If I Retire, How Will I Know When It’s the Weekend?: Your questions answered on how to plan, invest, and live in retirement!

By Kathleen L. Wronski

Your questions answered on how to plan, invest, and live in retirement!

• Language: English
• Publisher: BookBaby
• Release date: Feb 10, 2016
• ISBN: 9780991758128

Book preview

Glossary

CHAPTER 1

Introduction

"We make a living by what we get,

but we make a life by what we give."

— Winston Churchill

This is a revised and expanded version of the first edition of my earlier book, If I retire, how will I know when it’s the Weekend? A revision was very necessary because things change. Firstly federal and provincial governments change the tax, investment and retirement rules. Then governments change. Then, the newly elected government change those rules. Again. The knowledge in my book is current as of December 2015. If you work with an advisor, an accountant, or a lawyer, it is good to check with them on the most current rules and knowledge if you are reading this book long past the January 2016 publication date. Also check with the internet sources that the information you are working with has not changed from my publication date.

An example of such a change is the proposed increase in the age of eligibility for the collection of the Old Age Security benefit. The former government passed legislation to delay receiving the benefit until the age of 67 years. The recently elected government (Liberal 2015) has promised that they will not increase the age of eligibility. However, as the new government looks over the fiscal finances and the projected longevity gains of the citizens of Canada will they actually keep the current eligibility at 65 years?

Furthermore not only have Canadian governments been changing the rules, the U.S. government has been very, very busy. There have been many changes affecting snowbirds that spend time in the U.S. A new chapter for U.S. citizens and Canadian snowbirds is needed and has been added, as there are many more tax and estate implications for those people who spend time in the U.S.

Finally, many readers had suggested they would like to see more information and detail on chapters such as the Estate Planning and Can you Afford to Retire? There are also changes happening in the wealth advisory world with the introduction of web based investment services, also known as robo-advisors, and changes to the disclosure of fees that you are paying your bank or advisor for investments services.

Lastly in this edition I have included a glossary of investment terms and acronyms you will encounter as you expand your retirement and investment knowledge.

Retirement. Maybe you’ve planned for it, maybe you’ve dreaded it, maybe it has taken you quite by surprise, but barring an early death (which would mean, among other things, the utter lack of requirement for you to read this book), retirement is either in your future or it is now. If you’re like me, you have plans for when you finally retire: travel plans, plans to keep fit, and maybe plans to spend more time with your children or grandchildren. And maybe, again like me, your challenge is to devise a means through which you might ease into full retirement by continuing to work at a career you really like, but at a more relaxed pace.

Either way, now is the time to take stock of your finances, your health, your family and your social network. Do you have enough to retire? Have you spent enough time with your family and friends so that you’ll have a robust social network in retirement? How will you be paid in retirement? How will you keep yourself healthy? Can you work in retirement? What opportunities should you take advantage of in retirement? What should you be wary of?

I have observed some very successful and some not-so-successful retirements. I would like to pass on the best practices that I have observed. While I have a business degree, many investment, planning and insurance designations, and 30 plus years of experience working in the investment field, it’s really my clients who have been my best teachers. I have been there right alongside people as they’ve transitioned from saving for retirement, to living in retirement, and then to the ultimate act of passing on their wealth to their family and near-and-dear causes.

This book is about my journey from a place where I was largely concerned with what stock to buy for someone, to a more comprehensive position that affords a view of the whole person, including their finances, family, personality traits, and big-picture goals. Along the way, I have increasingly come to understand what it takes to make a difference in other people’s lives as they take those steps that will ensure that they will live well in retirement.

Certainly, I want to make sure you have enough money in retirement, and that really is the focus of this book. As a wealth advisor I am constantly thinking about the money, but I also want to touch upon the healthy lifestyles that can make a retirement not just good, but great.

Exactly what is a great retirement?

This is what I have learned and want to share with you.

A great retirement is one which works well for you. By this stage, we’ve reached the age where we know ourselves. We’re blessed with some wisdom and experience about what makes us happy — and what is not so good for us. Taking into consideration all that I have observed from my own family’s experience and that of clients, I want to share wisdom about how to plan for your retirement from a physical, spiritual and financial point of view. When is the best time to plan demanding trips and when will you slow or your body slow you down? What are your travel cost options? Where is the best place to live in retirement? How you will get paid in retirement? If you plan to work in retirement, what are your options for that? When you are retired, how will you know when it is the weekend? What sort of structure do people have in their retired lives? What do you need to know about estate planning?

For my client, Carole, retirement is about having the time to spend with her granddaughters. For her husband, Richard, retirement is about assuming the Chairman’s seat at his company and taking the long-term view on the organization’s direction. For Terry, retirement is about seeing the world and volunteering at the zoo. For Robin, retirement means time at last to concentrate on her art. Retirement should reflect your values and goals. Your retirement and its timing are all about you, after all, and your particular set of priorities. More than that, it’s about having the income to make the choices that will bring you fulfillment.

I’m sure you’re familiar with the old adage, knowledge is power. With this book, I want to equip you with the power to make the most out of your retirement — whenever it might begin. I don’t work alone and my knowledge comes from many different sources, including my team of Michael Cann, Jorge Saban, and Alison Seto here at the office, and all the other accountants, bankers, estate planners and retirement experts I have consulted with during my career.

As we get started, I thought it would be a good idea to let you know how I have organized the book so that it delivers on my intentions.

Chapter 2 discusses issues clients have dealt with as they approach and enter their retirement years. It’s all about setting priorities on your interests and activities in a way that stacks the odds in favour of your ability to enjoy a long and satisfying retirement.

Chapter 3 is a new chapter that discusses what you will do with your time in retirement. In retirement will you decide to work? Either for a paycheck or perhaps a payback to society?

In Chapter 4, I discuss that oh-so-worrisome and oh-so-important question: can you afford to retire? Here, you’ll find information about life expectancy in Canada in the twenty-first century (bottom line: you could live for a very long time) and worksheets to help you figure out how much annual retirement income you’ll need (Yikes, that much?).

In this edition, Chapter 5 has been updated to incorporate the proposed government changes to the Canada Pension Plan and the Old Age Security age of eligibility. There is a comprehensive catalogue and explanation of the various types of investments you might use to generate retirement income.

Chapter 6 is compilation of the investments that can pay you in retirement including fixed income, preferred shares, dividend paying equities and the different tax rates that apply to different types of income.

In Chapter 7, I discuss the major issues that can put your retirement income and capital at risk and I offer my best advice on how you might manage those risks.

Chapter 8 is another new chapter explaining the many new rules that have been enacted by the U.S. government that significantly change, increase, and complicate tax reporting for Americans outside of the U.S. Plus there are new U.S. border rules can poses risks for unwary Canadian snowbirds.

Chapter 9 is a discussion of the effects of debt in retirement, and how too much debt is a Canadian affliction.

In Chapter 10, I provide an introductory primer on the key points of estate planning; this is important reading for anyone who is serious about structuring their affairs for the benefit of their loved ones. It is also essential reading if you have, or are contemplating taking on the duties of an executor.

In the last chapter, Chapter 11, you will find a balanced discussion of the advantages of working with or without an experienced investment professional, including an explanation of what the various designations and titles that are used in the investment industry really mean.

In conclusion, at the core of a great retirement is having enough. Never lose sight of that. It is having enough money, knowledge, and security so that you and your loved ones can relax and know there will be enough money and time for the rest of your life. It is the pay-off for all the good savings and investment discipline that you exercised in your working years. It is about taking care of those you love and taking responsibility for your life.

A glossary has been added to explain all the financial jargon in my book and some of what you will encounter in the investment world.

I sincerely hope that this book will do what I intended it to do: help you to prepare yourself and organize your financial affairs so that when you leave the paid workforce you can have a long, comfortable and fulfilling retirement.

CHAPTER 2

Retirement Priorities:What Is Important to You?

It’s not the years in your life that count,

it’s the life in your years.

– Abraham Lincoln

Some people have a very clear vision of their retirement, while others can’t quite see beyond the relaxation of the first few weeks after work. If you see yourself in the former category (plans all made and just waiting for the day), it never hurts to take a fresh look at your retirement priorities and reassess, especially if there have been any significant changes in your life. If you see yourself in the latter category (you mean there’s more to retirement than just relaxing? Who knew?), it’s not too early to take that first step to figure out your retirement priorities. Whichever camp you’re in, your priorities will largely determine how you want to live in retirement, and this, in turn, will obviously impact your financial planning.

Before we review some of the major items that should be on everyone’s retirement priority list — health, relationships, leisure activities, travel and location of home base, to name a few — and before you decide which prioritized spot they occupy on said list, I’d like to share good news about the impact that aging has on happiness. A lot of people worry that their retirement years will be less fulfilling than their work years. Sure, as you get older you may have trouble remembering the odd word or two (or even three!), and your best sports days may be behind you, but the big surprise is that you will probably be happier.

The seven stages of man — Shakespeare’s dominant image of the life course in the sixteenth and seventeenth centuries — portrayed life as consisting of a rise in stature and contentedness to middle age, followed by a sharp decline toward the grave. This has long been the prevailing assumption about getting old, and many people still make the same one by default (remember the words from the Rolling Stones song, What a drag it is getting old?). But what does modern research say?

There have been a great number of studies done on the subject of happiness, and the results are encouraging. For instance, research by America’s General Social Survey, Euro-barometer and the Gallop survey series asked two main questions of people.

The first: Thinking about your life as a whole, how do you feel?

The second: Yesterday, did you feel happy/contented/angry/anxious?

The first question is said to measure global well-being; the second, an individual’s emotional well-being. The results? People are the most miserable in their 40s and early 50s, and then their happiness picks up sharply. David Blanchflower, an economics professor at Dartmouth College in New Hampshire, and Andrew Oswald, an economics professor at Warwick University in the UK, looked at the figures for 72 countries. The nadir varies greatly — Ukrainians are at their most miserable at age 62; the Swiss at 35 — but in the great majority of countries, people are at their unhappiest in their 40s and 50s. The average low point of unhappiness globally is 46 years old.¹

In addition, an article that appeared in The Economist recently reported that happiness has a U-bend over the course of someone’s life. According to the authors, we start out our lives, on average, in a pretty cheerful state, and then things go downhill from there. The crush of first love goes wrong, there’s more competition to get into the best schools, and the job market is more competitive than anticipated and so on. We start to learn about real life — including paying all of our own bills, dating, marriage, children, juggling a career and everything else — and all of this takes a bite out of our happiness. It also means we are very busy and that can be rewarding, but exhausting. I remember juggling babies and working, all deeply rewarding and both needing full-time attention.

The downhill slide, mind you, slows during late middle age. It’s at this point that things start looking brighter (in my case it might have a lot to do with more sleep). This shifting reality is thanks to a fairly simple physiological fact. Basically, people behave differently at different ages. Older people are better at controlling their emotions, better at accepting misfortune and slower to anger. One of the reasons my older clients are, by and large, more sanguine in the face of a market downturn than their younger cohorts is that they’ve seen it all before and know that, if they can only exercise patience, the market will get better. They have heard all the crisis talk before and know that they will weather the downturn as they have weathered many similar events before.

People also come to accept their strengths and weaknesses with age, and are usually better at forgiving themselves too. Maybe you aren’t going to be a multimillionaire, but you are going to earn enough money to provide for yourself and your family. Maybe you’re not going to light up the silver screen with your acting ability, but you can join a community acting group and entertain your community. The U-bend of happiness is real: it helps us laugh at our laugh lines. As many of my long-time clients have answered when I ask them how they are faring today, I am on the right side of the daisies.

Your Health is Your Best Investment

How pleasant is the day, when we give up

striving to be young — or slender.

— William James, American philosopher

Ah, but will we ever give up? Those words were penned by William James in The Principal of Psychology in 1890, and we have only to look at the growth of the anti-aging industry to know this home truth: we are still striving! Although creams and ointments and cosmetic procedures may help you look a bit younger, the best way to stay young is to keep fit and healthy. My clients have taught me many things over the decades, but one of the most enduring lessons I’ve learned is that my happiest clients are the ones who take care of themselves, their families and their finances. In this chapter, I’ll touch upon diet and exercise as retirement priorities whose influence on your enjoyment of this time span cannot be understated. There’s a good chance you may live for a long time: you cannot control your genetics, you cannot control a traumatic event or accident occurring, but you can control your own diet and exercise.

There are four things that you can do to maintain your health.

•  Exercise: Just Do It Right!

•  Nutrition: You are worth a healthy and balanced diet.

•  Smoking: Just Don’t Do It!

•  General Health Maintenance: Get regular medical checkups.

Exercise

Exercise is done against one’s wishes and

maintained only because the alternative is worse.

— George A. Sheehan

There’s no doubt that being in good