steps to consider as you structure your retirement portfolio.

A Looming Bear Market

Ok, I’m having a bit of fun with the “read it on the internet” line, but the reality is that a Bear Market WILL happen. I’m not being prophetic, just stating the facts.  Since before the days of the tulip mania in 1637, bear markets have always been will us, and they always will.  We’ve benefited from a very nice bull run. We’re being naive if we think that it will never end.

Since 1900, we’ve had 32 Bear Markets, defined as a correction of 20% or more.  Do the math, and that averages out to a Bear Market every 3.7 years.  The average bear market lasts 367 days (the longest was 34 months!). Here’s what they look like graphically:

The Looming Bear Market Will Drive A Retirement Crisis

I actually did read an article on the internet about the looming bear market crisis.  In “The Next Bear Market In Stocks Will Drive A Retirement Crisis,“ the author states:

“A recession could decimate even substantial retirement portfolios.”

Further, the author goes on to say that Social Security and Medicare, and the resulting increase in taxes, increase in eligibility age and reduction in benefits “would be a disaster” for those dependent on the safety net.

Add to that the Voices Of Worry over the global debt pile up and the underfunded status of many state & local pension funds and things could get really, really ugly.

Maybe I shouldn’t have retired early. 

Too late now, I guess I’d better get to work on building a Bear Market Crisis Prevention Plan.

The Looming Bear Market Crisis

We all know a Bear Market is coming. It’s been an increasing theme in the blogosphere, with even the esteemed Financial Samurai taking risk off the table. America’s wealthy are moving to cash.  Ben Carlson of A Wealth of Common Sense has 36 Obvious Investment Truths to remind folks that you should protect yourself.

I’m not a panic-driven investor, screaming a scare tactic headline to drive traffic (tho, if you’re reading this, I guess it worked, right?).  Rather, I’m reminding folks of the reality of how the markets work and encourage you to think about it as you develop your retirement portfolio strategy.  Yes, stocks have historically outperformed over the long-term, and will likely continue to do the same.  Just recognize that the road can be bumpy, and plan accordingly to avoid getting bitten by a bear when you can least afford it.

A Bear Market Crisis Contingency Plan

The reality is that bear markets have always been with us, and always will.  Unfortunately, we never know when that snake is going to strike, so it’s best to wear snakeproof boots along the path of retirement.  Following are some steps I’m taking, as an early retiree, to defend our portfolio against the risk of a bear attack.  View them as suggestions, and pick and choose as appropriate for your situation.

6 Steps To Bear Market Protection Continue Reading…

Is typical retirement advice good? – Testing popular Retirement rules of thumb

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By Ed Rempel, CMA, Fee-for-Service Planner

Special to the Financial Independence Hub 

You want to retire soon. How should you set up your retirement income?

You talk with some friends, read about it on the internet, and talk with a financial advisor. Are you actually getting good advice?

When it comes to retirement income, most financial advisors rely on a few rules of thumb handed down from one generation of advisors to the next. The rules appear to be common sense and are usually accepted without question.

Do these rules of thumb actually work?

Before giving clients this advice, I tested them with 150 years’ history of stocks, bonds and inflation. I wanted to see if these rules were reliable for a typical 30-year retirement. (The average retirement age is 62. In 50% of couples that reach their 60s, one of them makes it to age 92.) 

These five rules are the “conventional wisdom” – the advice typically given to seniors:

  1. “4% Rule”: You can safely withdraw 4% of your investments and increase it by inflation for the rest of your life. For example, $40,000 per year from a $1 million portfolio.
  2. “Age Rule”: Your age is the percentage of bonds you should have. For example, at age 70, you should have 70% in bonds and 30% in stocks.
  3. “Sequence of returns”: Invest conservatively because you can’t afford to take a loss. You can run out of money because of the “sequence of returns.” You can’t recover from investment losses early in your retirement.
  4. Don’t touch your principal. Try to live off the interest.
  5. Cash buffer: Keep cash equal to 2 years’ income to draw on when your investments are down.

The results: NONE of these rules of thumb are reliable, based on history.

Let’s look at each to understand this.

1.) “4% Rule”: Can you safely withdraw 4% of your investments plus inflation for the rest of your life?

Based on history, the “4% Rule” was safe for equity-focused investors, but not for most seniors.

In the results shown in the graphic at the top of this blog, the blue line is the “4% Rule,” showing how often in the last 150 years a 4% withdrawal plus inflation provided a reliable income for 30 years.

The “4% Rule” only works with at least 50% in stocks.

The “4% Rule” worked only if you invest with a minimum of 50% in stocks. Even safer is 70-100% in stocks. It is best to avoid a success rate below 95% or 97%. They mean a 1 in 20 or 1 in 30 chance of running out of money during your retirement.

Most seniors invest more conservatively than this and the 4% Rule failed miserably for them.

A “3% Rule” has been reliable in history, but means you only get $30,000 per year plus inflation from a $1 million portfolio, instead of $40,000 per year.

These results are counter-intuitive. The more you invest in stocks, the safer your retirement income would have been in history.

To understand this, it is important to understand that stocks are risky short-term, but reliable long-term. Bonds are reliable short-term, but risky long-term. Why? Bonds get killed by inflation or rising interest rates. If either happens during your retirement, you can easily run out of money with bonds.

The chart below illustrates this clearly. It shows the standard deviation (measure of risk) of stocks, bonds and cash over various time periods in the last 200 years. Note that stocks are much riskier short-term, but actually lower risk for periods of time longer than 20 years.

Stocks are more reliable after inflation than bonds after 20 years.

Ed’s advice: Replace the “4% Rule” with “2.5% +.2% for every 10% in stocks Rule.”  For example, with 10% in stocks, use a “2.7% Rule.” If you invest 70% or more in stocks, then the “4% Rule is safe.

2.) “Age Rule”: Your age is the percentage of bonds you should have. For example, at age 70, you should have 70% in bonds and 30% in stocks.

Continue Reading…