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retirement planning

Kathleen Livingston enjoys the day in her new home base of Hamilton after moving there from Regina.Glenn Lowson/The Globe and Mail

This time last year, Kathleen Livingston thought everything was in place to ensure a smooth transition into retirement.

That was until the 61-year-old and her common-law partner recently decided to go their separate ways after 21 years together, and she was forced to completely re-evaluate her situation.

"One of the things that I found shocking was that I expected my retirement to be with my partner, and that sets you up for many different assumptions," she says. "Now I've been disabused of all those assumptions and illusions, it changes the horizon and the landscape significantly."

Despite the turmoil, Ms. Livingston is determined to put a positive spin on the new direction her life has taken. As part of a written agreement between the pair, Ms. Livingston had no claim to her partner's pension, although she did gain all the proceeds from the sale of their house in Regina. Consequently, she is left with a small portfolio, split between mutual funds and a tax-free savings account. She applied for and receives a small monthly stipend from the Canada Pension Plan and she will get Old Age Security when she turns 65.

To complicate matters further, Ms. Livingston has relocated from Saskatchewan to Ontario to be nearer to her siblings and mother, who are in poor health.

But while her situation is understandably anxiety-inducing, it's far from unique. The "grey divorce" phenomenon is growing. The 2011 federal census shows that 21.6 per cent of Canadian women and 18.9 per cent of Canadian men in their late 50s are divorced or separated, the highest among all age groups.

The need for planning ahead for retirement is therefore of vital importance to this demographic, particularly when the basic costs of living – mortgage or rent payments, utilities and food – all fall squarely on the shoulders of one person rather than two.

"Here's the thing," says Jonathan Sceeles, a certified financial planner with Edward Jones in Toronto. "It's not that it will cost more living alone, it's that you will have fewer resources to cover your costs."

Mr. Sceeles estimates that being single in retirement still costs close to 90 per cent of what a couple would spend, but a twosome often benefits from having two incomes, two pensions and additional CPP and OAS payments, which amount to "another $1,000 a month."

To help offset this, Mr. Sceeles strongly recommends that single retirees not carry a mortgage into retirement, and champions downsizing or relocating to a lower-cost neighbourhood as a method of eliminating that possibility.

"You could even consider selling the property altogether and using that capital to invest and create income and then rent a property, so there's a number of things you can do if you have real estate to begin with," he says.

Mr. Sceeles also advises some of his single female clients to consider a Golden Girls situation.

"If they can find someone that they think they can live with for many years, it's certainly a very viable option," he explains.

Ms. Livingston recently purchased a new home in Hamilton, which was less expensive than the one in Regina, and is also looking to re-enter the workplace. As a senior administrator for a not-for-profit company previously, she was interviewing for jobs with industry associations at the time of publication.

Given her financial situation, she says she will likely be working into her 70s. Mr. Sceeles estimates that by working to 70 rather than 65, retirees will increase their CPP payout by about 42 per cent. Old Age Security can also be postponed for up to five years after age 65, in exchange for a higher monthly amount.

"If you're able and willing to continue to work even a couple of additional years it can make a significant difference to how your financial plan will look and how long your money will last," he says.

Joshua Brown, a certified financial planner with Sun Life Financial in Whitby, Ont., says broader questions need to be asked before making that decision.

"I've sat down with people and their financial planner has said you definitely can't retire until you're 70," he says. "Has that person looked at their family history, because if their parents lived until they were 75, do you really want to be working your whole life to have maybe five years of enjoyment?"

Mr. Brown says someone like Ms. Livingston should also be considering the timing of her OAS withdrawals, particularly once she starts back at work. He refers to another single client of his, older than 65, who didn't get any advice at the time and started to draw his OAS, but because he was making more than $100,000 in income, most of the OAS was clawed back.

"If we're waiting on OAS we can get more of a payout later on because we can wait until 70 to start drawing OAS," Mr. Brown says. "So that's one thing for that particular client to be thinking about, if we are working we are going to want to sit down when you're 65, before you make any decisions on OAS because we can wait. "

Mr. Brown also explains that someone like Ms. Livingston should be consulting a financial adviser to plan to move funds from her TFSA to her retirement savings, particularly given the amount of time she has been off work this year carrying out her big move from Regina to Hamilton.

"She might only have half of a normal year's income," he says, "So that individual, if she's used to saving, she might go back to work and start putting $1,000 a month into an RRSP, but this year her income maybe be only $50,000, half of what it might be next year of $100,000, so we would want to just look at things like that."

Ms. Livingston is reticent to use a financial planner though, saying that her portfolio is too small to interest a professional adviser. But Mr. Brown says that needn't be the case.

"The more experience that an adviser has and the more education, the bigger the account minimum typically," he says. "However, [while] I prefer to have a $100,000 [minimum] account, I took on a $7,000 account this year and I helped some new immigrants start up a $100-a-month savings plan."

Mr. Brown advises that someone in Ms. Livingston's shoes should be bold and approach someone who they would feel would be a good adviser for them, even if she feels her portfolio might fall below the minimum requirements.

"Fear is a huge factor with meeting people for an initial financial plan," he says. "It's like going to gym class when you're 12 years old but now you're 60 and you've got to meet with somebody and you've got to show them your whole financial health or physical health. Not everybody can do that."

When it comes to investing that money, however, Mr. Sceeles says that women who enter retirement single due to separation, divorce or death tend to take a more conservative approach compared with those who have been single for life, often because their partners have handled the couple's finances and it takes these women a while to assess their risk tolerance.

"I would say that women who are single all their life are probably a little more aggressive [with their investments] because they've learned to look after themselves," Mr. Sceeles says.

In Ms. Livingston's case, now surrounded by her family in Ontario, she is already feeling more confident and hopeful about her future. Buying a new home was the first step in moving on from her previous relationship, and finding a job is next on the agenda .

"Financially, I don't know," she says. "I'm going to have some equity left over from the sale of my house in Regina and at least I will have something of a retirement portfolio, if not a lavish one.

"I'm an optimist by nature so whatever comes my way I'll deal with it."

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