The following is an excerpt from the You Could Live a Long Time: Are You Ready?
Thinking about your financial future could mean a future where you won't need to think about finances.
Establishing some clear goals around their financial future was a technique that helped many of the elders. Carol had some financial struggles when she was younger, but now, at 85, is very happy with her financial position. At age 43 she left her husband and raised three children on a teacher's income. By taking evening courses, she was able to improve her credentials and increase her salary, and her pension was based on her last five years of teaching. "I have been conscious of financial matters ever since my father brought me a piggy bank offered by our local bank to encourage children to save. Things have been tight in the past, but now I'm quite comfortably settled. I can waste money, or send it off to people, or go out for lunch at the drop of a hat. The most important thing in life is to develop a financial goal and to always pursue it. You need to become financially confident."
Planning ahead also helped Brian. "When I was in my late fifties I figured out where I wanted to live and what it would cost, and realized that I wouldn't have enough to live on if I didn't make some changes. So I made some strong decisions early on. I took a new job that came with a pension and continued to work there until retirement. With this supplementary pension, my money is more than enough." William regrets not having done this. "If I were able to turn back the clock and be 50 again, I would have set myself a goal about saving money." Hugh advises me to cut up my credit cards. "Pay cash for everything. That way when you're old you'll have some money left."
Jeanette's financial preparation meant that she was able to cope when her husband developed dementia shortly after retiring. "For the first part of my marriage, my husband looked after all our financial matters. Then, when I was in my forties, I decided I wanted to handle the finances so I could become aware of what we had. I thank my lucky stars I did, because when my husband became ill, I was prepared. Make sure you understand your finances and your pension. You need to be able to manage your affairs so that you will have enough to live comfortably even if something happens to your husband. You have to be prepared. It can happen at any time."
But even the best-laid financial plans may need modifying. When Betsy was younger she sold her house and assumed the proceeds would be sufficient for a nice retirement nest egg. "I have done my best to plan financially, but if I live well into my nineties there may be a problem. I have been renting an apartment for the past nine years, but have just recently bought a condo as a better investment. I hope I will not be a burden to my children."
Sherry Cooper's book The New Retirement is a useful resource to help us evaluate how financially prepared we are for retirement. Cooper reminds us that our retirement nest egg will be affected by income risk (the size of our returns and the impact of inflation), contingency risk (those unexpected but necessary expenditures) and longevity risk (not knowing our lifespan). She makes the case that we boomers, in general, haven't saved enough for retirement, and she foretells the economic crisis when she urges us to make conservative estimates about future rates of return on our investments and the equity in our home. Although one can quibble with her specific recommendations regarding the optimum portfolio allocation, this next tip brooks no debate. She says the best way to reduce the strain on our nest egg is to keep working and delay drawing down our retirement savings.
The Canadian Retirement Income Calculator, an online service provided by the government of Canada, is a useful exercise to estimate the ongoing income you may receive throughout your retirement from your pensions and other retirement incomes. You enter your personal information on the site, including your CPP Statement of Contributions, financial information about your employer pension (if you have one), recent RRSP statement(s) (if applicable) and statements for other savings that will provide ongoing monthly retirement income (annuities, foreign pensions, survivor pensions, etc.). The site states that the service is secure and will ensure the privacy of your personal information. It should take about thirty minutes to use the calculator.
But my favourite of all the financial resources is Redefining Retirement: New Realities for Boomer Women , by Margaret Hovanec and Elizabeth Shilton. The authors' goal is to help us develop a sustainable lifestyle for our retirement years, and, despite the book's title and focus, the advice is equally relevant to men. The book walks us through the construction of a Lifestyle Maintenance Budget to help us balance our income and expenditures after retirement. The authors appreciate that, for many of us, the Lifestyle Maintenance Budget won't balance in the first go-round, especially if we plan to continue our lifestyle unchanged post retirement. They walk us through some exercises of cost-cutting and income boosting, and then it's up to us to do the hard work of eliminating that gap between projected income and projected expenses. The tools include a monthly budget sheet with spending categories, and practical tips for saving money. What sets this book apart is that Hovanec is a psychologist and she understands our attachment to money and all the glittering things it can buy. She reminds us, before we make a specific purchase, to calculate the amount of life energy the item cost. Life energy is basically the time we've spent in acquiring the money that we intend to trade for the product or service. We're the only ones who can decide which trade-offs are worth it, and this exercise forces us to face the question squarely. The book's consistent message is that we have choices, and we should be making them now.
Excerpted from You Could Live a Long Time: Are You Ready? by Lyndsay Green, copyright 2010. Reproduced courtesy of Thomas Allen Publishers. All rights reserved.