By Jonathan Chevreau
On Wednesday, the Financial Post ran an online column of mine it titled Life After Retirement: Your Working Career Probably Isn’t Over Yet — Welcome to the Encore Act.
Regular readers will know that if I had my druthers, the headline would read more like the one we’ve displayed above: “Why Work probably won’t end after your Findependence Day.” (that is, the day you achieve Financial Independence).
I don’t view the terms Retirement and Financial Independence as interchangeable. By definition, Retirement (or at any rate, traditional full-stop Retirement funded with a generous Defined Benefit pension) means no longer working for money. Financial Independence (aka Findependence), on the other hand, can occur years and even decades before traditional Retirement and so seldom means the end of productive work.
This very web site — as well as the now six-m0nth-old sister site, the Financial Independence Hub — is dedicated to clarifying this distinction. And of course the Hub also constitutes a big element of my own personal Encore Act: next Tuesday will be the one-year anniversary of my own Findependence Day. In my case, I define that as no longer working as an employee of a giant corporation or government entity, and having the financial resources to work if I choose to, and not if I don’t.
How to find your Encore Career
Global study finds 15% of Canadians plan never to fully retire but many will embrace semi-retirement
Compared to 14 other countries surveyed, Canadians do well in reaching their later-in-life goals, even if they have to spend all their wealth and leave less to their children.
HSBC’s latest global report — The Future of Retirement, Choices for later life – surveyed 16,000 working-age and retired people, including 1,000 Canadians.
When asked about their attitude towards spending and saving, 27% of working-age Canadians say “spend all your money and let your children create their own wealth.”
The study also found Canadian retirees are much more likely to reach their later-in-life goals than some of their counterparts in other countries. 44% of Canadian retirees have reached “at least one of their retirement hopes and aspirations,” well above the global average of 24).
Mixed sentiments on semi-retirement
Canadian retirees are among the most likely to feel forced into semi-retirement, but almost half of those still in the workforce are planning for it. Only 17% of today’s fully-retired Canadians say they semi-retired first, versus 45% of working-age respondents who say they plan to semi-retire before taking the traditional full-stop retirement.
While semi-retirement can be forced on some as employers look to downsize older more expensive workers, many full-time workers actually aspire to semi-retirement. 15% of Canadians who are retired say they made the decision to semi-retire due to a lack of employment opportunities later in life. Only Australian retirees (17%) reported a lack of job prospects in greater numbers than Canadians, and respondents from both countries were well above the global average (10%).
“This latest research suggests that older Canadians and those approaching retirement age may also be feeling the pinch of underemployment at time when saving for the future is often at its most crucial,” said Betty Miao, Executive Vice President and Head of Retail Banking and Wealth Management, HSBC Bank Canada, via a press release distributed Wednesday (April 29).
Semi-retirement can also be forced on mid-career workers
Even among younger workers, 10% of survey participants between the ages of 45 and 54 admit their shift into semi-retirement wasn’t their personal choice. HSBC suggests that in the post-downturn job market, many experienced workers are being overlooked for full-time positions. In fact, half of all semi-retired respondents globally say they changed careers when they stopped full-time work. HSBC says some of these will be high achievers who reached their career aspirations and financial goals before retirement, but the figures “also point to a pool of wasted potential among experienced employees.”
The research also shows a major shift in how Canadians plan to retire in the future. While only 17% of those now fully retired say they semi-retired first, 45% of working-age respondents plan to semi-retire before taking full retirement. Around the world, an average 26% of working-age people plan to semi-retire at some point.
Miao says that with expected shortages of skilled labour in some sectors and professions “career opportunities look bright for at least some of those planning to work into their golden years.”
The full global and Canadian retirement survey reports and online retirement planning tool are available online here.
My friend the inimitable Norman Rothery posted a blog at MoneySense.ca Thursday that was inspired by a Twitter exchange last weekend: the post is titled Apple Watch Delays Findependence.
On Twitter, I had publicly disclosed that I had pre-ordered the new Apple Watch, even though delivery is several weeks away. Norm made a query about the possible impact on Findependence, then followed up in his blog by suggesting that young people buying these gadgets might seriously be delaying the arrival of their Findependence Day (that is, the day they reach Financial Independence) by 17 days for the cheapest model and for as much as two years for the expensive glitzy gold model.
I have no great problem with the blog, a typically contrarian piece by a great value investor: it’s all grist for the mill, as they say and I’m happy to see an influential writer like Norm use the term Findependence. Even so, let me assure readers out there who may have fancied me to be a frugal kind of guy that I quite definitely did NOT purchase the expensive gold-banded version. For the curious, I picked one of the simple entry-level models with a black band and the smaller watch-face, roughly the model illustrated above.
I entirely agree with Norman that the first generation of technology tends to have kinks and it’s never a bad idea to wait for a few releases and let the pioneers suffer the slings and arrows of outrageous technology fortune.
Three reasons why I pre-ordered
Here’s my latest MoneySense blog, which bears the headline When dividend investing trumps a balanced portfolio.
That’s an accurate depiction of the content but here at the Hub we’re sticking with the more offbeat headline used above. Because this column really does begin with a true story about harness racing in Florida.
How can that possibly relate to asset allocation and dividend investing? Click the above link to find out, or the Hub’s version below. And yes, the happy winner depicted below clutching a winning ticket is my wife, Ruth Snowden.
She’s known in her industry by that name. When we got married more than a quarter century ago she was concerned I might take offence that she didn’t want to use my surname in business circles. My response won’t surprise those who know us: “Honey, you can call yourself whatever you want as long as you pay half the mortgage!”. Of course, the mortgage has long been paid off, consistent with the Hub’s philosophy that “the foundation of Financial Independence is a paid-for home.” Read more
By Billy and Akaisha Kaderli,
Special to FindependenceDay.com
At the age of 62, we are beginning our 25th year of financial independence. That is quite a feat!
From the beaches on Nevis, West Indies, to the shores of Phuket, Thailand we have travelled extensively through these decades, and what a ride it’s been!
Young and strong in those early years, we were willing and able to tackle just about anything. Now we tend to be a bit more cautious but we’re not letting up. We still climb into the backs of pickup trucks, ride the chicken buses and soak in volcanic hot pools. The time has passed quickly from when we were the youngest, grayless couple in a group of retirees, to now where we blend in with the retiree crowd.
Still, no one can take away the dance we danced and we are filled with gratitude for all the miles and smiles.
You can do it too!
How do you want to live the next five, ten, twenty years or more? Only you can decide what is best on your path and how to get to your goal.
We were often told retiring early couldn’t be done successfully and that we would fail. These self-supported 24 years have proven the naysayers wrong, and we believe that since we have done it, you can too. In our books and on our website we share the tools we have used to get us here so that you, too, can create your own successful retirement, early or not.
We maintain that one must keep one’s dreams alive. No one will do it for you. Besides, it’s much more fun to be led by one’s dreams instead of being pushed by one’s problems.
No matter where you are on your path to Retirement (Findependence?), here are some time-tested tools we have used. Take advantage of what we know.
This is basic and oh-so-essential. When you track what you are spending you know exactly where your money is going and you are able to make decisions clearly and in real time about your cash outlay. This one habit will change your financial life.
Manage cost per day and annual net spending
Once you track your spending, you are able to figure out the yearly amount of money you are devoting to live the lifestyle you are currently enjoying. Divide your yearly amount by 365 days a year and you have your Cost per Day. Manage these figures assertively and you will be in control of your money. We have been retired for a full 24 years (beginning our 25th year January 14, 2015) and our annual spending for these years has been well under $30K per year.
4 categories of spending
In any household, there are four major spending categories: housing, transportation, taxes and food. If you make adjustments here – and there are lots of ways to do so – you are on your way to financial independence. Open yourself up to options such as house sitting, moving to a less costly area to live, paring down the number of vehicles you own, and being aware of your entertainment outlays.
Positive attitude and mental flexibility
Some people think having a positive and flexible mental attitude is small stuff and inconsequential. But without a sense of wonder, an open mind to new things and even to Change itself, making the transition into a satisfying new life of retirement is more difficult. There are so many opportunities and different ways to live, travel and experience life! Why get in your own way? Embrace your retirement and get a mitt and get in the game!
So, as we begin our 25th year we encourage you to dust off that dream and create a clear vision. Strengthen your will to move into your new life and put your solid financial plan into action. If you do these simple things, you, too, can live the life of your dreams.
Editor’s note: On the date of our retirement, January 14, 1991, the S&P 500 was at 312.49. It has averaged better than 8% yearly plus dividends over these decades. Our average annual spending is well below $30K yearly.
About the Authors
Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991. They wrote the popular books, The Adventurer’s Guide to Early Retirement and Your Retirement Dream IS Possible.
Seniors are now twice as likely to rely on their home equity to fund their retirement than before the financial crisis, says a Fidelity retirement survey. They’re also more likely to work in retirement, provided they can find employment.
Since 2005, the number of Canadian retirees relying on home equity to fund retirement has more than doubled from 14% to 36%, says the survey, commissioned by Fidelity Investments Canada ULC.
Conducted by The Strategic Counsel, the 10th Fidelity Canadian Retirement Survey of retirees or workers 45 or older also finds:
• Since the financial crisis, the number of retirees saying it has been more difficult than expected to retire has dropped from 28% in 2009 to 20% in 2014
• More pre-retirees expect to work full or part-time in retirement (62% in 2014 compared with 55% in 2005)
• An increase in reliance on savings held inside a RRSP or RRIF (58% in 2014 compared with 53% in 2005)
• Despite changing trends over the past decade, the vast majority (85%) of Canadian retirees have a positive outlook on life in retirement
Half retired earlier than planned
Fidelity says 48% of retirees polled had retired earlier than planned, often for involuntary reasons. Of this group, 19% had to retire early because of health problems. Another 9% attribute early retirement to work stress and another 9% said “work stoppage” was the reason for early retirement.
Of those retirees not working, one in five would like to work if they could. The main reasons for retirees not being able to work are heath (38%), feeling employers are not interested in employing retirees (23%) and not being able to find a job (15%).
Planning to work is not a retirement plan
“Planning to work in retirement is not a retirement plan,” says Peter Drake, vice president of retirement for Fidelity Canada. “Having a viable plan in place to generate sustainable income in retirement is arguably the most important aspect of retirement planning. Working with a financial advisor and setting goals for retirement is the best way to ease uncertainty and reduce stress around how to create the retirement paycheque. A good retirement plan should have flexibility in case circumstances change, as they often do.”
The survey of 1,390 adult Canadians was conducted online between October 22 and November 3, 2014.
Here’s my latest MoneySense blog, entitled Why you should re-think Early Retirement. This is a topic I’ve been researching for several months, going back to some blogs I wrote on Mark Venning’s ChangeRangers.com, which challenges readers to “envision the promise of longevity.” He also sensibly counsels that we should “plan for Longevity, not for Retirement.”
As you can see by clicking through to the blog (also reproduced below), some of this message was articulated in a speech delivered Wednesday evening at the Financial Show, and which I also gave Monday night at the Port Credit chapter of Toastmasters.
By Jonathan Chevreau
I recently delivered a talk about how longevity changes everything. I began by showing the front cover of the latest Bloomberg Business magazine, which shows a woman celebrating her 173rd birthday. Read more
Earlier this week there was extensive mass media coverage of the latest Sun Life “Unretirement” survey, which found more Canadians now expect to work full-time at age 66 than the number who are retired.
Given that the traditional retirement age has been 65, and remains the age many older investors think of collecting Old Age Security and the Canada Pension Plan, the general tone of this coverage was that the idea of working to such an “advanced” age is in itself scandalous.
Regular readers will know what I’m about to say, and did say Wednesday night on a CTV item on the survey. With rising trends to longevity, more and more people are choosing to work longer or feel financially compelled to do so. Indeed, governments around the world generally would love to see us all work longer and pay taxes longer, which is why the age of OAS onset is being bumped up to 67 for younger Canadians.
Plan for Longevity, not Retirement
Our sister site, the Financial Independence Hub, attempts to be a North American portal running content that may interest readers on either side of the 49th parallel.
This isn’t always easy; sometimes it runs blogs from people like Roger Wohlner, The Chicago Financial Planner and perforce the content (like this blog he adapted for the Hub) will be mostly US-specific: touching on topics like IRAs, 401(k)s, Roth IRAs and all the rest of it.
By the same token, its Canadian contributors often write about things like the TFSA or Tax Free Savings Account, which is the equivalent of America’s Roth IRAs and variants of same.
As fate would have it, the Financial Post (my former employer until 2012), asked me to contribute an article comparing the tax and retirement systems of the two countries. You can find it here under the headline Canada vs. the US: Whose Retirement grass is greener?
Findependence is legitimate cross-border topic
I was happy to take the assignment because I’ve been grappling with US/Canadian tax and retirement issues ever since I wrote the book that spawned this and other web sites. The original edition of my 2008 financial novel, Findependence Day, was meant to be a transborder financial love story, covering the tax and retirement topics of both countries through the eyes of characters residing in both countries.
My feeling was then and remains that when you get right down to it, the main lessons of Financial Independence are pretty similar in the two countries. The Post article addresses the similarities and differences head on.
As I explained when we launched the site, we do not perceive the Hub as being a tactical personal finance site: such sites do need to be specific to one country or the other. Nor is it a Retirement site per se: it covers the entire life cycle of investing starting with Millennials graduating with student-loan and credit-card debt and moving all the way up to Wealth Accumulation, Encore Careers, Decumulation & Downsizing and finally Longevity & Aging. These are universal topics not restricted to being on one side of the border or another. In fact, I play a lot of Internet bridge and most of my partners are Americans: it never occurs to us that the border makes a scrap of difference.
Asymmetry in US and Canadian financial content
However, when it came to marketing the book, I soon realized that while Canadians are happy to read US personal finance books, it doesn’t work in reverse. The US is after all a country with ten times more people and is arguably the most important economy in the world. Most Canadians have significant investments in US stocks and if we loaded up when the loonie was near parity, we’re glad we did: with the loonie now near 80 cents US, our retirement accounts are 20% larger to the extent they hold investments denominated in U.S. dollars.
But on the other side, I find with a few exceptions Americans have little reason to bone up on Canadian investments: Canada makes up only 4% or so of the global stock market, compared to close to half for America.
All of which explains why I decided to publish an all-American edition of Findependence Day in 2013. I challenge readers to find a single reference to Canada! Plus, last fall, I released two short Kindle e-books that are summaries of the book, and which cost just US$2.99. I describe A Novel Approach to Financial Independence as a kind of “Cliffs Notes” summary for American readers, and in Canada it’s a “Coles Notes” summary. Again, just like the retirement systems, citizens in both countries grew up with yellow-and-black “cheat” sheets to help us get through school: Cliffs and Coles are almost identical concepts.
When the original book was published, we billed it as a “North American” edition, since it would mention things like RRSPs and IRAs in the same breath. But with the launch of the all-US edition, we now call the original book the Canadian edition. I hope to do an all-Canadian edition on the Kindle sometime the next year or two.
I recently delivered my debut “Ice Breakers” talk at the local (Port Credit) chapter of Toastmasters, an organization I highly recommend for anyone who wants to polish their public speaking and leadership skills.
I began by pulling out a $5 bill and dropping it at my feet. I asked how many audience members would pick one up if they saw a stray fin on the sidewalk. Most would, but also admitted they probably wouldn’t bother to stoop to pick up a penny or a nickel. I also remarked that when you pull a green $20 bill out of your wallet and consider what it can purchase, your attitude to that bill’s value is probably about what it was to a purple $10 bill some two decades earlier. Inflation, it seems, is forever with us.
If this is inflation, bring it on!
But if you ever wanted a concrete demonstration of the value of a lowly blue $5 bill, then go the website fiverr.com. That’s FIVERR, a “fiver” with an extra R. You may even see ads for this site elsewhere here at FindependenceDay.com as well as at MoneySense.ca, where this blog may also appear.
FIVERR is a wonderful example of the global trend to technology-enhanced outsourcing of personal and business services. You search for some task you want performing and a bunch of people from anywhere in the world offer to take on the “gig” for as little as $5. They may want to upsell you, which is perfectly fine, but my experience with the site was it did exactly what I asked for the price offered. The cover of my new e-book released earlier this week, and shown below, was designed for $5 (US dollars, mind you!).
The other gig I needed to publish the e-book at Amazon was to format my Microsoft Word manuscript into the format required by the Kindle. This task too was performed for $5. I don’t know where in the world these people are located. I assume some are in the United States but for all I know — and as in the case with 99 Designs, which we looked at a few weeks ago — it could be half way around the world, where $5 may buy what $100 purchases in North America.
You can offer gigs as well as utilize them
It costs nothing to join fiver.com and of course you’re as free to be the provider of services for $5 a gig as you are to be the purchaser.
In fact, if there are any services out there that readers think I could perform for $5, drop me a line at firstname.lastname@example.org.