A Canadian based study was conducted by three University of Waterloo researchers, entitled “Basic Living Expenses for the Canadian Elderly”, to determine the basic living expenses required by Canadian seniors living in different circumstances in terms of age, gender, city of residence, household size, home ownership / renter, means of transportation, and health status.  It assesses the minimum level of income required in retirement and the adequacy of savings and income security programs.  Using Halifax, Montreal, Toronto, Calgary and Vancouver as base urban centres, the study looks at identifying what the elderly income threshold is for these urban areas for an single elderly individual and an elderly couple for 2001.

The paper’s conclusions suggest that individual circumstances, rather than age, are the primary drivers in determining the cost of basic expenses.  The thresholds resulting from the study provide a general impression of the necessary after tax income needed to cover basic needs.

A no frills retirement – couple rents rather than owns, owns no vehicles but uses public transit, low clothing expenditures, and has very little or no extra cash for minor indulgences (like cable, alcohol and entertainment) – would have an annual cost of between $20,200 to $27,400.  Some comfort is out there for those concerned about those annual cost numbers because the Old Age Security (OAS) and Guaranteed Income Supplement (GIS) programs for low income seniors gets close to covering these basic needs – just barely or very close depending on the city you live in.  If you add the Canada Pension Plan (CPP) payouts, if you worked most of your life, you will get more – a bit less than $30,000.

I’m sure most would look at a no frills lifestyle and cringe but there will be income.  Most Canadians want better than the no frills version and expect the same or similar levels of comfort they enjoyed while working.

Another article that discusses the noted study presents some info regarding how much income to you need.  It assumes you receive about $30,000 from CPP and OAS as a base.  For a more active lifestyle than the no frills lifestyle described above, an extra $10,000 to $30,000 a year would be needed.  Some financial planning research suggests you need retirement savings of 25 times your annual retirement spend (excluding CPP and OAS) if you want to keep spending that much for the rest of your life.  Statistics Canada indicates that median spending by a couple over 65 is about $40,000 a year and average spending is about $51,000 per year.  At the $10,000 value that would mean a nest egg of $250,000.  A higher end lifestyle, at the $30,000 value, would mean a nest egg of $750,000.  If you want to be a big spender with an extra $100,000 a year of disposable income, your nest egg would have to be $2.5 million.

This all goes to show that you need to match wants to means – find a retirement lifestyle that fits your budget.  A more lavish lifestyle will be supported by an appropriately sized nest egg.  For many, going back to work part time can provide additional cash for extra lifestyle improvements.  Ideally finding part time work doing something you enjoy so you would love the work as well the extra money.

Refer to http://ideas.repec.org/p/mcm/sedapp/240.html to download a copy of the study.  Information from one of the authors can be found at http://www.naylornetwork.com/cia-nwl/articles/?aid=31031&projid=2080.

Refer to http://ca.finance.yahoo.com/retirement/article/moneysense/42/retirement-three-magic-numbers for an article about the study plus additional related data.

A recent article published  in the Ottawa Citizen (Saturday, May 1, 2010) by J. Chevreau (Wealthy Boomer) entitled “If you’re in debt, forget retirement” highlighted information worth considering as you look towards defining a retirement life you can afford.

The article highlights the results of 2 new surveys – one from Investors Group Inc. and the other from the Royal Bank of Canada.  These surveys indicated that Canadians intend to carry significant amounts of debt into retirements.  The 1st survey indicate 62% plan to carry debt such as a mortgage into their retirement.  The 2nd survey indicated 39% of Boomers 50+ entered retirement with some debt.

Previously the standard was to enter into retirement debt free but some now feel carrying debt in retirement is not necessarily bad.  A more relaxed attitude regarding debt seems to exist.  This may be due to a number of factors including delayed parenthood for the current boomer generation, family situations (divorce, remarriage, older children still living at home, etc.), and current low interest rates.  The article goes on to talk about deductable and non-deductible debt.  All appear to agree that getting rid of non-deductible debt is important point to stress when considering how ready you are for retirement.  Various views exist regarding deductible debt based upon the fact that this is more of an advantage to those in higher tax brackets.  There are numerous tax advantages.

Another item of note in the article was from an actuary (Malcolm Hamilton).  He is quoted in the article and states that retirees can get by on just 50% of their working incomes, assuming a paid-for home.  He also indicates that if you’re still in debt, you have no business retiring and it is almost always a symptom of poor planning.  Boomers with safe investments (like bonds, etc. which currently generate little or no return) and debt should consider clearing the debt.

A recent article published in the Ottawa Citizen (Making Retirement Dreams Come True – Saturday February 6, 2006 – Wealthy Boomer, Jonathan Chevreau) and also in the Financial Post, discusses a book entitled “Retirement Rocks!” (subtitled Canadian Boomers Invest in Life).  The article provides some interesting information for Boomers to consider.

One of the most interesting points raised in the article, and a point I’ve often considered, pertains to “how much is enough?”.  The couple who wrote the book believe that once debts are eliminated and kids launched, retirees can live on 50% or less of what they earned in their working years.  One of the authors was a financial advisor and shares a more detailed perspective of this 50% or less view – a good guideline is 20 times what you spend in a year, assuming you plan to live 30 years in retirement and die broke.

How does that translate into some real numbers……if you were use to living on $50K a year, you would need $1 million, if you were use to living on $100K a year, then you would need $2 million.  The article goes onto say that if you wish to leave an estate, then you want 25 times your annual spending limit.

Another interesting point noted in the article is that working part time in retirement can make a huge difference to retirement cash flow.  For every $1K you earn per month, you’ll need $200K to $250K less in your retirement pot.

The article also notes lifestyle questions – imagine three lifestyles: a bare bones lifestyle that includes Kraft Dinner and cable TV; a lavish lifestyle of foreign travel and dining out; and one between these two extremes.  When asked, most Boomers pick the latter as their dream.  All of this leads to the need for Boomers to do more retirement planning in advance of leaving full time employment and seriously considering whether working part time at something you like to do should be in your future.

Other lifepast50 posts contain information related to this and should be read in conjunction with this post – check out the related posts.

Retired Couples – shared retirement vision?

Boomers Next Stage – Transition Period?

A recent poll examining the attitudes and behaviours of 1,002 retired Canadians, age 55+ which included 746 retirees who are married or in a common-law relationship conducted in January 2010 by Angus Reid showed that 51% of Canadian retirees indicated that they had no idea, or only a vague idea, of what they wanted in their retirement.  The poll also indicated that 51% of those Canadian retirees that were married or in a common law relationship had the same / shared vision for their retirement as their partner.

This result should cause some pause for thought.  What retirement vision do you have and is it shared by your partner?

A recent article published in the Ottawa Citizen and Financial Post on Friday, January 29, 2010 entitled “Couples should have the same retirement ideas”, provides additional details regarding the poll and also identifies additional reading and support tools that couples can pursue.  Retirement planning should include establishing an understanding of what you would like to do together and also recognizing that your vision will evolve over time.  The article encourages couples to tackle the retirement vision discussion and not to avoid it.

Another interesting poll result was that 34% of retired couples say they are closer than ever because they can spend more time together but 19% say the hardest thing about adjusting to retired life is not being able to do all the things they use to do as a result of a reduced income.

A recent article published in the Ottawa Citizen and Financial Post (Saturday, December 26, 2009) by Jonathan Chevreau (Wealthy Boomer) discusses the fact that the decade we are about to complete will be the last decade many boomers will work as full time salaried employees.

The first wave of Baby Boomers born in the 1945/46 era will hit the traditional retirement age of 65 in 2010 and 2011 with the rest of the Boomers born in the 50’s reaching the traditional retirement age sometime before the end of 2020.  According to Canada’s Urban Futures Institute, 425,000 Canadians will retire each year by the time the end of 2020 appears.

The article references a BMO report that thinks the word “retirement” should be retired.  That report, issued by the BMO Retirement Institute in April 2009, found that the 2008 market crash caused Canadian Baby Boomers to revise their “retire by” plans.  A previous BMO study, from 3 years earlier, found most Canadian Boomers planned to work in some capacity after traditional retirement, with the top reasons being “to stay mentally active” and to “stay in touch with people”.  In the earlier study, money placed 3rd.  With the current report, money moved up to 1st as more than 80% of respondents cited the need to make money in retirement or semi-retirement.  Things have changed for those Canadians who aren’t lucky enough to have one of the gold plated defined benefit retirement plans at their disposal.

Boomers are entering a transition period – similar in nature to what Boomers have experienced if they underwent career changes during their full-time working life.  An opportunity to pursue other interests while you transition, which might provide Boomers with the opportunity to make some money on the side without the pressure of a demanding full-time salary job.

The article also points readers to a BMO online “transition calculator”.  You can find it by Googling “Retirement Your Way”.  The calculator will show the impact on savings if you work past the traditional age of 65 or if you opt to work part time during a multi-year transition period as you move from full time employment to full time leisure.  Sounds like a potentially useful tool.

Taking on part time project related work that could produce income in the $40K to $80K should be of interest to many Boomers who want to transition more slowly before getting into full-time leisure mode.  A interesting pursuit to me.

The author also goes on to say that semi-retired Boomers can accomplish a lot during this transition period and he is expecting many great things to appear.

An article published in the Ottawa Citizen and the Financial Post on Saturday, August 22nd by Jonathan Chevreau (Wealthy Boomer) should be read by all.  I’m sure we are all wondering, given the recent economic downturn whether we have enough tucked away for the future.  The findings noted as part of the headlines in the newspaper article is “Most Boomers’ retirement plans going nowhere”……this is what caught my interest.

The article discusses a forthcoming book, unveiling the Retirement Myth by Jim Otar, which says most baby boomers have not saved enough to retire comfortably and should plan to remain in the workforce quite a bit longer.

The author’s background is engineering and he provides this perspective in his book regarding his views on boomers preparedness for retirement.  One graphic noted in the newspaper articles discusses a tower designed for an average wind speed of 6 miles per hour crumbling under a 100mph wind speed and the author noting that based on good engineering, you would never design anything for the average…..you would design for the worst and then some.  This philosophy is the one taken by the author regarding retirement plans – it is wise to design your retirement plan not for average but for adverse conditions.

The book will be published in the fall.  You can download a free trial version at www.retirementoptimizer.com from now until August 31st.  The free trial version is an Excel spreadsheet with restrictions – parameters are fixed.  You can purchase a user license which allows you to change the locked parameters should you so wish.

As well you can see a video interview with the author at www.financialpost.com – find the Wealthy Boomer section and look for the various interviews.

A recent publication from the C.D. Howe Institute entitled “Faster, Younger, Richer? The Fond Hope and Sobering Reality of Immigration’s Impact on Canada’s Demographic and Economic Future”, presented a number of interesting points that members of the Canadian boomer generation should be aware of.   You can view the report at the C. D. Howe website (www.cdhowe.org).

The report’s focus is clearly on immigration and the demographic challenges facing Canada – basically a slow growing and aging population.  At the same time the report highlights some issues that should be of concern because it may impact the Canadian boomer generation directly – namely our desire to maintain and enhance our living standards.

One element of the report of interest to boomers is the Old-age Dependency ratio (OAD).  This is the ratio of Canadians aged 65 or greater compared to Canadians aged 18 to 64.  The OAD has been rising since 1971 and will enter a period of steeper increases around 2012 as more boomers pass the age of 65.  This shouldn’t be a surprise as we all should be aware of the fact that there is a boomer bubble – a large percentage of the Canadian population are baby boomers and this group is fast approaching the age of 65.  It is commonly believed that the higher the OAD ratio, the greater stress is placed on the generations below to support a large older generation.  This will no doubt impact many aspects of the boomer generation – fewer Canadians supporting more older Canadians could result in less for all across the country……lower economic growth, fewer social benefits, etc., thus impacting many things we have become accustomed to and expect to be there for us boomers.

The report presents a case for major policy reforms to mitigate the impact of the slower growing and aging population.  We can’t rely on immigration to bring in enough people to sustain our expected Canadian lifestyle and fully support our aging population.  The report indicates that these policy changes may have more impact than simply increasing immigration.  The changes to be made include:

• postpone retirement to age 70
• increased fertility, at least to the replacement level
• boost productivity growth

Impacts on the Canadian boomer generation ………  we may have to work longer in full time or part time capacities, we may have more grandchildren and/or great-grandchildren if fertility rates increase, we have to produce more output per workforce member ……… each of these will directly affect us as we age.  We will have to wait to see what these impacts may be but Canadians clearly have some issues to deal with, and the baby boomers specifically have some thinking to do.

There is a benefit to all Canadians in keeping Canada young.

An article published in the Ottawa Citizen (June 1, 2009) contends that baby boomers are drifting into old age with poor eating habits, too little exercise and decimated savings as quoted by the CEO of the International Longevity Center (www.ilcusa.org). This organization also indicates that there is a shortage of geriatricians and caregivers which means that society is unprepared for the aging population.

In a report published by the Interntional Longevity Center entitled "The Future of Living: Independently", boomers are urged to plan ahead for old age.  Boomers are encouraged to establish support systems by "keeping engaged, active and socially connected through pleasureable and meaningful activities like volunteering" and living in communities that make this possible.  Boomers are also encouraged to "think strategically about access to health care" and use new technologies to prevent isolation and enhance safety.

The article also talks about obesity with predictions that obesity is on the verge of causing a decline in life expectancy in our society – impacting boomers and generations behind the boomers.

The article carries on to state that we are approaching a point in time in human history where there will be a shift in global age structure – rise in life expectancy combined with falling fertility rates will leave societies with more older members than younger members – a different circumstance than the human population has experienced across human history.  With current life expectancy for Canadians at 82.5 years for women and 77.7 for men (Statistics Canada), Canadian society will experience this as soon as 2015.   By 2015 there will be more people in Canada over 65 than under 15 (based upon Statistics Canada’s most recent population projections) and the number of seniors will double in the next 25 years.

In a related article in the Ottawa Citizen on June 1, 2009, Canada is facing a serious eldercare crunch.  Government policy makers need to keep Canada’s aging population in mind so that government controlled infrastructure, policies, plans and resources can be designed to better support the aging population.  The article quotes a Carleton University researcher who states that investing in services for seniors now will dramatically cut costs to taxpayers later on.  Another interesting point in this article was that research survey results indicate that seniors would prefer to spend their final years at home, favouring help form formal services over family care.

The two articles present similar information.  Refer to the articles through these links…..Baby boomers aren’t aging gracefully, experts warn……and…….Canada faces elderly care crisis: researcher.

What could this mean to boomers?  The statistics indicate facts we boomers have known for a while.  Combine this with the fact that studies show our society isn’t fully prepared for what the statistics show and boomers may have some serious issues to contend with as we age closer to the Canadian life expectancy norms.  Taking better care of yourself may lead to a longer life but if individuals aren’t prepared to appropriately take care of themselves and society lacks the means to deal with an aging population, then where could that leave us boomers.   Some interesting points to consider.

Lane@lifepast50