Tag Archives: semi-retirement

Retired Money: How to be financially, physically and emotionally fit for Retirement

Posted By |

My latest MoneySense Retired Money column, which has just been published, looks at a self-published book by the semi-retired (at age 64) Howard Pell. His book is titled Retire Fit, Fit & Fit. Click on the highlighted headline to retrieve the full MoneySense column: Retirement fitness involves mind and body, as well as money.

So what does the Fit, Fit & Fit mean? It’s in the headline of this blog as well as the adjacent photo taken from the book cover, which is the book’s subtitle. So it’s referring to being all three of financially fit, physically fit and emotionally fit for Retirement.

There are plenty of books about financial fitness so Pell pays only lip service to that aspect: what he brings to the table is insights on how to integrate finances with physical and emotional fitness. (To some extent, so does the book I co-authored with Mike Drak: Victory Lap Retirement)

Pell, who is based in Waterloo, Ont., does add a few newish terms to the semi-retirement lexicon.  He dubs the lifestyle “voluntary unemployment” but like many at this stage, finds the word “retired” inadequate. He tosses out several alternatives but the best one is his suggestion to simply adopt the Spanish word for “retired,” which is Jubilado (for males) or Jubilada (for females.”) He would use the term to signify anyone who is financially, physically and emotionally fit.

I can certainly relate to his observation of the semi-retired life that  “The big difference is that now all my deadlines and commitments are self-imposed.” Of course, as the old quip goes about driven self-employed business people: “My boss is a slavedriver.”

Pell also went personally through the “glide path” to semi-retirement described in other Retired Money columns and here at the Hub, via working a three-day week for his then employer during the last two years of his time there. This is a good way to test out your financial fitness while also clearing time for more physical fitness and — perhaps the toughest challenge — preparing for emotional fitness for retirement (I’m speaking for myself here.)

Finding the sweet spot

A Venn diagram on page 7 of Pell’s book (shown adjacent) illustrates that the sweet spot is the intersection where financial, emotional and physical fitness all converge.

If they don’t, and you became financially fit by selling out either your physical and/or your emotional health, the retirement your finances make possible may be a very limited and unsatisfying one.

It’s also possible to be only physically fit or only emotionally fit but lack the financial resources for retirement. The need to keep working to pay the bills will be frustrating, especially if all your peers have retired.

Continue Reading…

Forced Early Retirement? 7 things you should do right now

Posted By |

By Michelle Arios

Special to the Financial Independence Hub

There are a lot of life situations that can lead someone to retire much earlier than they had initially anticipated. It could be illness, injury, the need to move quickly, an emergency family circumstance, or even a company closing its doors. Why you’re being forced to retire isn’t nearly as important as the silver lining you need to find in your situation, and what steps you’ll take to get there.

1.) Get a great Savings plan

Your normal savings account may not be enough to carry you through. It might help to change your current savings account to one that gives you a better interest rate, particularly if you’re going to consolidate your retirement accounts. It might also help to supplement your savings with some investments that will grow with time.

2.) Work out your new Budget

People in retirement often live on fixed incomes, especially if their spouse is also retired. You need to be sure your money can go as far as you need it to, and that might mean breaking apart your old budget and determining where and how you can best reduce costs while maintaining your quality of life. There are some easy-to-use smartphone apps that might help you do that.

3.) Downsize your Home

The expenses of maintaining a household are high. If you’re retired, you probably don’t need all the extra space anyway. Finding a roommate can help, and so can selling your previous home to purchase a smaller home that’s easier to maintain. Often times, utility bills will significantly go down on a smaller property. You’re also gaining some extra cash and a little more financial longevity.

4.) Find affordable alternatives

Monthly costs, like health insurance and cellular phone bills, can often add up to a lot of money. You might want to consider shopping around for a better deal. Continue Reading…

Why “Topping up to bracket” makes sense if you’re temporarily in a low tax bracket

Posted By |

My latest column in Wednesday’s Globe & Mail looks at a strategy called “Topping up to Bracket,” which can be useful to anyone who is temporarily in a lower tax bracket.

Click on the highlighted headline to access the online version, assuming you have Globe subscriber privileges or haven’t exceeded the monthly free click quota: A strong tax case for early RRSP withdrawals.

When might you be “temporarily” in a lower tax bracket than usual? This can of course happen when you lose a job or if you’re in your Sixties and transitioning between full employment (typically earning in higher tax brackets) and Semi-Retirement, when it’s tempting to “bask” in lower tax brackets.

Temporary because as Semi-Retirement progresses, you can end up moving back into higher tax brackets: for example, if you start to receive Old Age Security (OAS) at 65, then take Canada Pension Plan (CPP) a few years later, these are both taxable sources of income.

And the big hit can come at the end of the year you turn 71, when RRSPs must be converted to Registered Retirement Income Funds (RRIFs) or else annualized or cashed out. RRIFs entail forced annual withdrawal rates that keep rising between your 70s and your mid 90s.

So that makes “Topping up to Bracket” (a term used in a BMO Wealth Institute paper on the topic, published around 2013) a strategy not to be ignored. In practice it means making sure that in those low-earning years you at least bring into your hands each and every year the roughly $12,000 of untaxed earnings that’s called the Basic Personal Amount (BPA). And as the G&M column explains, it’s also a good idea to at least bring in the dollars that are in the lowest tax bracket (15% federally, 5% in Ontario), or roughly $42,000. There are of course higher tax brackets above that but the law of diminishing returns starts to kick in beyond the $42,000.

Note too that this is a “use it or lose it” proposition. If for example a year went by that you failed even to bring in even that $12,000 income that would not have been taxed, you can’t carry forward the opportunity to benefit from it the following year. You will of course have another opportunity for the BPA that year but it won’t double up because you neglected to earn low- or non-taxed income the previous year. Continue Reading…

Sun has set on the Golden Days of DB pensions: How to survive the New Retirement

Posted By |

My latest Financial Post column can be found online, by clicking on the highlighted headline: Sun has set on the Golden Days: How to survive the ‘New’ Retirement. It can also be found on page B8 of the Friday paper under the headline Senior Investing Gets Critical.

The piece is based on a half-day conference held in Toronto on Wednesday sponsored by Franklin Templeton Investments. The third annual Retirement Innovation Summit was an equal mix of sessions on Retirement readiness and updates by Franklin Templeton executives on the current state of the markets.

The big theme was the well-established (two decades now) shift from the guaranteed-for-life Defined Benefit pensions earlier generations enjoyed, to market-variable alternatives like Defined Contribution pensions. As a result, longevity risk and market risk has been gradually shifting from the shoulders of employers to those of their workers/employees. And that in turn has meant that would-be retirees have to devote a lot more attention to the markets and investing than older generations that enjoyed what seems in retrospect to be a “golden age” of retirement income security.

Retirement is a gradual process, not a cliff

As for Retirement Readiness, one speaker described how Retirement itself has become more tentative. Instead of moving abruptly from 100% work mode to 100% leisure the moment you reach the traditional retirement age of 65, workers are experimenting with retirement and more often than not returning to the workforce, only to rinse and repeat.

Since the US financial crisis, the numbers of people aged 65 or more who are still working full-time has been on the rise. Of those still working after 65, only one in five did so because they felt they had to because of shaky personal finances. For the other four in five, it’s “because they want to or truth to tell, their spouse wants them out of the house,” the speaker said.

Furthermore, among both full- and part-time workers in that age category, 40% reported they had retired twice already: they had quit the working world, returned a few months or years later, then quit again and then returned to work again.”

Taking a Retirement Victory Lap

So much for the so-called “Retirement Cliff.” This of course is a major theme of the book I co-authored with Mike Drak: Victory Lap Retirement. We basically argue that retirement is a long process that involves slowly moving into. After all, you never see an airplane land by suddenly putting on the brakes in mid-air and dropping vertically: there is a gradual “glide path” to a smooth landing.

So it is with Retirement in our view: call it Semi-Retirement or an encore career or a legacy career but in essence it’s about moving gradually over five or ten years from 100% full-time work to perhaps 80%, 50%, 30% and so on, so that by the time you’re fully retired (perhaps in your 70s), the shock to your system is much less severe.

 

4 books to prepare for Your Victory Lap

Posted By |

Image result for retire wild happy and freeImage result for the essential retirement guideImage result for your retirement income blueprintImage result for it's your time by donna mccaw

A question that frequently comes up is what books we would recommend people read to help prepare themselves for a successful VL (Victory Lap). I think this happens because many of our talks are held at libraries and people there are accustomed to doing their own research. There are a lot of good books out there, including Victory Lap Retirement, but the following four will do the job getting you both mentally and financially prepared to launch your own VL.

1)   How To Retire Happy, Wild, and Free, by Ernie Zelinski.

This is the book that helped convince me it was ok to leave my stressful banking job. If you are in a similar position, you know it is hard to leave a well-paying job late in your career. However it is just as hard staying in a job that makes you miserable just to save some extra money for a retirement that you have no idea what it will look like. When you are in a job you hate, something has to give and I hope it’s not your health. If you lose your health,  does it really matter how much money you have? You might want to think about that one a little before it’s too late.

We give out a copy of Ernie’s book at our presentations, as there is usually at least one person in attendance who is willing to admit they are struggling with the “should I stay or should I go?”  decision.

Having been there myself I feel for them and know Ernie’s book will help them, just like it helped me.

2)    The Essential Retirement Guide, by Frederick Vettese

I like to sleep at night and after reading this book I was able to sleep a lot better. Most of us are stressed out about the possibility of running out of money in retirement. I can’t speak for any of you but I worried about money, making the mortgage payment, getting the kids through school for most of my life and I’ll be damned if I’m going to waste any more of my life worrying about money during my Victory Lap. Life is too short for that and I have better things to do with my time.

Continue Reading…