Twice as many retirees now rely on home equity: Fidelity survey

House made of money in handSeniors 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

PeterDrake

Peter Drake

“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.

Longevity changes everything: rethinking early retirement

foreverpillcoverHere’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

Working to 66 is no tragedy

Senior man working on a computerEarlier 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

I still love the positioning of Mark Venning at ChangeRangers.com, who says we should be planning not for Retirement, but for Longevity. Read more

Is the Retirement grass greener in the United States or Canada?

Depositphotos_40901151_xsOur 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.

FindependenceDayBook_Crop1All 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.

 

What can you buy for 5 bucks? Quite a lot!

fiverrI 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!).

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My ebook cover designed by Fiverr.com

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 jonathan@findependenceday.com.

Are you ready for The Big Shift?

bigshiftIf you’re intrigued by the kind of content we publish here and on our sister site, you should be fascinated by The Big Shift, a book published originally in 2011 by Marc Freedman.

The subtitle tells it all: Navigating the New Stage Beyond Midlife. Freedman is a “social entrepreneur” who founded a firm called Civic Ventures (now Encore.org), and previously published (in 2007) a book called Encore: Finding Work That Matters in the Second Half of Life. We’ll review that in the next few weeks.

Both books have crystallized my thinking of what our sister site is all about, so much so that we have renamed the fifth of its six major blog categories Encore Acts, (from the previous Business Ownership). As we noted Saturday in the Hub’s new weekly wrap, an Encore Act may or may not include entrepreneurship but there are many Encore Acts that may not involve launching a new business.

The Longevity Bonus: centenarians galore? Read more

Maybe you just THINK you want to retire?

senior gentleman working on laptop outdoors

My latest MoneySense blog has been posted, titled Maybe you just think you want to retire?

The word “think” needs to be emphasized, since the point is that I’m not so sure baby boomers really want to retire anymore, at least not in their 50s or early 60s. I actually had written this particular blog before reading and reviewing some books about Encore Careers and Second Acts, such as last week’s review of Unretirement.

Of course, this website and sister site Financial Independence Hub are dedicated to the proposition that there is a difference between traditional “full-stop” retirement and Financial Independence, or “Findependence.” To us, Findependence sets the stage for one’s true calling in life, which is why the six blog sections over at the Hub now include one called Encore Acts. From where I sit, it’s a lot easier to launch an Encore Act once you have a modicum of Financial Independence established.

For the full blog, click the blue link above.

For archival purposes and the convenience of one-stop shopping, you can also find the original blog below.

Read more

Baby Boomers embrace Unretirement

BN-ER243_bkrvun_GV_20140923135029Unretirement is a concept not unlike Findependence or Financial Independence; it’s also the title of a recently published book by Chris Farrell, Bloomberg Businessweek columnist and senior economics contributor for American Public Media’s syndicated radio show, Marketplace.

I’ve also seen the term Unretirement used by Sun Life Financial in Canada but that seems to be more a marketing term the company uses to promote its surveys on traditional retirement. That survey has been going for six years now, which certainly predates the publication of Farrell’s Unretirement (it was published in 2014 by New York-based Bloomsbury Publishing plc).

The theme of the book is encapsulated in the title of the opening chapter: Work Long and Prosper. As we’ve noted in the Aging & Longevity section of our sister site, the Financial Independence Hub, advances in life expectancy suggests the Baby Boomers and succeeding generations may work long past the traditional retirement age of 65.

True, many boomers may no longer be employed by giant corporations — either because they choose to leave or are involuntarily parted from such employment — but Farrell sees most of them becoming free agents of some sort: finding new “encore” careers, starting new businesses or contracting their services back to former employers while adding other clients, volunteering and philanthropy, among other activities.

Five pitfalls related to Longevity Read more

How Ernie Zelinski retired Happy, Wild & Free

How-to-Retire-Happy-Cover-3D-2-2-AI have a lot of books about Retirement and Financial Independence in my personal library, but I seldom go through any one twice. Today’s review is an exception because of a lunch I had with a friend we’ll call Albert (not his actual name).

Albert is a former client with whom I’ve kept in touch. He’s now 70 and just begun to retire. Because of various circumstances, he was unable to engage in most of the basic practices described here or at our sister site, the Financial Independence Hub:  so no taxable or tax-sheltered savings for Albert.

Fortunately for him, he bought a house in Toronto at something like a third of what’s it’s worth now, and it’s that home equity that has allowed him to finally stop working. He has no dependents and after going over the pros and cons took out a reverse mortgage.

The Joy of Not Working

But that’s not what this blog is about. Over our lunch, Albert told me he’d been at the public library to check out books about Retirement. Two were by a Canadian writer who has achieved massive international success through self publishing: Ernie Zelinski. He’s written 15 books but the two best-known were the ones Albert got from the library: The Joy of Not Working and How to Retire Happy, Wild and Free. I told him I’d read both a long time ago and likely reviewed them when they first came out.

Retrieving Wild & Free from my office shelves, I noticed I had read it in November 2003, when I was 50 and (as it turned out), still more than a decade from my Findependence Day. I started to flip the pages and noted I had underlined many passages, some of which I reproduce below.

It holds up well. Note the subtitle of Wild & Free: “Retirement Wisdom that you won’t get from your financial advisor.”

Connoisseur of Leisure is now 65

Photo of Ernie Zelinski

Ernie Zelinski

Zelinski is an interesting character. He lives in Edmonton, Alberta and opted for semi-retirement when he was 30, despite having a net worth of minus $30,000 at the time. Born in 1949, he turned 65 last summer. Zelinksi, who is unmarried, has long described himself as a “connoisseur of leisure” who used to work just two or three hours a day.

That work was mostly writing his books, generally in various Edmonton coffee shops. He religiously adhered to a daily writing regime that clearly worked for him: as of 2015, The Joy of Not Working has sold 280,000 copies, Zelinski told me this week.

Zelinski self-published Joy between 1991 and 1997, at which point he handed it to Ten Speed Press, later acquired by Random House. While it has slightly outsold Wild & Free, he makes more from the latter because it’s self published. He says it was rejected by 35 British and American publishers and sent me three rejection letters to confirm it. One New York giant publishing house told him in 2003 that “the retirement shelf” is quite crowded but “we hope you prove us wrong.”

I’d say he did: He has since negotiated 111 book deals with publishers in 29 countries. The two big titles continue to sell, so much so he says he can’t qualify for Old Age Security. “I’m making the best money ever in my life. Only 1% get it clawed back … I guess I’m a 1 percenter among 65-year olds.” He now works about half an hour a day. How he spends the other 23-and-half hours you can divine from his books.

Do we focus too much on the financial side of retirement?

As I perused the pages of Wild & Free once again, I was struck by how little the book dealt with the usual financial matters that the personal finance press tends to focus on. Here’s one passage I had underlined 12 years ago:

“… the biggest mistake you can make with your retirement planning is to concentrate only on the financial aspects.”

Some of the points in the chapter summaries include “You are never too young to retire,” “Retiring too late means you don’t get another chance to do it right”, “Life is short — and so is money,” and “It’s better to live rich than die rich.”

The book nicely touches on the dilemma debated just last week in a MoneySense blog I wrote that was repurposed here at our sister site (aka “The Hub”) under the headline, “Retirement Planning would be so much easier if we knew (exactly) when we were going to die.”

I have to admit that once I re-read the passages I had underlined in 2003, and much more that I hadn’t the first time around, I thought to myself: “Why am I working so hard when I really don’t have to?”

It’s not about loafing but about staying active

Zelinski’s list of things you can do in Retirement takes multiple pages to list and it got me thinking about my own oft-postponed semi-retirement. When I put the book down for the second time, I was even inspired to go back to a hobby that had obsessed me between 2004 and 2011 or so: Internet bridge. Over those years, I had encountered many cyber personalities from around the world and was pleased to reencounter several of them once I did.

While Zelinski doesn’t use the term Findependence, his vision of Semi-Retirement is certainly consistent with this website’s insistence that our last few decades need to have purpose:

“This I can assure you: You won’t find genuine joy and satisfaction by spending all your time sleeping, relaxing, loafing, and watching TV, hoping to live up to the ideal of a true idler … To retire happy, wild, and free, you must stay active.”

As I have noted in other blogs about Extreme Early Retirement, Zelinski is certainly no loafer: he was smart enough to get out of the corporate jungle early in life so he could become an entrepreneur: in addition to his publishing empire he still speaks a bit. Sounds corny but it’s another case of “do what you love and the money will follow.”

I could go on at length but if you want more, go ahead and buy the book, or for $2.99 you could buy this summary e-book by Bob Matthews. It certainly made me think and I’d love to hear from Zelinski fans who have implemented his ideas over the years.

Just drop me a line at jonathan@findependenceday.com. In fact, Ernie himself supplied me with a few letters from readers who achieved an even more happy, wild and free retirement than the author himself.

We’ll revisit them in a few weeks.

Is “Extreme Working” as unbalanced as Extreme Early Retirement?

My latest MoneySense blog is on the pros and cons of Extreme Early Retirement, or its opposite, which one reader dubbed “Extreme Working.”  It was in response to my recent column in the magazine about extended longevity, a theme we regularly explore here at the Financial Independence Hub’s “Longevity & Aging” section.

David Headshot small2
David Davidson

As mentioned in the MoneySense version of the blog, one of the readers highlighted — Oakville-based David Davidson — also sent along a photograph of himself, which we’re running here (on the left).

For continuity and archiving purposes, here’s the original version of the blog:

By Jonathan Chevreau

My recent column on planning for longevity attracted some good counterpoints from readers. In it, I suggested that with life expectancy rates steadily on the rise, people shouldn’t get too hung up with early retirement.

However, I recognize that my own preference to “just keep working” (at least for the time-being) is not necessarily shared by everyone.

There’s more to life than working

Click to the comments section of the story, and you can see one reader was concerned “the author can’t think of anything they would rather do with their time then work.” He or she cites such non-paid activities as volunteering, cultural activities, and visiting friends and family:

“Those activities would be mentally and socially stimulating, and wouldn’t require that I have to be somewhere at any given moment. I would be in charge of when and how often I participated.”

Well sure, but I’d argue much of that can be accomplished on nights and weekends. I don’t see paid work and other rewarding activities as being mutually exclusive. I certainly can see plenty of things I’d love to do that don’t result in attaching an invoice. One reason for my focus on “Findependence” has been my wish to pursue longer-term creative projects.

I’ve also argued that as the Boomers shift gradually into semi-retirement, they can find a more comfortable balance of paid work and those rewarding alternative activities. Several years ago, my wife went down to a four-day work week, precisely so she could visit her aging parents in the country, usually on Fridays. Both have since passed away and she has returned to a five-day week but the point remains. Those who are really well to do and who have an extensive network of friends and family can go to a three-day week if necessary, or do what one self-employed colleague of mine does: she works from home from 8 am to 2 pm, then takes the rest of the day off for all these other activities.

45 years of working is enough

While it wasn’t posted as an online comment, I also received an email from an Oakville reader happy to be identified by his real name (and supplied the above photo): David Davidson is 62 (as I will be in a few months) and has been working full-time since he was 17.

“After 45 years I think I’ll stop working and enjoy the fruits of my labour before it’s too late … I do get exasperated by all the ‘keep working and never spend your money’ retirement articles I see these days”

While Davidson agrees with my skepticism about “extreme early retirement” he draws the line at planning to work into advanced old age and having to save enough money to last beyond 100 years of age:

“That seems like ‘extreme working’ to me and a way to ensure the financial management business hangs on to my money as long as possible.”

Davidson says he has “scrimped and saved all my life to pay off the house, and put my children through university debt free, all while maxing out both my and my wife’s RRSPs and TFSAs.  This was not easy and involved a lot of long hours and sacrifice from everyone.”

Now that they are totally debt-free and the children launched, the couple have more than $1 million in combined registered savings “and we intend to spend it.” (She has a small indexed pension; he does not.)

Delaying CPP until age 70

As a hedge against extended longevity, they won’t take CPP until age 70, but it has “long been my plan to have all the savings spent by our mid-80s.  After that, if we need money, we’ll have the house to sell (it’ll probably be too much for us to look after by then anyway) and we can rent an apartment or whatever.”

Davidson says his parents and grandparents had minimal expenses once they passed age 80:

“My father and his wife are both 89, in good health until recently, and don’t spend all their CPP & OAS (neither has a pension); my mother and my wife’s mother were the same.  My wife’s father died at 68 so there is a downside to planning to live a long time – you might not make it.”

Well, yes, we all realize that. As a friend of mine says, “Live every day as if it were your last, because one day it will be.”

Enjoy the good early years of Retirement

Davidson sensibly counsels enjoying the “really good early years of retirement, before infirmities and just plain exhaustion set in.” He describes my hail-and-hearty 98-year-old friend Meta who still works part-time as “an outlier: the reality is most of us aren’t like that.  My father rode his motorcycle until he was 88 so he’s been as healthy and active as anyone could wish for.  This year at 89 he has inoperable cancer and most would say he’s had a good long life.”

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