Tag Archives: Financial Independence

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.

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Early Retirement: It’s a Lifestyle, not a Vacation

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Billy and Akaisha in the Highlands of Ecuador

By Akaisha Kaderli, RetireEarlyLifestyle.com

Special to the Financial Independence Hub

Ever wonder how it was for us in the beginning of living life without a paycheck?

In 1991, we understood that we were retiring with the idea that we would not be returning to work. If we had to, we would, but it was not part of the plan. We were not taking a break from work, we were leaving the working world all together. It was a little unnerving to be making such a clean break because we were out on our own with little emotional support from family and friends. Our retirement at age 38 challenged the belief systems of everyone we knew.

Important points

After all this time, the most important thing we want our Readers to know is: Don’t let anyone destroy your dream. Learn to be self-sufficient and self-motivating and you can create the life you want to live. If you desire something strongly and it makes you happy, don’t look to others for approval. Move in the direction of your dream.

Additionally, we want to inform you of the value of tracking spending. We’ve tracked our spending since our early years of owning a restaurant when we were in our 20’s. This has given us a sense of control over our finances and that brings self-confidence. If you track your spending you always know where you are financially, and if you know your net worth you can calculate what percentage you are spending. A rule of thumb is to keep your spending at 4% or below of your invested capital. If the market changes or your life circumstances change, knowing where you are with your money output is priceless.

What we wanted to achieve

Above all else, we wanted our freedom.

We had been working 60-80 hour work weeks with very little personal time or time with family and friends. While we consider ourselves to be productive people and we loved our jobs, this amount of time focused on work began to feel like a grind. I am sure many readers understand this feeling as we were not unique. We longed for large stretches of time before us that were unstructured so we could do as we wanted, when we wanted. So we traveled, read books, took classes, played music, took photos, and met new people – all on our own time schedule.

This pleased us greatly.

The greatest lessons we have learned 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…

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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January is a great time for these 4 financial planning action items

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January rings in the New Year, a sign of optimism, and the annual promise of something new: adopting resolutions, setting goals and looking ahead. It’s also a time to reflect on the previous year. Making resolutions is common for many, but less than 40% will actually achieve what they set out to do.

Nevertheless, for those looking for improvement in their financial health, here are some good habits to follow at the beginning of each year.

January is a good month to…

Save

1. ) Calculate your net worth

You know how to do this. Total up all your wealth building assets – home, investments – subtract your debts – mortgage, credit cards, car loan, and voila – the resulting total is your net worth, or in other words, the current picture of your financial standing.

There are lots of online calculators that help you do this, but don’t stop there. Redo the calculation at least once a year. Create your own spreadsheet so you can compare several years. It will help you see if you’re moving in the right direction. Otherwise, how can you know if you’re getting ahead?

Also read: Your financial plan is a compass

Focus on what you can do to improve your finances, and if you find yourself getting off track, do some course corrections and carry on.

2.) Revisit your goals

January is also a good time to review your goals. If you have a spouse or partner, set aside some quiet time this month to have the money talk. Have an honest discussion about your short-term and long-term goals and check to see whether you are still on track to meet them.

Or, maybe your situation or priorities have changed, and you need to reassess. If something is not working, go back and modify. Since you can’t know what the future holds for you, a period of five years is a manageable target.

Also read: Create your own financial plan with these eight steps

Map out a few steps for the current year that will see you heading towards a better financial situation. Continue Reading…