With the rising cost of living and people waiting to have children until much later in life, it’s common for clients to be working in their sixties with a mortgage, taking care of elderly parents, paying for their children’s post-secondary education while also saving to help their children with a down payment for their homes.Patrick Chu/iStockPhoto / Getty Images
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For the past few decades, the typical retirement was marketed as the end of people’s working days and the beginning of their golden years – a well-deserved, fun-filled time with family and friends.
The path to get there may seem simple. Work hard, get married, buy a home, pay down your mortgage, save and invest consistently during your prime income-earning years, and you can retire at 65 with enough money to downsize, relax, and travel. Yet, life doesn’t follow this seemingly linear path. The only certainty we have is the bumps and turns we experience along the way, portfolio manager Alexandra Horwood wrote recently in an article for Globe Advisor.
She says people getting close to retirement may want to consider a “rewirement” of how they think about, plan, and live this final stage of life – particularly in today’s shifting workplace and economic environment. Read the full article here.
If you are going to invest in an insurance policy, you need to understand what you’re accomplishing with the insurance, Tim Cestnick writes for the Globe.
There may be more than one answer. In this article, Mr. Cestnick looks at the top 10 uses of life insurance.
In the latest Tales from the Golden Age feature, Beverly Fox, 66, of Victoria talks about retirement after selling her stamp business, including taking on too many activities at first.
“At first, I said yes to everything, such as volunteering at four different organizations, joining a dragon boat team and doing weight training. It got to be too much,” she says. “I didn’t have a day off. I was warned not to say yes to too much at first because it could get overwhelming, and it was true. I had to give up some of my activities, including some volunteering and the dragon boat team, which was hard because I felt like I was disappointing people. I am still trying to find a balance, including finding more time for myself.”
Her advice to retirees: Don’t give all of your time away to others. Self-care is important.
With her 60th birthday approaching, Jill wonders if she can “retire responsibly” soon or if she needs to work longer. Jill is single again, with three adult children, a salary of $81,000 a year, and a $1.2-million house in a Toronto bedroom community. She earns another $4,800 a year teaching yoga.
“My dream is to live in Nova Scotia, where I can purchase a home for $400,000 easily, but would worry about not being able to afford to come back if I needed or wanted to,” Jill writes in an e-mail. Ideally, she could keep the family home as well. It has a mortgage outstanding of about $225,000.
Looking for ways to achieve her goals, Jill is thinking of building a basement apartment to generate some income – “not my favourite idea.” She could use the extra money to “spend lots of time in Nova Scotia in summers if I don’t move there,” Jill writes, or to help carry her Ontario home if she does move away. She is also thinking of taking a home equity line of credit “and letting my principal help me pay bills,” she adds. She figures she can live on $45,000 a year.
Jill has a fully indexed defined benefit pension plan of $934 per month with a bridging benefit of $273 per month from age 60 until age 65, when CPP kicks in. The total at age 60 will be $1,207 per month. Her liquid investments include $35,000 cash in a savings account and $101,000 in an RRSP. “I know many single women my age who are all wondering the same thing: Can we do it on our own?” Jill writes.
In the latest Financial Facelift article, Warren MacKenzie, head of financial planning at Optimize Wealth Management in Toronto, looks at Jill’s situation.
When it comes to retirement, most couples plan for the places they’ll go and the people they’ll see, but don’t spend enough time thinking about how they’ll pass the rest of the time with their spouse. “People have conversations about things like, ‘where are we going to travel’ [but] they don’t really get into the day-to-day of life,” says Amy D’Aprix, founder and chief executive of Toronto-based consulting firm Life Transitions by Dr. Amy. Failing to communicate how to handle a major life transition like retirement can test even the most solid relationships, especially if each person’s vision of how to spend their days is different. “Even a positive change like retirement puts stress on a relationship,” says Saunia Ahmad, director and clinical psychologist at the Toronto Psychology Clinic. Kathy Kerr reports.
Question: My condo fees have increased a lot in the past five years. Should I be concerned about my ability to pay them long-term?
Rona Birenbaum, founder and certified financial planner at Caring for Clients in Toronto answers this question that she often gets from her clients:
Many lifestyle expenses are rising significantly this year, and condo fees aren’t exempt. The fact that they’ve been rising a lot over the past five years could mean that the condo has been either catching up on overdue repairs or is preparing for future ones.
My first suggestion is to review the most recent Notice of Future Funding Report for the condo reserve fund. This notice should include a third party’s reserve fund study and the condo board’s proposed funding plan. That plan will include agreed upon increases for the following three years. A long-term funding plan and associated condo fee increases will also be in the report.
The older the condominium building, the larger the potential funding required to maintain it. If the reserve fund is low relative to the ongoing and future needs of the building, a special assessment could be around the corner. A special assessment is a lump sum required from condo owners. It results if the reserve fund can’t afford to pay for a major repair or to fund a lawsuit. The obligation can often be paid for over a few years to reduce the impact.
If you are thinking of selling, the size of your condo’s reserve fund relative to the ongoing and future operational and maintenance needs of the building impacts its value. Weaker financials equal lower values compared to similar units in a well-financed building and vice versa.
Once you have all the information in hand, you and/or your financial planner can use it, along with your other financial details, to assess your capacity to afford future condo fee increases and your other lifestyle expenses. Forewarned is forearmed.
The Globe and Mail
Have a question about money or lifestyle topics for seniors? Please e-mail us your question at si*******@gl**********.com and we’ll try to find an expert to answer it in a future newsletter. We can’t answer every question, but we’ll do our best. Note: questions may be edited for length and clarity.
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