I need to get this right. I’ve only got one chance.
Running out of money in retirement is NOT an option, especially for the “conservative accountant” in me. I refuse to be a burden to my children (or anyone else for that matter)!
It’s been 10 months since my husband and I received our last “official” corporate paycheque. Early retirement has been a true blessing: complete control over our life, time and money. We know there will be bumps in the road but so far so good. We are both happier than we’ve ever been. Life is great! Continue Reading…
I know Isaac Asimov’s Three Laws of Robotics, I read Arthur C. Clarke’s 2001: A Space Odyssey and I love the Terminator movies (I’ll be back!).
From all this I know three things: Robots are very smart. Robots always start off to help you. Robots have a tendency to turn on you.
One of the newest crazes and buzzwords in personal finance is: “Robo-Adviser.” If you’re not familiar with the term, it refers to investment management by algorithm in the absence of human input.
With a “Robo” you are asked to complete an on-line risk assessment questionnaire. Your responses determines the prescribed portfolio of ETFs (Exchange-Traded Funds) with a built-in asset allocation best suited to your needs. Once a year the portfolio is rebalanced to this prescribed asset allocation recipe.
My latest blog for MoneySense.ca revisits the topic of Decumulation, a subject to which we gave full column treatment in the print magazine early in the fall. Think of Decumulation as the mirror image of Wealth Accumulation. And of course, here at the Hub we have sections devoted to both.
For one-stop shopping and archival purposes, we’re publishing the blog below as well, with some different subheads, links and the addition of an illustration and a photo of Decumulation Institute founder John Por.
By Jonathan Chevreau
With 10,000 American baby boomers turning 65 every day, plus 1,200 Canadian boomers, there is fast approaching a major sea change in how this generation handles their investments.
When you’re working, things are somewhat automatic. Your employer deposits your paycheque into your bank account perhaps every second week, conveniently withholding income taxes at source. Perhaps you’ve automated your savings program and pension contributions.
In short, you are in Wealth Accumulation mode, and so likely is your financial advisor, since he or she is also probably personally in the same mode.
The Decumulation Institute
John Por, Decumulation Institute
But once you turn 65 or cease to draw a full-time salary, you are now in the “Decumulation” zone. We devoted a column to Decumulation in the September issue of MoneySense, in which we highlighted a new undertaking by John Por called the Decumulation Institute.
Last week, I attended the second meeting of this group, which includes Malcolm Hamilton, the retired actuary who continues to be quoted by this magazine and others. Except for John and Malcolm, most of the attendees didn’t wish to be identified or quoted directly.
1,500 Canadians will retire each working day until 2034
In his progress report, Por said that by the year 2022, some $2 trillion in financial assets held by various Canadian financial institutions will be converted into retirement income. Over the next 15 to 20 years, he says 1,500 Canadians will retire each working day. Record keepers on average roll over about 30% of Defined Contribution pension assets at the retirement of the members of those plans.
Por’s research shows that bank-based advisors are “poorly trained in discussing retirement income issues,” in part because of the focus on Wealth Accumulation. Por says a mindshift is required to go from Investments to Income.
From the perspective of individuals preparing for this shift, a number of things have to be considered. These include adjusting lifestyle expectations, considering longevity risk, saving more money, taking more investment risk or simply postponing retirement.
Por has created a website at www.decumulation.ca and begun work on Decumulation Workshops that may help DC pensions, financial advisors or possibly their clients prepare for this transition.
It was Por’s pioneering work on Decumulation that prompted us here at the Financial Independence Hub to include sections on both Wealth Accumulation and Decumulation, as well as Longevity & Aging.
Advisors slow to make the leap?
In my experience, relatively few financial advisors have made this leap. One that comes to mind because he’s written a book about it is Daryl Diamond of Diamond Retirement Planning. The second edition of his book, The Retirement Income Blueprint, expertly maps out the terrain. Rogers Group Financial’s Clay Gillespie is another who has a similar focus.
Both of them are listed in the Getting Help section of the Hub (as is MoneySense’s online directory of fee-only planners). A third, who is also contributing articles on Decumulation for the site, is Doug Dahmer, of Emeritus Retirement Income Specialists in Burlington. He provides a number of tools and even games that let you run “what if” scenarios on life expectancy, inflation, timing of government benefits, tax rates etc.
Jonathan Chevreau is MoneySense’s editor-at-large and recently launched the Financial Independence Hub. (https://findependencehub.com/). He can be reached at jonathan@findependenceday.com
Here’s a blog I wrote for MoneySense.ca before the Hub launched, housed in what it now terms the MoneySense Findependence Archives. It seemed to resonate so I’ve repurposed it here, adding the cover shot of the book from which it’s drawn: You Can Retire Sooner Than You Think.
It deals with an interesting rule of thumb that most retirees and would-be retirees would do well to adopt. Developed by U.S. financial planner Wes Moss, it’s called the 1,000-Bucks-a-Month Rule. It means that for every thousand dollars in monthly income you want in retirement, you need to have saved $240,000. Continue Reading…
Good piece by David Aston in MoneySense magazine on the big next step for baby boomers and anyone else with sufficient wealth or pension income to stop working full-time. David is one of the best financial writers out there and it’s little wonder he’s won awards that prove it. Note that one of his sources in this piece is Lee-Anne Davies, whose Agenomics blog you can find links for in our Longevity & Aging section.
He also talks to actuary Fred Vettese (author of The Real Retirement) and fee-only planners Money Coaches Canada and Daryl Diamond, author of The Retirement Income Blueprint. Both are also listed here at the Hub’s “Getting Help” section and you can find my review of Daryl’s book in the Reviews section here.
The three levers
My favourite line from David’s piece is “You can make adjustments by pulling on three levers: save more, work longer or spend less in retirement.”
No mention of Findependence although David has mentioned it in the past. Like most mass media outlets, MoneySense is sticking with the word Retirement. Hey, I couldn’t get them to change from Retirement to Findependence even when I was the editor–in-chief!
But also check out Sheryl Smolkin’s guest blog here at the Hub today: she chronicles her ten-year road to Findependence (yes, she used that exact word!) that occurred AFTER she took early retirement at age 54.
As I’ve often said, that’s way too young to retire and do nothing and Sheryl has doubled her retirement savings since her “first” retirement. As she says, it’s all about second or “encore” careers. As is also clear, she finds working on your own terms (aka Findependence) to be lots of fun.
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