Tag Archives: semi-retirement

Book Review: Retirement Income for Life (3rd edition)

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ECW Press

By Michael J. Wiener

Special to Financial Independence Hub

Actuary Frederick Vettese has a third edition of his excellent book, Retirement Income for Life: Getting More Without Saving More.

He explains methods of making your retirement savings produce more income over your entire retirement.

These methods include controlling investment fees, optimizing the timing of starting CPP and OAS pensions, annuities, Vettese’s free Personal Enhanced Retirement Calculator (PERC), and using reverse mortgages as a backstop if savings run out.

This third edition adds new material about how to deal with higher inflation, CPP expansion, new investment products as potential replacements for annuities, and improvements to Vettese’s retirement calculator PERC.  Rather than repeat material from my review of the second edition, I will focus on specific areas that drew my attention.

Inflation

“We can no longer take low inflation for granted.”  “An annuity does nothing to lessen inflation risk, which should be a greater worry than it was before the pandemic.”  “We could have practically ignored inflation risk before COVID hit but certainly not now.”

It’s true that inflation is a potential concern for the future, but it’s wrong to say that it was okay to ignore inflation in the past.  Not considering the possibility of inflation rising was a mistake many people made in the past.  We were lulled by many years of low inflation into being unprepared for its rise starting in 2021, just as many years of safety in bonds left us unprepared for the battering of long-term bonds when interest rates rose sharply.

Inflation risk is always present, and financial planners who have treated it as a fixed constant were making a mistake before inflation rose, just as they would be wrong to do so now.  This underappreciation of inflation risk is what causes people to say that standard long-term bonds (with no inflation protection) are safe to hold to maturity.  In fact, they are risky because of inflation uncertainty.

People’s future spending obligations are mostly linked to real prices that rise with inflation, not fixed nominal amounts.  The uncertainty in future inflation should be respected just as we respect uncertainty in stock market returns.

Maximizing retirement income

Vettese does a good job of explaining that things like CPP, OAS, and annuities provide more income now because they offer your estate little or nothing after you die.  To make full use of this book, you need to understand this fact, and “you have to commit to the idea that your main objectives are to maximize your retirement income and ensure it lasts a lifetime.”

Spending shocks

Retirees should “set aside somewhere between 3 percent and 5 percent of their spendable income each year, specifically to deal with spending shocks.”  “This reserve might not totally cover all the shocks that people … might encounter, but it will definitely soften their impact.”

It’s easy to plug a smooth future spending pattern into a spreadsheet, but real life is much messier than this.  I’ve seen cases of retirees choosing to spend some safe percentage from their savings while also expecting to be able to dip in anytime something big and unplanned for comes up.  This is a formula for running out of retirement savings early.

Retirement income targets

In this third edition, Vettese assumes that retiree spending will rise with inflation until age 70, then rise one percentage point below inflation during one’s 70s, two percentage points below inflation from age 80 to 84, then 1.8% below at 85, 1.6% below at 86, 1.4% below at 87, 1.2% below at 88, 1% below at 89, and rising with inflation again thereafter.

This plan is based on several academic studies of how retirees spend.  I don’t doubt the results from these studies, but I do have a problem with basing my plan exclusively on the average of what other people do.  The average Canadian smokes two cigarettes a day.  Does that mean I should too?

The academic studies mix together results from retirees who spent sensibly with those who overspent early and were forced to cut back.  I don’t want to base my retirement plan partially on the actions of retirees who made poor choices.  Similarly, I prefer to base my smoking behaviour on those Canadians who don’t smoke. Continue Reading…

How to Maximize Retirement Income with Hobbies

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In retirement, hobbies, believe it or not, can seamlessly transition into income-generating ventures: thus presenting an opportunity for older adults to monetize their passions. Whether it’s woodworking, photography, gardening, or crafting, the key lies in recognizing the market demand for these skills or products and strategically positioning oneself to capitalize on it. Here’s a quick look on discovering how collecting and small businesses can boost your finances in your later years.

 

Image Adobe Stock/Pikselstock

By Dan Coconate

Special to Financial Independence Hub

Retirement offers a perfect time to turn hobbies into profitable ventures. Many retirees seek ways to supplement income through hobbies that provide both enjoyment and financial rewards.

Choosing hobbies with financial benefits allows you to maximize retirement income with hobbies while staying engaged in activities you love. The right hobby can provide personal fulfillment and a steady income stream that supports your retirement goals.

Explore Collecting as an Investment

Collecting serves as one of the most effective ways to generate income. Collectibles like vintage items, rare artifacts, and diecast car models can appreciate over time. Market trends and knowledge about item values help collectors make smart investment decisions.

Limited-edition diecast car models typically increase in value, offering a return on investment. Collectors who stay informed about market demand can identify items with the most potential for appreciation. Adopting eco-friendly collecting practices for diecast model cars enhances the long-term value of your collection and supports environmental conservation.

Turn Hobbies into a Small Business

Starting a small business based on a hobby provides another income source. Retirees can transform passions like crafting, gardening, or baking into profitable enterprises. Selling handmade goods, plants, or homemade treats on platforms like Etsy or at local markets offers a steady income stream.

Consider expanding your hobby-based business by offering workshops or classes. Teaching others how to create or maintain their own collections or crafts can generate additional income. For example, a retiree who enjoys gardening can teach a course on growing and maintaining a garden.

Monetize Knowledge and Expertise

Sharing knowledge and expertise related to your hobbies can also generate income. Retirees can offer workshops, create online courses, or write e-books to teach others about their hobbies.

This method monetizes your passion and keeps your mind active and engaged. For example, if you have extensive knowledge of vintage car models, you could create an online course or write a book about the history and intricacies of collecting these items.

Invest in Appreciating Assets

Hobbies that involve acquiring appreciating assets, such as art collecting, antique restoration, or wine collecting, offer financial rewards over time. These assets often gain value as they age, providing an additional source of income in retirement. Staying informed about market trends and seeking expert advice ensures that your investments yield the best possible returns. Continue Reading…

Findependence Hub turns 10 years old

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Image by Pexels

Hard to believe but Findependence Hub just turned 10 years old. We launched Financial Independence Hub on Nov. 03, 2014. Here is the very first post.

You’ll note that for a long time, we self-referred with the short-hand “The Hub.” This was of course long before another site was launched a few years back also called The Hub. So we try NOT to refer to ourselves using that short form, as it may be confusing.

However, the slogan still applies: North America’s Gateway to Financial Independence. That’s because both our readers and content providers are in Canada and the United States. Given the population differences, though, we are disproportionately Canadian.

From the start, the aim was to publish at least four blogs a week, and often five. In fact, as of this writing, we had published 2,931 blogs: just shy of 3,000. That’s roughly 300 blogs a year.

As we explained a few weeks ago, generally we don’t schedule Wednesday blogs far in advance, in order to leave that slot open for any late-breaking developments. It also allows us to shuffle the schedule when necessary.

The future

So what of the future? Well, my personal financial life is more or less an open book, between what I write here and what I write every month in my Retired Money column at MoneySense.ca.

As I disclosed earlier this year, I am now 71 and therefore enter the magic land of RRIFs as of the end of this year and into January 2025. At some point, I may retrench blog frequency down to three blogs a week instead of four or five: aiming for Monday/Wednesday/Friday. Happy to hear reader and sponsor feedback on that though. I’m also open to partnering suggestions.

Certainly I would like to thank the registered users who have hung in this far, as well as our advertisers who make it possible to provide this content at no charge to readers. Continue Reading…

What Fritz Gilbert learned writing 400 blogs on Retirement

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TheRetirementManifesto.com

 

By Fritz Gilbert, TheRetirementManifesto

Special to Financial Independence Hub 

On April 12, 2015, I published my first post.

In the nine years since I’ve kept writing… and writing…and writing.

I’ve published 428 articles about retirement (see my Archives page).  If you do the math * …

…I’ve written the equivalent of 11 books over the past 9 years. *

(* The Math: 1,500 words per post x 428 posts = 642,000 words.  The average 200-page book is 60,000 words, so that’s ~ 10 books.  Add in the actual book I wrote, and it’s equivalent to 11 books in 9 years.)

And yet, with all of the writing, I’ve missed something.

I’ve never taken the opportunity to step back and think about what I’ve learned from all of my writing.

During our recent RV trip to the Ozarks, I took some time to reflect, and today I’m sharing the most important things I’ve learned through my years of writing articles about retirement.

I suspect the most important lesson may surprise you.  But I’m getting ahead of myself…

I’ve written the equivalent of 11 books in the past 9 years, all on retirement. What’s the most important thing I’ve learned in the process? Share on X

What I’ve Learned Writing 400 articles about Retirement

Reflecting on the past 9 years of writing has been an interesting trip down memory lane.

  • The first 3 years, as I was preparing for retirement.
  • The middle 3 years, as I was making the transition.
  • The final 3 years, as I figured it out.

It’s all there.

The 428 articles are like pebbles I’ve sprinkled on the trail, helping those in my footsteps find their way.  I’m thankful I decided to experiment with blogging.  It’s turned into something I love.

But what have I learned?

Image created by Fritz Gilbert on Pinterest

What I’ve Learned about Retirement

  • Retirement is Complex:  Any topic that can fill 11 books has more layers than an onion. Don’t underestimate how complex retirement is.  Yes, we all expect the financial complexity (Bucket Strategies, Roth Conversions, Safe Withdrawal Rates, Estimated Quarterly taxes, Asset Allocation, etc.).  What’s been more surprising to me is the complexity behind the non-financial aspects of retirement.  Working through your experiments to determine how to replace all those non-financial aspects you once received from work (Sense of Identity, Purpose, Structure, Relationships).  As complex as the financial issues are, I would argue the non-financial aspects are more so. Be prepared for ebbs and flows as you go through your retirement transition, you’re entering a maze that’s more complex than most people realize.
  • Retirement can be Difficult:  I’ve gotten hundreds of emails from readers telling me their stories, and I’ve read every one.  Many are stories of the difficulties you’re having adjusting to retirement.  Your stories led me to research the Four Phases of Retirement and realize how blessed I was to be in the 10-15% of retirees who skip the dreaded Phase II.  As you’ll read in the next bullet, I’m convinced there’s a proven way to make retirement less difficult, and I’m fortunate that I chose the right path.
  • There are Proven Ways to Make it Easier:  I was 3 years from retirement when I started this blog.  I’d seen some of my friends struggle with the retirement transition, and I was obsessed with learning why some people have great retirements, whereas others struggle. I was motivated to find the path that led to success and was fortunate to discover it. I’m convinced it wasn’t merely luck, but rather a result of the extensive planning my wife and I did in my final few years of work.  If there’s one trick I’ve learned to make retirement less difficult, it’s the importance of putting in the work to prepare for the transition before you cross The Starting Line. Focus on the non-financial aspects as much (or more) as you do the financial ones.  To understand how I approached the challenge, check out The Ultimate Retirement Planning Guide, which lays out all the steps starting 5 years before you retire.
  • Retirement Changes with Time:  I’ve often said that retirement is like marriage – you never really know what it’s like until you do it.  As I thought about what I’ve learned from writing so many articles about retirement, I realized there’s another parallel between marriage and retirement.  Just as your marriage will evolve over the years, so too will your retirement.   The honeymoon is great, but it doesn’t last forever.  Working through the challenges that surface is one of the fun parts of both marriage and retirement.  No retirement (or marriage) is perfect, but there’s a lot you can do to make it the best experience possible.  Learn to experiment, learn to follow your curiosity, and learn to maintain a positive attitude.  If there’s one piece of advice I’d give to help you deal with the changes that occur throughout your retirement, it is to embrace, nurture, listen to, and follow your curiosity wherever it leads.
  • Retirement can be the Best Phase of your Life:  We all want great retirements, right?  I’m grateful that retirement is the best phase of my life.  Many of you can say the same.  But …. there is a large percentage of folks who can’t.  If you’re struggling, I encourage you to study those in the first camp.  Listen to what they talk about, and observe what they do.  Chances are good you won’t hear much talk about money.  As I wrote in The 90/10 Rule of Retirement, if you’ve done your planning correctly you won’t worry much about money after you retire.  By studying the 72% of happy retirees,  you’ll find the common themes of Curiosity, Purpose, Relationships, Fitness, and Planning.   Focus on doing those things well, and you’ll find, like many others, that retirement can be the best years of your life. It’s interesting to realize how many of those commonalities relate to the non-financial aspects of retirement.  In my experience, it’s in those areas where you’ll find true joy. Continue Reading…

Retirement needs a new Definition

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By Ryan Donovan

Special to Financial Independence Hub

Before we dive into this article, let’s play a quick game: a word association game. I’ll bet you a crisp $5 bill, or a shiny loonie for the more risk averse out there, that with three chances, I can guess the first word that pops into your head. Now, it has to be the first word, so no cheating. Ready, set… the word is ‘Retirement.’

If you said ‘Retirement Income,’ ‘Retirement Savings’ or ‘Retirement Home,’ I’ll come to collect my winnings. If you said anything like ‘Travel,’ ‘Hobbies’ or ‘Exploration,  then good on you; I’ll send along an IOU.

The reason I felt so confident taking that bet is because when I tell people that I work in retirement planning, 99 out of 100 times, they assume that I work in financial services. The other time, people ask about senior living. 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.

One of our primary goals when creating our startup, RetireMint, was to reframe the national conversation around “what it means to retire,” which, at its core, requires redefining how Canadians prepare for retirement.

Now, I am not discounting the importance and necessity of a sound financial plan. After all, you are reading this in Financial Independence Hub … Yes, financial planning is the keystone of retirement preparation, as you won’t even be able to flirt with the idea of retiring without it. Yet, retirement planning must adopt a much wider definition and break free from the tethered association of solely financial planning.

Retirement should really be a time to enjoy the fruits of your hard labour:  a chapter that will hopefully span decades, fuelled by leisure, exploration, discovery and meaning.

Answering the ‘what, where and how’ of everything you want to see, do and accomplish in this next chapter requires conscious preparation in areas far beyond spreadsheets and bank statements. 

The industry paradigm is that you have about 8,000 days in retirement, or around 22 years. In each of those years, you will have more than 2,000 hours of new-found free time that would have been spent working throughout the majority of your life. Filling these thousands of hours with meaningful and purposeful activity is much more easily said than done.

The common approach to retirement planning (yes, we are now using the wider definition) has been to ‘punt the ball down the field’ and ‘cross that bridge when you get to it.’ Yet, we see time and time again that those who leave their lifestyle planning to their first day of retirement are the ones who have the hardest time transitioning into this next chapter.

The people who say, “I’ll never get tired of sipping Piña Coladas on a beach,” face the same fate as the ones who say “I can’t wait to golf every day.” While these may be dream activities for retirees, they ultimately see diminishing returns if they’re your only activities, because humans are funny creatures:  we need meaning and variation.

Despite its innocent demeanour, retirement has some dark, inconvenient truths: 

  • Ages 50-64, 65-84 and 85+ have the three highest suicide rates in North America, and in the last five years, we’ve seen a 38% increase in suicides among Baby Boomers.
  • Canadians over 65 have a divorce rate three times the national average.
  • Over 25% of older Canadians are socially isolated, which causes a 50% increased risk of dementia.
  • And, 77% of older Canadians live with at least two chronic illnesses or conditions.

It’s statistics like these that starkly highlight the importance of planning for your lifestyle, wellness and purpose, as well as the need for trusted resources to help with this planning. This was the a-ha moment that sparked our urgency to develop RetireMint.

RetireMint stemmed from empirical evidence showing that once people’s finances are at least on the right track, their primary concerns and conversations with their financial advisors shift far beyond the scope of their meetings. “What am I going to do with the grandkids?,” “Where am I going to travel?” “What happens when I lose my work insurance coverage?,” are just a few of the plethora of questions that popped up time and time again.

It’s fantastic that Canadians have this level of trust and comfort with their advisors, but the truth is that financial advisors are not equipped to answer all of these broader retirement inquiries, and they’ll be the first to admit it. It’s clear that this undue burden falls on the shoulders of financial professionals, but if not for them, who is going to provide the answers? Continue Reading…