Gails Blog

I can’t believe all the people I meet who are looking forward to retirement. And then there are all the people who are dreading it because they believe they’ll be destitute. You’re going to stop doing purposeful work, stop being with your friends, stop earning because… why? 

I’ve always believed retirement is a really, really bad idea. I have no intention of ever retiring. There are times I work more than other times (during which I save up money so when I’m not as gainfully employed I have a stash of cash.) But I’m going to die in my boots. The idea of waiting for my Friday Hair Appointment while Waiting For The Kids To Call is anathema to me.

Statistics show that when people retire, they lose their social skills, they get poor and they die. Sometimes they die within weeks of their retirement. No, they weren’t sick. They just up and kick the bucket because, well, as Albert Einstein says, “Life is like riding a bicycle. To keep your balance you must keep moving.”

As for early retirement… Freedom Fifty-odd… bah! In one study, researchers found that settling into your Golden Years at age 55 doubled the risk for death before reaching age 65, compared with those who worked past age 60.

I’ve been a proponent of Restyling, as opposed to Retiring. While you may not want to do the job you’re doing right now, you can restyle to do another job, have another career, find another way to make a meaningful contribution while you make some money. Maybe not as much as before. Maybe more.

Perhaps the reason people are so hell-fired about retirement is The Grass is Greener Syndrome. Kind of like, “my life sucks and what you do looks better.” But you know what? The grass isn’t greener, and if your life sucks, why in heaven’s name would you wait until you were 55, 60 or 65 to fix it?

For many people work isn’t separate from life — it’s a part of it. While it may not be fun for some, for others it’s a passion. Either way, it’s a part of our lives, good or bad. The trick is if you’re in the ‘bad’ category, you need to start looking now at what you can do differently, as opposed to just sucking it up until you can retire.

People are always talking about striving for work-life balance. When you’re doing something you really love, you don’t need to cut back so you can up your Couch-Potatoing. Instead of tossing work out the window completely, maybe the trick is to find something you love, get really good at it, and then restyle your life so that you can do more of it, and make some money too. People who are passionate about personal fitness become fitness instructors or personal trainers. What, you don’t think you need to stay flexile when you’re old? People who are passionate about gardeners learn to landscape. All that life experience comes handy, doesn’t it? People who are passionate about design, cooking, photography, mechanics, animals… well, you get my drift.

Maybe it’s time to take a Big Picture look at your life — how are you spending your time right now? This is one of the exercises I used in my Retirement Answer Book (no longer in publication). I asked people to create 24 blocks for a day, over 7 days (so you’ll end up with 168 blocks), and colour in the squares  with different colours that represented how many hours they worked, played, did personal hygiene stuff, took care of their families, and whatever else they did in their lives.

Of those things, what do you enjoy doing? What do you want to carry with you through the rest of your Whole Life? What do you want to eliminate? How are you going to do that?

Having the life you want should not be a case of holding your breath until you can retire. You should be working hard right now to create the life you want, while you’re aware of the restyling you may have to do as you slow down.

The home inspector I just worked with is in his 70’s. He loves his job. He’s the best at in. AND he works with his wife, who is also a home inspector. They tool around together, having fun, helping people like me, and earning $400 a pop to boot. Why would he ever retire?

How worried are you about retirement? I’ve been getting quite a few questions recently from people who are at or approaching retirement and I think there are more than a few things wrong with how people are going about this.

First there are the people who plan to go into retirement with debt. Really? You couldn’t get your consumer debt, your car loan, your mortgage paid off while you were working, so you think you’ll be able to do so when you’re not? Hmmm.

It used to be a Golden Rule to have all your debt paid off by the time you moved into retirement. That included your mortgage. Then people started saying, “Well, I have to live somewhere, so if I have a bit left on my mortgage, what’s the big deal?” I don’t have a big problem with this, assuming you have the retirement income that isn’t gobbled up by your housing costs. But many people don’t. And yet I get letters from people who, instead of trimming their housing costs for retirement, are planning to increase the debt on their homes just when their incomes are falling drastically. They write me because they’re not sure how to manage this. Well, you CAN’T! It simply makes no sense to increase your overhead when your cash flow is shrinking.

Then there are the people who plan to come to a grinding halt on the work-front at some previously chosen date, be it 65 or earlier, simply because they want to stop working. Early retirement is a huge dream for many people. And yet they’ve done very little in the way of asset accumulation or income projection.

Y’all do realize that we’re living longer, right? At the beginning of this year, the Stats Man reported that life expectancy had hit 80.4 years, with chicks eeeking out four years more than dudes. Of course, since you weren’t born in 2005, which is the birth year this report is based on, you may croak a little earlier (or later, depending on your fam’s history). The point I’m trying to make here is that if you retire at 65, you still have 15+ years to feed, clothe and house yourself. If you retire earlier, you put even more of a strain on your savings. So you better do some income projections to see just how long the money will last. And don’t forget to figure in the impact of inflation.

Next there are the people who haven’t, even for a second, considered setting aside some money for the future. They are so busy having a great time right now, that the future… well… it’ll be fine, just fine. Heads up people. While government pensions may be enough for those people in the lowest income bracket, for many others it just will NOT be enough. If you haven’t looked at how much you’ll receive from social security, then you should. And if that doesn’t scaring you into setting aside a little something for the future, I don’t know what will.

Here’s the thing: the earlier you start saving for the future, the less money you have to take out of your cashflow because the longer you put the Magic of Compounding on your side. Start in the 20’s and you can get away with saving as little as 6% of your income. Wait until your 40’s and you’re going to have to sock away 18-20% . Yah, time does make that much of a difference.

You can go into retirement with your eyes closed and your fingers crossed behind your back and hope for the best. Hey, if that’s how you’ve done life so far, you’re probably pretty good at it by now. But if you get there and find you’re subsisting, don’t whine.

Another alternative — some would say a better alternative — would be to take a realistic look at what you may need for retirement, how much you think you’ll have, and what you can do to close the gap if there is one.

And for heaven’s sake, make sure you’re debt free before you get there. Spending your limited resources paying for crap you bought on credit should be the last thing you do.

So, are YOU worried about retirement? Do you even think about it? And what do you think when the idea of coming to the end of work pops into your head? If there are things about retirement you’d like more information on, post your questions on this blog and I’ll get to work on some answers for you.

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One of my biggest bugaboos over the years has been the difference in the way men and women deal with money. Some of it boils down to personality (women want more information; men want to score big); some boils down to the differences in our incomes. And while the general consensus is that we’ve pretty much achieved parity, that’s a myth, which is why women MUST start taking better care of themselves financially.

While it may seem as if women are in the workforce as much as men (with breaks for maternity leave), according to Statistics Canada, Women In Canada 5th ed., women have worked for pay for only 75% of their potential years vs. 94% for men. Plus we earned only 71 cents for every dollar a dude earned. Why oh why, in the 21st century would the average salary for female full-time, full-year teachers be just $47,500 while male teachers earned $63,300?

Women also take their roles as caregivers seriously, with almost twice as many women as men are involved in caring for children and elderly relatives. Of course, in order to cope with this caregiving responsibility, we reduce our work hours, refuse promotions and retire early.

While it is true that more women are well-educated – and this should lead to high-paying, professional jobs – the sad reality is that people with a post-secondary education hold 38% cent of Mcjobs, and women hold 2/3 of these jobs. Monica Townson, in New Frontiers of Research on Retirement: New vulnerable groups, says that 40% of jobs held by women are considered to be non-standard (part-time, contract, temporary) with few, if any, benefits.

Most people see our Canada Pension Plan as being a universal benefit, but you might be surprised to learn that the average CPP pension for women in October of 2005 was$334, just 63% of that received by the average male. Since we work for less time and money, our CPP payments, which are based on earnings, are lower. In 2003, the average annual pre-tax income of women age 16 and over was $24,400 — 62% of the figure for men, who had an average income of $39,300 that year.

We hear a lot about the fact that employed women have workplace pension. In 2001, that was true for just under 40% of women, leaving over 60% of women in the workforce without a company pension. And as of 2006, fewer companies are offering pensions.

Sure, but her husband has a pension, so she’ll be fine, right? Give me a break. His pension may be okay while he’s alive but statistically she’s going to outlive him, and have to live on 60% of his benefit. Pension experts suggest this is 10 to 15% less than needed to maintain the same standard of living. And since most workplace pensions are not indexed for inflation, she’s going to lose an additional 2 to 3% in purchasing power per year. Over 15 or 20 years that can really add up.

The government pension at 65 is also woefully inadequate. In 2007, OAS was approximately $492/month. When combined with GIS, given for those with no other income, the amount increased to a whopping $1113. A roof and food? Really? On less than $1200 a month? Women’s average retirement income was approximately $1260/month or $15,120/year. (The After Tax Low Income Cut Off for a single in large urban centers is $17,219, according to the National Council of Welfare.)

Despite the fact that Canada is a country of immigrants, many who have not lived in Canada 40 years between the ages of 18 and 65 are not eligible for full OAS. After 10 years in Canada before 65, they qualify to receive only 1/40th of OAS benefits for each year of residency, even though they are Canadian citizens or Landed Immigrants. Hey, we may be immigrants, but we still have to eat!

The picture is clear: while the government is doing what it can, with more of us retiring, if we don’t take personal responsibility for our futures we’re going to have a crappy last twenty years. I’m not really into dumpster diving, so I’m saving. You should be too.