Retirement Do's and Don'ts
Don’t leave long standing friendships:
It is a major adjustment to leave long term friends, doctors, bank managers, hair dressers, your favorite stores, and familiar surroundings. Leaving your lifetime community, can be a shock if a spouse dies shortly after the move. Many couples who transplant during their senior years, depend heavily on one another during the transition and if one dies the other is left feeling more alone than if they were in a community with years of memories.
Do Keep your home:
Children and grandchildren are happier coming to visit in a home that has a lifetime of memories. When parents move, adult children do not feel like it is ‘going home’ if the home they go to is not the one they grew up in. Most retirees are waiting well into their seventies before trading the family home for smaller accommodation.
Don’t neutralize your favorite travel location:
When we move to the climate of our dreams, it becomes less likely that we will travel or appreciate the escapes that travel offers. If we remain in communities where winters are cold, the true appreciation of a mid-winter holiday is more profound than for those who move to Arizona or similar locations for retirement. If you live in a community of perpetual summer, what do you do for a change? — Go check out a wintery climate.
Don’t expect retirement to be Nirvana:
Retirement is just more Life. Don’t wait until you retire to start living and don’t go into retirement expecting it to be the easiest time of life. As we age, all kinds of unexpected events can come our way. It is important to live where you have a strong support network.
Do balance moderation and risk:
Ultra conservative financial planning such as GIC’s may not generate the investment income you need. However, an even bigger mistake could be to say “I’m 50, it is do or die” — and start investing in all high risk investments. It is estimated that the necessary retirement income is $3,500 a month.
Don’t spend too much too soon:
We are living longer. A person who reaches 65 has a one in two chance of living past 90. Most people wait until they are 50 to start thinking seriously about their retirement finances. This in part, is because most people under 50 are still heavily involved in financing raising a family.
Do Create multiple income streams:
Income streams can include government pensions, employer pensions, investments and perhaps even supplemental earned income. Generally speaking, most retirees only get half of their income from pensions with the remaining income coming from other sources. The less you have in investments the more likely you need to consider generating earned income. Consider an opportunity that will generate residual income. A word of caution. While there are many Network Marketing opportunities, most people who do these businesses fail. No matter how it is designed multileveled sales schemes are destined to fail, with very few exceptions. That is why the Canadian government has many rules controlling these businesses as all too often people who can least afford to lose money — lose money.
Don’t give all your money to your kids:
Teach your children the value of hard work, and earning their own way. Handouts are like giving someone a fish, rather than teaching them to fish. It can become a bottomless pit. It is estimated that 70% of the couples who find themselves short of money for their own needs during retirement are people who have given too much money to their children…and find their children unwilling to help them in their time of need.
Don’t count of the Government:
In recent years rules have been changing. With the end of mandatory retirement, it isn’t as easy as walking into a government office and saying “I am 65 please help me, I don’t have enough to live on.” If you ask for help, you will be told to go get a job. Pensions can also be clawed back by the government for seniors making more than $60K.
Do expect to work:
Increasing numbers of retirees are working – not because they want to, but because they need to. While ageist discrimination is decreasing, it is not a foregone conclusion that you will be able to earn as much as you could when you were 40. Willingness to jobs you would have shunned when you were in your prime may be your reality. Recently, Mary an 80 year old took a job handing out demo samples in a grocery store. When she was 65 she retired from a high profile executive position. Now, she is working at $10.00 an hour, just to get by.
Do plan for contingencies:
Expect the unexpected. Many boomers face the responsibility of helping their aging parents. The average woman faces 6 years of extended care, and the average man requires one year of extended care. It doesn’t come cheap, when a family member or partner needs care. Roberta’s husband has Alzheimer’s and because they have not had homecare, he is not eligible for a government funded facility, so he is in a $3000 a month private facility – the only place she could find. Mary was a business executive.
Don’t go into retirement with debt:
Learn to live off your income, without needing money to fund past purchases. The TV commercial by a debt solutions company packs a punch. “If you owe $5,000 on a credit card and pay the minimum monthly payment of $100, you pay $87.00 in interest and it will take you 33 years to pay off that debt.” Never use credit cards, unless you can pay off the balance at the end of the month.
Do know how long your investments will last: If you withdraw 45 of your capital annually your savings will last approximately 33 years. If you withdraw 10% of your capital annually your money will be gone in 11 years.
Don’t get caught by Scams:
Retirees are ripe for picking by common consumer frauds. Con artists love people who are trusting and have time and money. Countless retirees donate money to causes that are nothing more than a well planned con scheme. The most common scam for seniors to get caught in is someone claiming to be investigating the retirees financial institution. The victim is asked to help protect their wealth by handing over a cash withdrawal for a ‘standard’ serial number check. It is hard to understand why anyone would hand over money they withdrew from a financial institution and hand it over to some small business in a ‘here today, gone tomorrow office.’ The other common scam, is the lonely widow, or unhappily married woman who is befriended by a smooth talking man…who cleans her out. It begins as an innocent friendship and soon she is so swept off her feet that she trusts, trusts too much. And, off he walks with the money she needs for her golden years and she has no legal recourse.
Do Plan for Foreign Exchange fluctuations:
When our currency is strong, it is easy to assume it always will be. But, currencies rise and fall. Prepare yourself to live as if your currency would never go above par. It can be good planning to choose your international trips at times when the variance between your currency and the currency of the country where you are travelling are in your favor. That may mean waiting a year or two.
Don’t ditch the spouse:
According to a 2005 study from Ohio State University, people who divorce lose an average of 77% of their personal net worth over time. The economic impact of divorce, particularly at retirement time, when accumulated funds should be going toward things such as health care, travel or accommodation, can be devastating. Al a 78 year old man, who found himself divorced at 65 had given his three children $50,000 each, for a down payment on their own homes, in the five years prior to his divorce. Then splitting their wealth between himself and his wife resulted in his network dropping from comfortable to in poverty. At 78 he is working 20 hours a week to survive.
Do revisit your will:
Estate planning is important and even more important if you own a business. Other complicating factors are if you have disabled or still dependent children.
Don’t make flippant financial decisions:
What may look like a good decision in the short term in the long term can be a bad decision. Think over your decisions and talk to more than one expert. Think critically. Does the person who is encouraging you to make an investment have a big gain by talking you into it, even if it isn’t in your best interests. If can be beneficial to engage the services of a financial planner that charges a fee — and is not motivated by commissions.
Usually this type of financial planner will reimburse any possible commissions back against any consulting fees. The motive is good financial advice — not commission motivated selling. Pay attention to management fees and other hidden fees that eat away your earnings. Pay attention to the tax ramifications at all times.
Do take care of your health:
Nothing is as important as your health. Be proactive, not reactive. While some medical needs, drugs, nursing or eye care maybe be covered or subsidized for seniors, it is a good idea to purchase a individual health insurance plan while you are still working. If you do not buy it as a continuation of coverage you had while working, it can mean needing to go through medical examinations and more expensive premiums – or being rendered ineligible for coverage. Check twice and know the fine print when purchasing critical illness insurance. Often these insurances are very limited – exempting anything that even even remotely be attributed to problems earlier in life. Collecting may mean you have a minimum of three disabilities. For instance: the ability to dress yourself, feed yourself and bathe yourself. For instance if you can’t dress yourself or bathe yourself, but you are able to feed yourself food as long as it is prepared for you…then you may be ineligible. There are many loopholes and it may mean you have paid a big premium for something you will never collect on — even if you are in need. Care can cost between $25,000 and $50,000 a year!
