Over the last few years, discussions around personal finance have been louder – and more confusing – than ever.
Market volatility, rising interest rates, the high cost of living and global unrest have dominated headlines and made life increasingly complicated for most Canadians.
Today (October 9) is World Financial Planning Day, a time to dim the noise and focus on the basics: a financial plan, what it is and how it can help you feel financially prepared for your future. More importantly, it’s an occasion to recognize that working with a financial advisor on a personal plan has many benefits, including greater financial confidence and a higher quality of life.
A financial plan is not just an investment plan: in fact, it’s much more. An investment portfolio is certainly a component of a financial plan, but your investments don’t provide a clear direction for any life plans in the coming years. Your investments can indicate financial returns, but their value is not guaranteed at any point in time and investments alone cannot prepare you for the future.
A financial plan is a goals-based document that provides a road map for what you would like to achieve in the short- and long-term. The goals are not necessarily financial, but they need monetary support (like investment income) to be reached.
Goals within your financial plan may include:
When you want to retire, and the lifestyle you want in your golden years.
Affording major expenditures, including a home, vacations or post-secondary education for dependents.
Preparedness for untimely events, such as premature death, disability or critical illness.
Plans for your estate and the legacy you’d like to leave for your family and charities.
These goals are personal and involve answers to questions that address significant, and sometimes difficult, situations. It can be challenging to determine these responses on your own, so working with a financial planner can help you answer these questions, define your goals and create a strategy to achieve them. Your financial planner will get to know you on a personal level. Then, based on your aspirations, project what needs to happen and create a financial plan for your future. Continue Reading…
Cut The Crap Investing recently looked at the go-to chart on creating retirement income. The post looked at sustainable spend rates. The 4% “rule” suggests that you can start at a 4.2% spend rate, and then increase spending each year to adjust for inflation. That protects your spending power and lifestyle in retirement.
That said, the 4% rule is based on a very conservative 50/50 stock to bond allocation using U.S. assets. We might be able to boost the spend rate in retirement by adding more growth and more non-correlated assets.
In the above post and charts we see the challenges of a 5% or 6% spend rate with a traditional balanced portfolio.
Here’s a very good post that shows how we can potentially boost our spend rate. And the go-to table on boosting your retirement start date with gold, REITs, small cap value, and international stocks in the mix. The equity allocation is moved up to 70% as well.
From that post …
So instead of limiting your retirement portfolio to the S&P 500 and government bonds, think about diversifying with small-cap value and gold! If you don’t mind a little more complexity, go a step further with REITs, utilities, and international stocks. This level of diversification has done very well in the past. It includes at least one asset that does well in each type of economic situation.
That post offers a nod to the all-weather portfolio and utilities as a defensive asset. Readers will know I am a favour of both additions, especially the defensive sectors for retirement that includes consumer staples, healthcare and utilities (including pipelines and telco). I’m hopeful that the approach will allow us to boost our spend rate to the 5-6% range.
Canadian banks in 2024
At the beginning of the month we looked at investing in Canadian banks. I noted that it is difficult to pick the winners and there is a surprising variance in returns among the individual banks. Here’s the total returns in 2024. Continue Reading…
The following is an edited transcript of an interview conducted by financial advisor Darren Coleman of the Two Way Traffic podcast with eldercare expert Yvonne Dobronyi of YCD Consulting. It appeared on September 6th under the title ‘Planning for your parents and what it’s going to cost.’
Coleman says the single biggest financial blind spot for families when planning for the future is the rising cost of eldercare and Yvonne Dobronyi agrees.
An eldercare consultant who counsels individuals and families through her firm, YCD Consulting, Yvonne says the monthly outlay for a retirement home starts at $3,600 for a single studio suite without care, but once in-home resources are included the tab can go up to $20,000 a month.
“Families are in denial and don’t want to ask difficult questions about moving Mom or Dad to assisted-living accommodation,” says Yvonne, who added that more than half the families she sees aren’t prepared for dealing with one, never mind two, elderly parents.
She says many seniors don’t understand they need to sell their home or cottage and sometimes both in order to afford retirement living if they have limited savings. And that seniors may have to work beyond their retirement years to maintain a cash flow to pay their bills even if they’re mortgage-free.
The two experts discussed a range of issues to do with eldercare:
Who holds Power of Attorney for both property and healthcare, and what happens when one sibling has it and the other doesn’t?
The importance of keeping these documents, along with a will, updated passport and medical records, in a designated file that’s readily accessible by a trusted contact.
‘Free’ (government-funded) resources like personal care and light housekeeping services are available after assessment if you qualify but only for 2-4 hours and when staff is available.
Dealing with long wait lists for LTC (long-term care) homes, how to navigate the system, and making decisions during emotional stress.
Below is an edited transcript of the interview, focusing on the cost of eldercare housing services and families being prepared, or not prepared, for what can happen.
Darren Coleman
This is probably the single biggest blind spot most families have when they do their own planning. We can prepare for retirement, but this is where it tends to catch people off guard. I want to explore what life looks like when people suddenly have to figure out, how do I live independently for longer in my home, or what happens if I move into seniors’ housing.
Some families are well prepared, but more than half are not. They react to a situation, so all of a sudden you have a crisis. Mom has dementia and Dad’s been the caregiver and now Dad falls in the home and breaks his hip, so he has to go to hospital. Who’s going to manage Mom? That’s when families get together to figure out what sort of care is required. So some will go to hospital, and others try to manage Mom. My experience is that a lot of times they haven’t designated a power of attorney, completed a will or made funeral arrangements.
Darren Coleman
The reason I think most find they’re not prepared is that the timing of when people will need care is unknown. And people don’t know what these things cost.
Yvonne Dobronyi
Often, family members don’t know where they have an RRSP or GIC, or whether or not their home is sellable the way it is. It’s something that’s avoided because families are in denial and don’t want to ask difficult questions. But it’s our duty as family members to be well prepared and that might involve asking difficult questions.
Darren Coleman
Someone should take the lead in these things. It might be more of a formal meeting or a conversation with some structure to it.
Yvonne Dobronyi
Absolutely. You sit down and share information that will be kept confidential. And if something happens, family members are prepared and know what to do. But often this is not the case.
Darren Coleman
People may be dealing with these things while they’re in this emotional crisis. That’s not the best time to have that chat with your brother or sister about who’s going to look after Mom or Dad.
Yvonne Dobronyi
Very often a parent made a decision to give the power of attorney to one child and not the other two. Or two of them have the power of attorney and can’t agree on what the next steps might be. So one family member says we should move Mom and Dad into a retirement community or long-term care, and the other one says no.
Trusted contacts, Wills & Powers of Attorney
Darren Coleman
There’s a new administrative element for financial advisors in Canada now. It’s about adding a trusted contact to your file. So if people listening have not done this with their advisor, I recommend picking up the phone and saying I’d like to add that to my file. You mentioned the power of attorney and the will. We should point out there’s two kinds of power of attorney. Sometimes people will say, I have a will. Well, it doesn’t matter. The will only works once you’re gone, and the power of attorney is the document that works until you’re gone. So you need both of them.
Yvonne Dobronyi
The power of attorney is responsible for making decisions on behalf of that party in a healthcare capacity. Say the resident or patient has an extreme crisis situation and is now on life support. There needs to be that meeting to determine what is the best route. And that’s a difficult decision to make. I recommend you have more than one person be the power of attorney for care, so you can look at it closely and determine together what would be the best route. Continue Reading…
Billy and Akaisha in Sorrento, Southern Italy; Photo courtesy of RetireEarlyLifestyle.com
By Akaisha Kaderli, RetireEarlyLifestyle.com
Special to Financial Independence Hub
“Improvise, Adapt, and Overcome” – Marine slogan
What a year!
Every year brings new challenges that we must face. Life doesn’t stop and the best way to meet the “new” is with an open attitude and a sense of confidence. Fear doesn’t help anyone or anything.
Solid plans often break
Our Readers will sometimes say they have just a few more things to settle, a few more “I’s” to dot and “T’s” to cross before retiring. They’re waiting for the health care issue to be settled, waiting for the bonus check next year, waiting to hit “this” particular financial number, waiting for next year to sell their properties, waiting for things to mellow out in the country, waiting for inflation to go down, waiting for the market to go back up,… they’re waiting…
Personal Financial Independence was put off until this imaginary perfect time, and then finally they planned a year of travel. But BAM! One of the spouses became gravely ill with a disease that not only shook them up, but forced them to shelve all excursion plans. Or the market started pulling back giving them the willies and they lost confidence in their future plans of early retirement.
Ask yourself, “What are you waiting for and why?” Then ask yourself if you have a Plan B for these unexpected situations.
Lots of people wait until they graduate from law school, or get the degree or wait until they get married, or until they buy that perfect house, or until the kids get out of school, or they hit that magic number to retire – in order to be happy.
They live for tomorrow and forget all about the pleasures and happiness of today.
Stop settling, start living. NOW.
You’re not going to get anything in Life by playing it safe. There are no guarantees.
Lesson learned; Faith over Fear, Don’t Worry be Happy
Image courtesy RetireEarlyLifestyle.com
We only have control of ourselves.
I get push back on this one, sometimes. Usually it falls under the “You don’t understand what I’m going through” category.
But if you think about it, stuff happens.
We can’t control a loved one getting ill, can’t control that our children or spouse do what we prefer. We don’t have a lot of say in international peace relations. Whether our children get divorced, illness knocks you or a loved one for a loop, there’s a huge business loss or politics don’t go our way – all we have control over – is our response to the situation.
If you are feeling out of control on your moods, there are lots of tools to clarify your mind and calm yourself down and lots of services available to you. Don’t let the stress build up until you have an even worse situation happen.
Lesson Learned; Life is not in our total control – only our response to it is.
Relationships change
Relationships are cemented or lost every year. Change is part of life, and some relationships don’t move forward with us.
Once again if you think about it, when you got married, had a child, moved cross-country, got that promotion, contracted a serious illness, got divorced, retired early or hit any other life milestone, did some friendships recede?
Most likely.
Life is change and sometimes your better future lies ahead of you, without those loved people in them.
Yes, it IS difficult to let go of habits and people. We’ve all been there at different points in our lives. It’s better to process the loss and continue to move forward, creating the life of our dreams, than to become bitter and angry over the loss.
In my opinion, 2024 was a year of clarification.
What I mean is, yup. Things fall away. Sometimes it’s beloved things and people. I think this helps us to focus on what really matters to us. This is a blessing in disguise and you will be stronger for it.
Lesson Learned; As you grow, some relationships won’t make it into your future.
Fear seems ever-present
When we are afraid of something, chances are, we don’t know much about it. Our perceptions are skewed because of this.
Remember the old saying – FEAR is False Evidence Appearing Real?
Take control and choose to find out more. The knowledge you discover will give you options and open up doors for you. Question the thoughts you are thinking and the beliefs you are holding. Question the definitions you have set for yourself. Fear does not serve you in any way and will only force you to contract, limiting your options even further.
This is a choice.
You can either learn and grow or contract and suffer because of it.
Lesson Learned; Fear is related to ignorance. Choose to learn more
People retreated into perceived safety
There is no safety, there are no guarantees. And sometimes as we age, we think we’ll feel better if we just “don’t take any chances.”
Remember Helen Keller’s quote:
Security is mostly a superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure, or nothing.
Make the most of life every day. It’s later than you think!
Lesson Learned; Life is a risk every day. Manage it.
Anxiety seems to be everywhere
This is a good one, and it surprised me a bit.
Living the “life of my dreams” I hadn’t realized that I was still carrying friction and tension in assorted areas of my life. Billy and I started getting massages more often. I began going to a chiropractor, and my customary yoga became more important. We upped our exercise routine, I meditated more and I opened my mind to new information.
Anything that just didn’t “fall into place easily” or no longer worked … we dropped.
This made us feel freer and gave us more physical energy, clearing our minds.
Lesson Learned; Make things easier on yourself in any and all ways.
Don’t stop living your life
When things change beyond our control, we must find the advantages in the situation and make the most of where we are. Continue Reading…
We provided a sneak preview of RetireMint late in August, which you can read here: Retirement needs a new definition. That was provided by RetireMint founder Ryan Donovan.
The MoneySense column goes into more depth, passing on my initial experiences using the program, as well as highlighting a few social media comments on the product and some user experiences provided by RetireMint.
RetireMint (with a capital M, followed by a small-case letter I rather than an e) is a Canadian retirement tool that just might affect how you plan for Retirement. There’s not a lot of risk as you can try it for free. One thing I liked once I gave it a spin is that it isn’t just another retirement app that tells you how much money you need to retire. It spends as much or more time on the softer aspects of Retirement in Canada: what you’re going to do with all that leisure time, travelling, part-time work, keeping your social networks intact and so on.
In that respect, the ‘beyond financial’ aspects of RetireMint remind me of a book I once co-authored with ex corporate banker Mike Drak: Victory Lap Retirement, or indeed my own financial novel Findependence Day. As I often used to explain, once you have enough money and reach your Financial Independence Day (Findependence), everything that happens thereafter can be characterized as your Victory Lap.
As Donovan puts it, this wider definition must “break free from the tethered association of solely financial planning.”
Donovan says roughly 8,000 Canadians will reach retirement every single week over the next 15 years. And yet more than 60% of them do not know their retirement date one year in advance, and more than a third will delay their retirement because they don’t have a plan in place.
Retirement not calendar date or amount in your bank account
Donovan says “Retirement has become so synonymous with financial planning, and so associated with ‘old age,’ that they’re practically inseparable. Yet, in reality, retirement is a stage of life, not a date on the calendar, an amount in your bank account, and is certainly not a death sentence.” He doesn’t argue that financial planning is the keystone of retirement preparation, as “you won’t even be able to flirt with the idea of retiring without it.” But it’s much broader in scope than that. As he puts it, this wider definition must “break free from the tethered association of solely financial planning.” Continue Reading…
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