THE ROAD TO RETIREMENT
This is part of the Globe and Mail's week-long series on baby boomers and how their spending, investing, health and lifestyle decisions could affect Canada's economy in the next 15 years. Is Canada ready for the boom?
For more, visit tgam.ca/boomershift and on Twitter at #GlobeBoomers
For many Canadians, the prospect of retirement is scary, yet exciting. In an online poll earlier this fall, The Globe and Mail asked Canadians how financially prepared they are for retirement, and what their biggest concerns are as they head into this new chapter of their lives. Of the hundreds of responses we received, "outliving my money" and "not having enough money" were two of the most common things we heard. Here's a sample of what Canadian baby boomers told us.
Situation: Late-stage divorce, but in good financial shape
Brenda Dusome has in many ways reached the top of the preretirement mountain trail: She owns a condo on Vancouver's seawall, has maxed-out her RRSPs and recently snagged a job with a rare defined-benefit pension plan. While she still intends to work until she is at least 70, she has a nice view of her financial future, and it looks pretty good.
That's not to say Ms. Dusome, a health clinic manager who is also runner and a hiker who regularly treks up Vancouver's famous "Grouse Grind" on Grouse Mountain, hasn't run into any obstacles along the way.
She and her husband of 26 years split when she was 50. For many in her situation, a divorce at that stage could mean starting over at the bottom of the mountain: A nest egg must be split in half.
"I thought I was going to have twice as much, because I thought I was going to be married," she said.
But with a career of her own, she was able to jump back into Vancouver's frothy property market after her divorce.
Ms. Dusome, a former vice-president at a credit union, says saving money has always been a modus operandi.
"On paper, when I retire, for sure my balance sheet will look fine," Ms. Dusome said. "But there will be some hard decisions to make."
For example, will she need the cash she could generate from selling or remortgaging her condo to do more travelling? Doing so would likely mean leaving central Vancouver, where she loves living for its nearby mountains, where she skis and hikes.
"My condo is something, as a lifestyle thing, for quality of life. It is very important to me."
She also knows she is lucky to have just signed on to an increasingly rare defined-benefit pension plan. However, her pension will be half as bountiful as that of someone who spent their entire career paying into one: "For me, getting into a defined-benefit plan over 50, it's not worth a ton, but it will make a big difference."
Situation: Retired early
After 31 years as a supervisor for a manufacturing company, Martin Ramsey decided to hang up his hat this past June.
Despite retiring four years ahead of schedule, Mr. Ramsey has no concerns financially.
"I was a prudent saver throughout my working career, maximizing my RRSP contributions, paying off my home 15 years ago, as well as utilizing the tax-free savings account when it was introduced," Mr. Ramsey says.
In total his retirement portfolio is close to $1-million. He has no outstanding debts and no dependents. In addition, Mr. Ramsey was able to pay into a defined benefit pension plan for 23 years before his company converted to a defined contribution plan in which he maxed out contributions every year.
"The DB pension plan was a real carrot for me in staying with my company," he says.
His decision to fast-track his retirement was made just a month before he walked out the factory doors for the last time. After losing an aunt and a close friend in a short span of time, Mr. Ramsey decided it was time to set his mind on some of the aspirations he never got the chance to fulfill during his working years.
His passion for taking photos is front and centre – a hobby he has been doing since he was a teenager. Over the years he has dabbled in freelance assignments, including a shot of Pierre Trudeau. Now he plans to dedicate more of his time to his favourite pasttime as well as use it to bring in a small income by selling his prints.
His bucket list isn't full of exotic travels – something he says he got out of his system in his earlier years when he photographed archeological digs in Mexico and Formula One races in Europe.
Instead he plans to focus on personal development and continuing education at the local college near his home in Hamilton. where over the years he has been a frequent student in engineering and computer courses.
"I always prepared myself for Plan A, B and C – because the trade industry had some uncertainty during the financial downturns," Mr. Ramsey says.
Situation: Low income, hopes to work again
Ray Noyes has an uncertain retirement plan for his 60s.
He hopes to return to work after living for years on disability payments, and would like to continue working until his late 60s if possible.
Mr. Noyes is currently living on $1,098 a month from disability benefits, much of which goes to pay $586 in monthly rent on his modest apartment. But he believes he may be able to return to work as his bipolar disorder improves and after he recovers from recent hip-replacement surgery.
His aspirations are modest; he says he hopes to achieve a somewhat less impoverished life in his senior years if he can find a way to return to work.
"I'm not striving to join the middle class. … All I'm asking for is to be less poor, at least get closer to the darn poverty line."
Mr. Noyes has volunteered with anti-poverty group Acorn since 2012 after the group helped him resolve a dispute with his landlord. He says he has met many others like himself who face poverty in retirement because they have lost jobs, faced illness and have been unable to save.
His modest income means he has few luxuries such as Internet or cable television, and his bad hip has even made it hard to get to the library to borrow DVDs for entertainment. He describes his bachelor apartment as the most basic he could find in Ottawa, but says the rent of almost $600 exceeds the maximum available shelter allowance of $479 under the disability system, so he uses some of his remaining "basic needs" allotment to supplement the cost. He believes disability benefits and core government Old Age Security and Canada Pension Plan payments need to increase for those who are single and have no other source of income, because they provide poverty-level amounts of income.
"I know people a bit older than me who are into their retirement and are depending on OAS and CPP, and it's very tough," he says.
Situation: Midlife divorce, having difficulty saving
Deborah Robertson says she has had a "peripatetic" career, working as a paralegal in Bermuda and as a constituency assistant for an MPP, among other things, all while raising a daughter who is now a lawyer in Victoria.
But her retirement plan remains a question mark. The law firm assistant says she has not managed to put much money away since emerging from a divorce four years ago. Not that she's complaining too much.
"I have had a good little run in the past couple of years of just enjoying myself, like you know, after the divorce," she says. "It was kind of nice to be on my own."
But a midlife divorce splits a nest egg in half. All tolled, she now has about $300,000 in savings, including the equity in her mortgaged house. But she knows she needs to get more serious about saving.
Her job pays $51,000 a year, a paycheque from which it is hard to squirrel away much. To afford to stay in her two-bedroom house, she says, she can't stop working. And her next 10 years, she says, are the only ones she can bank on being healthy. She says she might take on a boarder to help cover her costs.
She says she doesn't mind working well past the typical retirement age, as many assistants (and the lawyers they work for) do: "I enjoy working. It affords me a lifestyle that I like. I don't deny myself much while I am living this life, I must say. If I want to go out for dinner, I go. If I want that pair of shoes, I am afraid I buy it."
Still, once she eventually stops, she will need a place to live. And where she will end up, she admits, is unclear.
"I don't want to be warehoused in a building with a bunch of other old ladies," she says.
Her own mother is 87, living in her own home and recovering from a stroke. Caring for her, Ms. Robertson says, has her questioning whether she should simply live for today.
"You can suddenly see our own future. It's really made plain to you, at 60, when you look at your 87-year-old parent," she says.
Home: Upper Sackville, N.S.
Situation: Costa Rica bound
Anne McLeod, a high school law, history and English teacher, is set to put down her chalk in a year. But she sees her retirement as a chance to leave not just her career, but her country behind.
She and her 63-year-old husband, Darren, who works in finance for Halifax's transit system, plan to build their own home in Costa Rica, and – most likely – permanently trade the suburbs of Halifax for the monkeys and rain forests of Central America.
It all depends on a rebound in the strength of the Canadian dollar, she says, and whether they can sell their property here. But expatriate American friends in Costa Rica have already agreed to sell them a patch of riverside land. And they say they plan to plow all of the $200,000 in savings they hope to have into building a house there.
Their plan is predicated on the fact that living in Costa Rica is much cheaper than in Canada, meaning the $4,000-a-month before taxes they expect to receive in pension income will go much further than it would at home. Leaving Canada will also mean kissing goodbye to paying property taxes.
"That becomes a factor in staying in Canada. Especially in Nova Scotia, where our taxes are pretty much the highest in Canada. The cost of living is through the roof here, property taxes – and plus the winter," she said.
They are still sorting the tax details about whether they can live down there permanently or will need to keep a foothold in Canada. She believes they would still have to pay Canadian income tax. Health insurance, she says, can be purchased in Costa Rica and she says their health system is excellent.
"It's a very peaceful, a very laid-back lifestyle,' she said. "The people, they have their culture, they know who they are; I am only too happy to go there and assimilate into their lifestyle."
Their plan comes from a desire for adventure, something she says she shares with other boomers. "For me to stay here, I think I would be bored out of my mind," she said. "I really, really need to keep learning, to keep seeing, to keep doing."
Situation: Boomer with young children
At first glance, Bruce Alger has an impressive list of financial assets – a house paid off in Calgary, an investment portfolio currently sitting in the millions and a family cottage on Gabriola Island. But the father of three young kids has to make his retirement nest egg last twice as long than the average boomer.
"People would probably look at my overall assets and wonder why I would have a single worry in the world – but I have a very different situation than most my age with a much longer time horizon to plan for," Mr. Alger says.
With three kids aged 7, 11 and 14 – as well as a 25-year-old son from his first marriage – Mr. Alger won't be downsizing or using any home equity to fund his retirement. Instead he plans to work as long as he can and cushion his investment portfolio.
"Because of the unique situation I am in I can't sell my home to fund retirement, and on top of that I think it is foolish to think of your home as an investment when you still need a living space."
In addition to having to maintain a house for his young family, he still has three more university careers to fund. With his eldest already in the working world, he has maintained a family RESP for his remaining three kids, estimating he will need least $100,000 per child for postsecondary expenses.
While he is worry-free about having enough money to last his lifetime, he worries about his wife – who is more than 17 years younger – having enough when he is no longer around.
As a result, the bankrupt-trustee and chartered accountant still works full time with no plans to retire any time soon – if at all, he says. While his first motivation to continue to work is the money, keeping his mind active is also a key motivator.
"For me, retirement is continuing to make some money, keeping my brain alert and, most important, maintaining my relationship," he adds. "I love my wife and when I'm working it means I'm not getting underfoot."