The word Retirement scares off young people: let’s replace it with Findependence

ToastmastersLogoThe following is adapted from a speech I delivered to Toastmasters Port Credit this week. The actual talk was eight minutes long; this expanded version would take 15. 

 

 

As I look around this room, I see a mix of people: everyone from students and those just embarking on the workforce to people who are already retired.

I’ve worked as a financial journalist for more than 20 years and can tell you the word Retirement is a favorite word of both the financial industry and the media. It’s a handy way to depict a far-in-the future “dream” that conveniently helps banks, mutual fund companies, insurance companies and others sell various financial products, from funds to annuities. And we in the media are almost as fond of the term Retirement: I’ve seldom witnessed a newspaper, magazine or web site that turned away financial advertising!

I’m 61 and you could call me semi-retired. But my message to the younger people in the audience, and even some of the middle-aged ones who fear they’ve not saved enough, is FORGET RETIREMENT!

Is this heresy? Not at all. Because there is a better term: Financial Independence. As some of you may know, a month ago I launched a new web site called the Financial Independence Hub and everything I’m saying here can be found at the site.

alanmoore

Alan Moore, XY Planning Network

In fact, it includes a guest blog by Alan Moore of XY Planning Network in the US who posted a blog on exactly this topic. The X and Y refers to Generations X and Y, so he is providing financial planning advice to millennials and young people. And he too is telling them to forget about retirement but instead to seek Financial Independence.

Aren’t the two terms the same thing? Not really. To me, Retirement is the full-stop retirement our parents or grandparents enjoyed if they were lucky. They got a job out of college, enrolled in a Defined Benefit pension that guaranteed a certain steady future stream of income, hung in for the gold watch for 30 or 35 years, then retired at the traditional retirement age of 65. They could now watch day-time TV, golf, nap, play bridge or putter in the garden to their heart’s content for a decade or three. This is what I call the “full-stop” sudden retirement.

Perhaps some of you here are now enjoying such a retirement. Like Mark over there.

Show of hands: how many of you younger people here think they’ll be able to rely on a DB pension when they’re as old as Mark or me? And how many think they’ll stay with a single employer long enough to collect a big enough pension that they’ll never have to work again?

To the young, Retirement is a remote unattainable concept

The problem with the term Retirement is that it seems so terribly far away for young people. The official retirement age keeps rising: it’s now 67 for younger folk instead of 65, if you’re talking about the eligibility age for Old Age Security, and I wouldn’t be surprised if it reached 70 at some point. So telling a 20-year old they should cancel their SmartPhone service in order to save money for a retirement half a century away is hardly an inspiring message, is it?

But that’s what all the retirement peddlers want you to do: put away 10% or preferably 20% of your income by practicing delayed gratification. They may tell you that you’ll need a million dollars or more in order to retire one day. Too often, sadly, young people hear that and figure it’s so impossible they may as well give up and spend it while they have it.

In other words, they are telling young people that in order to enjoy a decade or two of leisure when you’re old and grey, that you need to deny yourself pleasures like travel or eating out while you’re enjoying your youth.

Let me tell you, any of the grey hairs here would probably love to take their retirement savings and use it to book passage on a time machine that would let them relive the Swinging Sixties. If you’re 20 today, I imagine that your 70-year old future self would feel the same way about your life right now.

A more attainable goal

So what do I suggest as a substitute for the word Retirement? I call it Findependence, which is just a contraction of Financial Independence. I’ve written a book, Findependence Day, which is just the day you’ve reached Financial Independence. The ebook I talked about in my third speech here is a sort of “Coles Notes” summary of that book.

But what do I mean by Financial Independence?

I like to refer people to the definition in Wikipedia:

Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities.[1] For financially independent people, their assets generate income that is greater than their expenses.

In practice, I think this means being able to survive without the single stream of income most call a full-time job.

Leaving the nest at 27 is NOT Financial Independence!

Depositphotos_13980277_xsDefined this way, Findependence can occur decades before the traditional Retirement, so it’s a goal that young people may find is more worth shooting for. Interestingly, last week I blogged at MoneySense about a study about young people and their financial readiness to leave home. They used what I consider an incorrect definition of financial independence: that if they left the nest and stopped depending on the Bank of Mum and Dad, that they were therefore financially independent. If they could get a job and pay their rent, that was the definition, which resulted in the absurd headline that most millennials hope to be financially independent by age 27.

I don’t think so. Even with DB pensions, the earliest most people aspired to Financial Independence was 55, which is the earliest some pensions permit early retirement. Anyone hear of Freedom 55? That London life campaign was one of the most successful sales pitches for Early Retirement. Yet only a few government workers or business executives who strike it rich ever retire that early.

Why do billionaires keep working?

Why is that billionaires like Warren Buffett continue to work? Or young tech entrepreneurs like Mark Zuckerburg? Don’t you think Zuckerburg, who’s all of age 31 or so, couldn’t be findependent by now? Obviously, they have passion and are driven by purpose.

What does that tell you? Age 55 is way too young to “retire’ in the classic sense of doing nothing: playing golf, watching daytime TV, reading all day. Yes, many people THINK they’ll travel all the time once they retire but as I wrote on another blog last week, travel is overrated and expensive, and is really something you would only want to do some of the time, not ALL of the time.

Integrating the Three Boxes of Life

threeboxesoflifeFindependence is about integrating education, work and play. On my sister site, Findependence.TV, I’m interviewed about a concept called The Three Boxes of Life, which is the title of a classic book by Richard Bolles. In the old days, we started life in the first box, Education, spent 15 or so years there, then graduated to the second box, Work. We stayed there for 35 to 50 years, and then came traditional Retirement, the third box of total play and leisure.

On the video, I talk about there being really only a single day: you work a bit each day and make money, you learn a bit each day and at the end of the day, you may “play” by getting some exercise, reading, watching TV or whatever.

On the site, there are blogs on concepts like mini-retirements and the four-hour workweek. Wouldn’t it make more sense to take the occasional mid-career sabattical or series of three-month vacations earlier in life, rather than saving it all for ten or 20 years of doing nothing when you’re too feeble to appreciate it? That’s why the subtitle of Findependence Day as well as The Financial Independence Hub is “While you’re still young enough to enjoy it.”

FullSizeRender

Meta celebrates her 98th birthday. With Alizon Sharon (c) and Ruth Snowden (r).

Plan for Longevity, not Retirement

Life expectancies are on the rise because of advances in medical science and more of us are practicing better health habits, with a focus on proper diet and exercise.

We can all expect to live a lot longer than we once thought, which is why the “Hub” ends with a section on Aging and Longevity. There you’ll find some blogs by Mark Venning of ChangeRangers.com, who coined the phrase “Plan for Longevity, Not Retirement.” I think it’s a great concept.

And it isn’t just a theoretical concept. On Sunday, we had a dinner party for a female friend of ours who celebrated her 98th birthday. She showed us a custom-printed card from – get this – her co-workers. You see, Meta still works two half-days a week at a local printing company. So she still spends a little time in the Work box. She also reads a lot, swapping books with my wife (Ruth, above), so part of her days are in the Education box. And she still travels and parties, so that’s the Leisure box.

Sounds like Findependence in action!

Working in retirement is not a retirement plan?

Here’s my latest MoneySense blog, based on a Fidelity media briefing on Monday. Click on the blue type to go directly to the piece at MoneySense.

For one-stop shopping and archival purposes, here it is again below, with different photos and subheads.

Peter Drake

Peter Drake, Fidelity Canada

 

By Jonathan Chevreau

You’re probably going to live longer than you think but it if you’re worried about outliving your money, planning to work in retirement is not a panacea, warns Toronto-based Fidelity Investments Canada ULC.

At a media briefing on Monday, Fidelity Canada’s Peter Drake, vice president, Retirement & Economics Research urged those still saving for retirement that they have to take more individual responsibility for their future after work. “You’re going to live longer than you think,” he said, citing steadily rising Life Expectancy statistics going back to 1921. Someone born in 1921 would have a Life Expectancy of about 58, a figure that passed 70 for someone born in the mid 1950s and which passed 80 shortly after the new millennium.

Can an “Encore Career” bridge the gap?

Certainly, the latest data from the 2014 Fidelity Retirement Survey released at the event suggests those falling short of their retirement savings goals are counting on some kind of paying “encore career” to make up the difference. While only 20% of those already retired plan to rely on income from a full-time or part-time job, fully 47% of those still in the workforce expect to have some form of a paying “encore career,” said Drake.

Many will rely on Savings and Housing

Non-retirees also put their hopes into Savings and Housing as a way to make ends meet in Retirement. While only 58% of current retirees say they will rely on income generated from savings in an RRSP or RRIF, fully two thirds of non-retirees (66%) plan to do so. Similarly, while only 36% of retirees believe their home equity will help boost their retirement income, half of non-retirees are counting on it.

Clearly, something has to give and that something appears to be the fond notion that people can just keep working past the traditional retirement age of 65. “Planning to work in retirement is not a retirement plan,” Drake cautioned.

Saying you’ll “just keep working” is of course easily said. Indeed, I’ve given that advice to anyone who’s not quite sure whether they have enough money to retire or not. As I quipped on the radio the other day, it’s better to arrive at the train station five minutes early than five minutes late: similarly, when it comes to saving for retirement, it’s better to oversave than undersave. Your children and the government will thank you for over-saving.

“Just Keep Working” not always possible

Unfortunately, Fidelity’s research shows you can’t count on working in retirement. The poll of some 1,400 Canadians found that of those not working, fully one in five retirees would like to work if they could. However, 15% can’t find a job and 23% say employers aren’t interested in employing retirees.

Then there are health and health care issues. Drake says 38% of retirees not working have health issues that prevent them from doing so. And even for those who are themselves healthy, 12% have to care for another family member. Out-of-pocket health care costs are an important consideration for retirees, Drake said. Even though this is Canada, 30% of health costs are not funded publicly, putting more pressure on finances the older you get. Citing per capital public health care expenditures, the big blips are right after birth and then after 65. The per capita annual expenditure is well under $5,000 from age one to age 64 but hits $5,828 between 65 and 69, passes $10,000 between 75 and 79 and really starts to spike after age 85 – past $20,000 –hitting a peak of more than $24,000 after age 90.

Drake noted that generally speaking, women can expect to outlive men, but the longer they do, the more the problems of dementia – especially Alzheimer’s – can arise.

Challenges of Longevity

Another byproduct of extended longevity is that inflation really starts to bite into the purchasing power of a typical retirement nest egg. While inflation has been low and consistent since the early 1990s, it could rise in the future, Drake warned. And even low inflation can reduce purchasing power. A nest egg of $50,000 today would have the purchasing power of just $30,479 25 years from now even with relatively benign inflation of 2%. If inflation were 3%, the purchasing power of that $50,000 would fall to less than half 25 years later: $23,882. And at 4% inflation, it would have the spending punch of just $18,757.

Jonathan Chevreau is Chief Findependence Officer for www.financialindependencehub.com

 

Reframing the Retirement discussion as Financial Independence

Michael Kitces

Regular readers of this blog won’t be surprised to see an installment dedicated to the difference between Retirement and my preferred term Financial Independence. However, I’m by no means the only person endeavouring to make this distinction. The other day a prominent American financial planner and influential blogger, Michael Kitces, called for a shift in focus for his profession in this essay published on his blog.

He noted that for most of its history the term “retirement” has been synonymous with “not working.” For all the pleasant imagery of golf, vacations and walking on the beach, the historical context for the term retirement was, Kitces wrote, “a mechanism to ‘force’ people out of jobs they were no longer competent to perform. Programs like Social Security were originally a way to soften the blow for those forced out of the workplace into retirement … and they weren’t expected to live long in that retirement in any case.

Total leisure may not lead to happiness

But research is showing that a total cessation of work in favor of a life of 100% leisure “does not actually create the happiness that we might have expected,” Kitces says, “Leisure as an occasional break from work is appealing, but a full-time life of leisure can become boring once the novelty wears off.”

allentuck

Andrew Allentuck

This is exactly what Financial Post writer Andrew Allentuck once told me: Allentuck himself has passed the traditional retirement age of 65 but he continues to write a weekly Family Finance feature focused on the retirement readiness (or lack thereof) of various couples in their 50s and 60s (usually.) When I asked him about this, Allentuck said simply, “Retirement is boring” and added that self-evident truth that the more you work, the more money you have.

Kitces observes that being productively engaged in work brings about the meaning and purpose in life that fuels positive well-being. The work environment also provides a source of interaction with others to fuel our social well-being. This explains the rise of part-time work in retirement or even entire new “encore” careers on the part of those who, financially speaking, could afford never to work for money again.

The financial industry has held out the state of “not working” as the ultimate goal and reward for decades of career success, yet those that reach the retirement finish line often find themselves “unhappy and unfulfilled” after a few months or years. The words in quotes is Kitces’s phrasing, which he follows by suggesting it may be time to rename retirement.

Findependence more achievable than Retirement

His suggested alternative? You guessed it: financial independence. My own call to shift the discussion from Retirement to Financial Independence was articulated in a guest blog I wrote more than a year ago for Roger Wohlner, aka The Chicago Financial Planner, which you can find here.

Here’s how Kitces frames the discussion: “Being financially independent is about being independent from the need to work, which then opens the door to more productive conversations about whether we want to work, and what meaningful work might be.” (his emphasis).

I have noted before that for young people for whom retirement is a distant and seemingly impossible prospect, Financial Independence is a much more doable goal. Kitces says as much when he provides a nod to my book, writing that “For many, their ‘Findependence Day’ may be much more achievable than a full-on retirement, in addition to being more personally satisfying and conducive to well-being!”

But he adds that you can’t plan for financial independence until it’s identified in the first place. Addressing other financial planners and their interactions with clients, he closes: “So the next time you’re talking about ‘retirement,’ think about ‘financial independence and see where the conversation goes!”

Motley Fool podcast, new websites

marketfoolerySome of these themes were discussed last week on Motley Fool’s Market Foolery podcast hosted by Chris Hill, which you can find here. He closed with a mention of the US edition of my new ebook.  (Note that I now also write for Motley Fool Canada, whose website is here. As per previous post, the Canadian e-book will be available on Thur., Nov. 13 but can be pre-ordered now)

Also, as detailed in November 3rd’s post, my associates and I have just launched two new websites focused on Financial Independence. By the time you read this, the initial versions should be available at www.financialindependencehub.com and www.findependence.tv. A third site, www.findependencehub.com, is a mirror site of the first one, for those who wish to save keystrokes and are comfortable with the neologism of Findependence.

 

 

 

Introducing new e-books on Financial Independence

jonchevreau_cover-2On Tuesday, Amazon Kindle Digital Publishing released the first of my two new e-books, entitled A Novel Approach to Financial Independence.

These are not brand new projects but are short (15,000 words) summaries of Findependence Day (the financial novels shown on the right) and priced accordingly. First out is the U.S. e-book. A Canadian edition will be available next Thursday, Nov. 13 (date moved up from Nov. 24) but can be preordered now. Amazon’s “Look Inside” feature lets you read the forward, my new introduction and the first two chapters free.

Companion guide serves as teaching tools to full novel

The purpose of the new e-books is to act as a teaching tool or companion guide to accompany the full novels. Thus, they are aimed primarily at three groups: financial advisers working with individual investors; teachers of personal finance or financial literacy who work with students; and finally parents, who may want to use the full-length book to teach their children or relatives the basic principles of financial literacy or findependence.

The ebooks are priced at US$2.99 or C$3.37 (the minimum amount you can charge at Amazon and still qualify for maximum author royalties). (Note the Kindle version of the full U.S. edition costs $7.09 but sells for less on other e-book platforms, primarily through Trafford.com, Amazon.com and Barnes & Noble.com.)

Financial focus, but includes short plot summaries

The focus of the e-books is less on the story or novel, and more on the underlying financial principles. However, it does include short plot summaries of each chapter. It also summarizes in bullet point form the financial lessons associated with each chapter. (These end-of-chapter recaps already appear in the full U.S. edition and e-book but not in the original Canadian edition.)

The new e-books also include the glossary and bibliography from the full U.S. edition, and a new introduction by myself. The U.S. edition includes a forward written by certified financial planner Sheryl Garrett, and the Canadian edition again features a forward by CTV News senior financial commentator Patricia Lovett-Reid.CdnEBookCover2

While the ebooks are for the Kindle, you don’t need a Kindle to read them:  Amazon provides a free Kindle reader app that lets users of iPhones, iPads and other devices read Kindle ebooks. Amazon customers can also access the Kindle Cloud Reader, which you can find here.

Astute observers may note that the title of the ebook inverts the wording of the full U.S. book. My reasoning was that while the term “Findependence” may slowly be catching on in Canada, where the book was first published in 2008, the term is less familiar in the U.S., so the main title focuses on the more well-known phrase Financial Independence.

The ebook also includes live links to two new web sites on financial independence that are in the process of being launched in a matter of days.

No need to be pessimistic about retirement, Hamilton says

Here is my MoneySense blog about Malcolm Hamilton’s talk to the Retire Rich event on the weekend.

Or you can read it here below:

Hamilton_Chevreau_322

Malcolm Hamilton (left) and Yours Truly. MoneySense.ca

Actuary and pension guru Malcolm Hamilton has already achieved what many MoneySense readers aspire to do one day: he retired at 62. But, he confessed at MoneySense’s Retire Rich on the weekend, despite his vast pension experience and gold medals in mathematics, he probably over saved. “I was cautious and now have more than I need. I have no good use for the money, although I might if we have another 2008.”

Now 63, Hamilton is mostly retired, although he is also a senior fellow for the C.D. Howe Institute and continues to do some writing and speaking. As one of the media’s go-to-sources for all things retirement and pensions, he reiterated a theme that has long been picked up by the country’s financial writers. He continues to believe most Canadians don’t need to “replace” 70 or 80% of their working incomes, which are the percentages usually proffered by our financial institutions. Most of us will be able to get by with 50% or even just 40% of what we earned in our working lives. “No one can tell exactly how much we will need to save. Canadians are unduly and irrationally discouraged about their prospects.”

Headlines downplay the good news on saving

He highlighted several pessimistic headlines produced in recent editions of our newspapers, most of them variations on the theme that Canadians aren’t saving enough. Not making the news were statistics like the fact Canadians’ collective net worth doubled from $4 trillion to $8 trillion in the 13 years between 1999 and 2012, and that’s after inflation is backed out. And that was over a period where interest rates hovered near historic lows, the stock market crashed twice and the world experienced a financial crisis almost as severe as the Great Depression of the 1930s.

Over that same time, Canadians’ retirement savings also doubled, from $1.5 trillion to $3 trillion, Hamilton said. “There’s something good going on that doesn’t seem to be reported.”

Most Canadians retire voluntarily between 60 and 65. On average they retire at 62, although that is “creeping up.” That’s not as early as most retired in the 1990s, he said, but it’s earlier than the late 1960s and 1970s, “when seniors were poor and almost no one retired at 65.”

Like Hamilton himself, most of today’s retired seniors don’t spend the money they have and own houses that are mortgage free. If they ever face financial duress, he said, they could tap the equity from those homes: renting rooms out, selling or downsizing, or resort to reverse mortgages. But most don’t do any of those things. “They live in their houses as long as they can. They don’t access home equity. They don’t withdraw money from their RRSPs as fast as possible. They continue to save as seniors.”

While the event was billed as “Retire Rich,” Hamilton said “saving for retirement is not about getting rich. If you want to get rich, you save as much as you can all the time and never spend. You live like a pauper but you won’t be happy and your marriage won’t last. Retirement saving isn’t about getting rich; it’s about finding a way to save enough of the income earned in your work life so that in retirement you can have a similar standard of living.”

Those making a minimum wage can save nothing and end up with as much disposable income in retirement as during their working lives. That’s because at age 65, the Government will give a single Ontario resident $19,000, most of it after-tax income. That consists of $7,000 from Old Age Security and $11,000 from the Guaranteed Income Supplement, $2,500 from refundable tax credits and “believe it or not” $500 from CPP, he clarified in a later Q&A session. “There is no poverty for Canadian seniors; the poor people in Canada are young.”

Why 52% replacement ratio may be fine

MoneySense subscribers attending such an event will of course be aiming for a higher retirement income. Hamilton said a typical Toronto couple with two incomes totaling $120,000 a year probably spend $480,000 on a modest house and have two kids. If they save five times their gross earnings and accumulate $600,000 in capital, they could replace 52% of their income in retirement. To get there, they’d simply need to save 6% of their income between ages 25 and 65, at which point they could retire. They would direct 23% of earnings to taxes, CPP and EI, and another 23% to pay for the house and kids. In all, 52% of their gross working income goes to taxes, savings, the house and children. At 65, all those expenditures disappear. The $600,000 capital will replace 20% of the income they were earning in their working lives, and CPP and OAS will generate 32%, for a total 52% replacement ratio. That will allow them to spend as much on themselves as they did when they were working.

Ironically, childless couples that rent will need to replace more of their working income – probably 70% — because they have been accustomed to having more disposable income. For parents, the house and kids should be the spending priorities in the first half of their working lives. They should be fine if they start to save a reasonable amount by their 40s.

  Should your retirement date be a surprise?

kevinhead1

Kevin Press, Sun Life Financial

Sun Life Financial assistant vice-president Kevin Press has penned a retirement planning article carrying a provocative headline: “Your retirement date will probably be a surprise.”

Published at www.brighterlife.ca, Press cited the most recent survey of Sun Life’s Canadian Unretirement Index and its startling finding that only 31% (fewer than a third) of Canadian retirees said they stopped work on the date they had actually planned. This attracted a fair bit of social media commentary, including my own predictable quip attributed to deceased Beatle John Lennon in his final album: “Life is what happens to you while you’re busy making other plans.”

Employers set the date a quarter of the time

At one level, the inimicable Press is of course correct. The precise date of retirement isn’t always a variable under one’s complete personal control. In these days of corporate cost-cutting, there’s little guarantee that one’s employment in a particular firm will last to the exact and convenient day of your projected retirement. One in four said they left their jobs because an employer decided that was the way it was going to be. The decision was forced by the employer for 10% of those surveyed, while another 15% took their employers up on their offers of early retirement.

Health is another major factor

But even if they love you and are willing to throw frequent raises and bonuses your way, your health may not cooperate. Sun Life found a whopping 29% reported their work lives ended prematurely because of “personal health or medical reasons.” Another 2% left not because of their own health but because of the deteriorating health of a loved one for which they had to care. Adding 14% more who experienced unexpectedly early retirement for other “unspecified” reasons, that’s 69% who did not finish their career as they had originally planned or expected.

This is all interesting data but should not be viewed as a particularly disturbing trend. Retirement planning is as much an art as an exact science and any financial planner will tell you that, even if employers and health are in your favor, there are many variables that will change the exact finish line. Stock markets will vary, as will interest rates, currencies and other factors. Even the related concept I call “Findependence Day” I have described as a moving target: if markets go on a tear the last few years before your planned departure from the workplace, your liberation from work may happen a few years earlier than it might otherwise have been. If markets languish in an extended bear market, you’ll probably decide to hang in there a few extra years, again assuming robust health and a willing employer.

Freedom 66?

In fact, a Sun Life ebook authored by Kevin Press quantified this in the wake of the 2008 financial crisis. Based on the traditional retirement age of 65, Sun Life surveyed Canadians as to what they thought they’d be doing at age 66. In 2008, 51% thought they’d be retired by that age, and in 2009, 55% thought so. This plummeted to just 28% in 2010 and has hovered between 27% and 30% in the subsequent years to 2013.

At the same time, the percentage who thought they’d still be working full time at 66 rose from just 16% in 2008 to 27% in 2013. Two thirds of those expecting to be working past 65 said they‘ll do so because they “need to” financially. By 2010, the average age at which Canadians expected to retire had jumped from 64 (in 2009) to 68 by 2010 and 69 in 2011. As confidence has returned, this average expected retirement age has since fallen back to 66.

Press’s e-book can be found here, and includes links to several calculators that should make your rough retirement date less of a surprise.

The downside of rising longevity — dementia

Senior man looking after sick wifeHere is my latest MoneySense blog, billed as the “Financial Implications of Dementia.”

For convenience and one-stop shopping purposes, I’m publishing a version here with a different set of photos:

The downside of rising longevity

 

One of the themes I’ve been exploring lately has been longevity – the notion that most of us can expect to live longer than our parents and grandparents. That assumes a lot of things, such as adopting healthy lifestyles, being blessed with good genes and not engaging in harmful behaviours. And of course, as the current Ebola scare reminds us, there’s no shortage of external circumstances that can render moot the idea of extended personal longevity.

But let’s be optimistic. If financial planners reckon on a lifespan of 90 or 95 years for the average client, let’s assume we at least reach our 90s. The unfortunate aspect of this is that while our good habits and advances in medical science may stave off such unwelcome events as heart disease or cancer, it also means there is a greater chance of succumbing to dementia. As RBC Dominion Securities investment adviser Nathan Mechanic told me many years ago, Alzheimer’s can have a devastating effect on family finances.

Dementia portrayed in essays and novels

franzen1

Novelist Jonathan Franzen

On my recent trip to Turkey, I happened to read some books that touched independently on the theme of the scourge of Alzheimer’s. One was an essay by novelist Jonathan Franzen entitled “My Father’s Brain,” contained in his collection, How to Be Alone. In it, Franzen chronicled the slow and painful loss of his father Earl to Alzheimer’s. He depicted it as a series of deaths of various capabilities: memory, mobility etc., wherein the actual physical death of the whole body was merely the final installment of a drama that unfolded over several years.

On a similar theme is Still Alice, a novelized treatment of Alzheimer’s written by neuroscientist Lisa Genova. Written in 2007, it portrays the onset of early Alzheimer’s at age 50 of cognitive psychology professor Alice Howland. It was turned into a film of the same name in 2014. For those who enjoy medical thrillers. Genova has been described as “the Michael Crichton of brain science.”

100 tips to stave off dementia’s onset

100thingsI also read an e-book I’d recommend to anyone interested in this topic, or who may already have gone through the experience with a parent or other loved family member. It’s called 100 Simple Things you can do to Prevent Alzheimer’s and Age-Related Memory Loss, by Jean Carper. The book was published in 2010 and the author dedicated it to her mother, Natella, who made it to 95 without dementia but spent a “final year with probable vascular dementia.”

I’d guess many baby boomers will be in a similar situation by the end of their long lives: 90 or 95 years of relatively strong mental health, followed by a year or two of this type of loss of mental acuity. So what are the 100 tips we can act on to minimize our chances of being afflicted with dementia? Here are some of the main ones that left an impression on me. Number one is to “Get Smart About Alcohol.” It stands to reason that excess drinking cannot be a good thing for our brain cells, although Carper concedes the benefits of modest (a glass or two) of red wine on occasion. And rest assured, chocolate lovers, you may be able to safely indulge in similarly modest consumption of dark chocolate, but less so milk or white chocolate. And yes, it’s okay to “say yes to coffee” and we don’t need to be afraid of caffeine.

Carper also recommends drinking apple juice or “juices of all kinds,” eating berries every day, eating curry, nuts, olive oil, spinach, tea, vinegar, fish and various other good foods. She recommends the Mediterranean Diet. And yes, exercise is a fine thing even if it’s just fast-paced walking. Sleep is important and meditation is helpful. It helps to be married and have a large social circle. Avoid red meat, avoid inactivity, beware the dangers of fast foods, control bad cholesterol and avoid environmental toxins.

If you have an interesting job, don’t be too quick to retire: work is an excellent way to keep your brain active. Alternatively, web surfers will be pleased to learn “Googling” is good for the brain, as are video games. So is learning another language. Build strong muscles, take multivitamins, and take regular nature hikes. The author even suggests “considering” medical marijuana, assuming it doesn’t entail breaking the law. But “forget about smoking” cigarettes and cut down on sugar.

Much of this is common sense and you may have heard some of these tips before. But if you can tick off more than half these items, my bet is you will have made a great start in delaying the onset of this affliction for yourself or anyone you love.

Reimagining Retirement

reimagine-your-retirementThe book pictured I picked up at the recent Write Canada 2014 writer’s conference in Guelph, Ont., the third time in five years I attended that event.

Joyce Li is a project manager and motivational speaker, originally from Hong Kong, now living with her family in Brampton, Ont.  Reimagine Your Retirement is published by Word Alive Press, and is what you might expect from a publisher focused on spiritual writing. Li’s perspective on Retirement is not at all the traditional  “full stop retirement” we think of when we see the ads from the banks and fund companies.

Instead, she views Retirement as a sort of spiritual/vocational halfway house between one’s working years and eternity.  This is not dissimilar to my own view of Findependence or Semi Retirement. In fact, she credits Rick Warren’s The Purpose Driven Life for inspiring her almost a decade ago: she gave six family members copies of Warren’s book, with personalized inscriptions.

Are you haunted by “nagging dreams”?

Li spends time a good chunk of time talking about ”nagging dreams “ that have yet to come true. And who among us does not harbour dreams we’ve not yet been able to manifest in this harsh workaday world and its seeming financial constraints? Li doesn’t make light of the financial side of retirement but seeks a way to reconcile it. And she’s not shy about confessing her own youthful dreams of becoming either a movie star or a pop star.

Spiced liberally with biblical quotes, Li is all about planning: plan the work, work the plan.

In the opening chapters, she reminds us the concept of retirement was non existent in biblical times and throughout most of history.  And whether retirement is  voluntary, involuntary, or delayed, Li doesn’t shy away from the financial side of it. One reality is that “Retirement requires financial support for an unknown time.”

And did you know the bible  has at least 250 verses that discuss money? Interestingly, she says the Bible has “no direct reference to retirement or retirement planning,”  except for one passage in  Numbers 8:23-26.  (“at the age of 50, they must retire from their regular service and work no longer.”)

While she  acknowledges that some plan never to retire, some will partially do so, and some will fully retire to disengage from the workworld altogether, Li’s personal orientation seems strongly oriented to reinvention or reimagination, as the book’s title suggests. This may entail going back to school, or  embarking on a brand new vocation.

The book will find few readers among atheists and agnostics, but will be thought provoking for those who see a spiritual dimension to life, no matter what particular religious affiliation.

A book for writing in

I wouldn’t suggest obtaining a library or ebook version of this book, as Li provides plenty of blanks she encourages one to fill in, with multiple exercises to put self discovery and concrete planning into practice.  She’s all about discovering one’s skills, life gifts, spiritual gifts and passions, then encapsuating what you’re discovered into a personal mission statement that will chart your 20 to 30 years of a reimagined retirement.  She’s a strong believer in the power of visualization, which of course is exactly what I suggest in my own book: drawing a line in the sand and declaring it your Findependence Day, even if it turns out ultimately to be a moving target.

 

 

 

 

YOUR Declaration of Findependence

Fireworks show over Khao wang Historical Park, Phetchaburi,ThailandIn advance of America’s July 4th celebrations, I thought I’d devote this blog to helping retirement savers prepare their personal “Declaration of Findependence.”

The other day at Forbes.com senior writer Richard Eisenberg devoted a piece to this theme, and cited my own recent experience in finally living the life I describe in my book, Findependence Day. Findependence, of course, is merely a short-hand description of the phrase Financial Independence. Findependence Day is the day in the future when you believe that income from all sources — including investments, pensions, rental income, business income, royalties – will exceed income from the single source most of us call a “job.”

So, without further ado. It’s up to you to fill in the blanks to reflect your personal circumstances:

Declaration of Findependence for ________ (your name here)

1.)  Based on my current age of __, I believe I should aim for  the __ day of the __ month in the year 20__. This happens to be the year I turn __.

 

2.)  I understand that as this milestone approaches, the actual date may have to be revised. If financial markets are very strong, I may even be able to move it ahead by __ years. If markets are weak, I may be forced to move it back by __ years.

 

3.)  I am currently employed by ________________ and am enrolled in a pension plan. The earliest date I can take an unreduced pension is ______.  I can also take early retirement by _______, provided I am willing to receive a smaller payout.

 

4.)  As an American  with ___ years in the workforce, I am eligible to begin taking Social Security benefits as early as age 62, which is ___ years before/after my planned Findependence Day. The latest I can take them is age __, in which case the payout will be much higher. Based on my annual contribution statements, the optimal time for me to commence Social Security is age  __.

 

5.)  Depending on whether I was born before or after Feb. 1,  1962, I will be eligible to take Old Age Security (OAS) benefits at age 65/66/67. (Circle one). If OAS is my only source of income in old age, I will also be eligible for the Guaranteed Income Supplement. Ideally, so is my spouse, in which case the day we’re eligible to receive combined OAS/GIS benefits will be our joint Findependence Day.

 

6.)  As someone who enjoys work but not necessarily all the stresses of full-time corporate employment, I see myself being semi-retired or self-employed by age ___.  By adding  $_____ thousands of dollars of part-time income a year to all the above sources of income, my Semi-Retirement could begin as early as ____, which is the year I turn _____. I will call this my Preliminary Findependence Day.

 

7.)  Instead of having one long extended Retirement at the end of my life, I prefer the concept of multiple “Mini Retirements,” and therefore of multiple Findependence Days to fund them. I would like to set the year _____ as the year of my first Mini Retirement, and therefore _______ will be my first (but not necessarily last) Findependence Day.

 

 

 

 

Seek Findependence, not Retirement

wohlner66This week, I did a guest blog on Roger Wohlner’s blog, The Chicago Financial Planner, which you can find here.  As I note there, Roger [pictured on the left] is the kind of fee-only financial planner I recommend in Findependence Day. By the way, Roger is a must-follow on Twitter as @rwohlner

As you can note in the comments section which follow that post, people are becoming more aware of this paradigm shift and the distinction the book makes between traditional “Retirement” and Financial Independence (or “Findependence”).

As one commented, by viewing the goal as Findependence rather than full-stop retirement, he was able to move his “retirement” date up by 15 years.

Related to this concept is a blog I did here a few months ago about Early Findependence being a more achievable goal than Early Retirement. I note in this weekend’s Financial Post, a package of stories about extreme saving (I’d call that ‘guerrilla frugality”) by Melissa Leong, including a profile of a couple who supposedly “retired” at 35.

We’ve seen these stories before of course: Derek Foster and Dianne Nahirny both wrote books describing how they retired in their 30s. But of course, they were really describing Findependence since if nothing else they were still “working” by writing books how about how they stopped working!

 

 

 

Next Page »