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Ask Bert Griffin - Can You Afford To Retire?


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Ask Bert Griffin - Can You Afford To Retire?

  1. 1. Ask  Bert  Griffin:  Can  You  Afford  to   Retire?   Over  the  recent  months,  the  media  has  been  telling  us  two  opposing  views  about  Canadians  being  able   to  afford  their  dream  retirement.     A  HSBC  Bank  Canada  study  done  earlier  in  2013  found  that  17%  of  Canadians  believe  that  they  will  never   retire,  expecting  to  be  working  even  well  past  retirement  age.    Those  who  do  think  they  will  retire   believe  that  they  will  do  so  by  age  63,  not  61  years  old,  the  age  that  the  generation  before  them  retired.     The  reason  is  quite  simple,  most  retirees  simply  cannot  afford  to  retire.  With  the  economic  downturn   affecting  a  lot  of  employees,  baby  boomers  found  themselves  jobless  at  50,  a  few  years  before  they  are   set  to  retire.    They  lost  their  pensions  and  they  cannot  find  a  new  job  that  pays  an  equivalent  salary.     The  2008  recession  also  negatively  affected  their  portfolios,  with  most  of  their  investments  losing   money  for  a  good  number  of  years.    Most  people  also  thought  that  their  retirement  means  that  they   would  have  lesser  expenses,  not  preparing  for  aging  costs  such  as  home  care,  nursing  care  and  medical   expenses.     Further  complicating  things  are:     1.  Grown  children  who  return  to  their  parents'  home  after  losing  their  jobs.    There  are  also  those  that   have  not  moved  out  because  they  cannot  afford  to.    Statistics  Canada  found  that  more  than  four  out  of   every  ten  young  adults  from  20  to  29  years  old  are  living  with  their  parents.    This  situation  meant  that   baby  boomers  are  not  getting  the  savings  they  would  expect  to  have  as  empty  nesters.     2.  The  mortgage  is  not  paid  off  yet.    There  are  some  people  who  enter  retirement  with  hefty  mortgages   where  there  is  still  more  than  $100,000  left  to  pay  off.    These  are  people  who  will  need  to  go  back  to   work  even  when  they  are  in  their  60s.     3.  Some  8  million  retirees  are  not  only  caring  for  their  grown  children  but  are  also  caring  for  their  own   ailing  parents.    A  lot  of  baby  boomers  nowadays  not  only  spend  to  care  for  their  grown  children,  but   they  are  also  caring  for  their  ailing  parents.    This  can  put  quite  a  strain  on  one's  finances  and  instead  of   saving  money,  you  are  spending  more  of  it.     4.  One  of  these  three:  not  having  enough  savings,  not  having  a  solid  financial  plan  and  not  budgeting.     For  some  people,  they  simply  failed  to  take  into  consideration  how  much  to  budget,  or  they  relied  solely   on  their  home  to  pay  for  retirement.    Some  people  did  not  even  think  about  retiring  until  it's  just  a  few   years  away.    Then  there  are  those  who  rushed  into  retirement  or  semi-­‐retirement,  only  to  wish  that   they  did  not  shortly  after.     Scare  Tactics?     On  the  other  hand,  there  are  people  such  as  Philip  Cross  and  Ian  Lee  who  think  that  these  are  just  scare   tactics,  and  that  Canadians  could  very  well  pay  for  their  retirement.  
  2. 2.     Cross  and  Lee  write  that  studies  often  overestimate  expenses  and  underestimate  the  value  of  some   assets.    If  you  do  take  personal  wealth  into  consideration,  such  as  what  Statistics  Canada  had  done  in  its   “The  Adequacy  of  Household  Savings”  study,  then  two  out  of  three  Canadians  would  actually  have  not   just  enough  but  excess  savings  for  their  retirement.    The  remaining  third  might  need  to  save  some  more,   but  what  they  have  to  cover  is  not  a  big  amount.     In  fact,  the  Organisation  for  Economic  Co-­‐operation  and  Development  reports  that  we  have  the  lowest   percentage  of  elderly  poverty  in  the  whole  world.     So  there  are  those  who  say  that  the  future  is  bleak,  and  there  are  those  who  say  that  we  are  just  being   alarmists  when  it  comes  to  our  retirement  funds.  Which  side  of  the  fence  should  you  be  on?     Figure  It  out  Yourself     A  lot  of  people  believe  that  they  do  not  have  enough  money  to  retire  and  would  just  postpone  whatever   plans  they  have  because  of  it.    The  sad  thing  is  that  instead  of  spending  their  days  on  the  beach  or  just   doing  whatever  they  want,  they  have  to  stay  at  a  job  they  hate  just  to  be  able  to  earn  more.     It  makes  perfect  sense  to  just  find  out  if  you  could  afford  to  retire.    How  do  you  do  this  and  what  are  the   things  you  need  to  consider?     1.  How  much  will  the  government  give  you?    You  can  visit  the  Canadian  government's  Web  site  where   you  could  calculate  just  how  much  you  are  going  to  receive  from  the  government  if  you  retire  on  a   certain  date.    This  can  tell  you  your  income  from  Old  Age  Security  and  Canada  Pension  Plan.    If  you  have   been  working  in  the  country  for  40  years,  a  couple  can  easily  get  around  $30,000  a  year  from  the   government.     2.  How  much  will  your  employer  give  you?  If  your  employer  has  a  group  RRSP  or  its  own  pension  plan,   you  might  want  to  ask  your  employer  to  give  you  an  estimate  of  how  much  you  could  get  if  you  enter   retirement.     3.  How  much  do  you  owe?    It  is  a  sad  fact  that  there  are  many  people  who  are  retiring  with  debt   nowadays.    So  do  check  out  if  you  owe  40%  or  more  of  a  year's  income.    If  you  do,  you  might  want  to   work  for  an  extra  year  before  retiring  so  that  you  can  substantially  bring  your  debts  down.    The  last  thing   you  want  to  do  is  to  be  saddled  with  a  hefty  mortgage  when  entering  retirement.     4.  Do  plan  on  living  longer.    You  probably  have  20  to  30  years  left  to  enjoy  your  retirement.    So  be  sure   to  pace  your  withdrawals  so  that  the  money  lasts  for  two  to  three  decades.     5.  What  do  you  need?    You  would  need  to  ask  yourself  this  and  be  honest  with  your  answer.         Generally,  you  need  to  have  around  70%  of  the  income  you  earn  now  to  live  the  same  lifestyle  you  enjoy   now  during  retirement.    
  3. 3. To  be  sure,  list  down  all  your  expenses  for  your  retirement.    You  can  ask  a  retirement  planner  for  help  in   coming  up  with  this  list.     Bert  Griffin,  a  certified  retirement  planner  and  investment  specialist,  says  that  you  should  keep  these   five  in  consideration  when  figuring  out  if  you  can  afford  to  retire  or  not.     "So  let's  say  you  are  earning  $120,000  now.    That  means  that  you  more  or  less  need  around  $84,000  to   retire.    You  and  your  spouse  can  get  up  to  $30,000  from  the  government,  while  your  employer  will  give   you  around  $30,000.    So  you  need  to  come  up  with  $24,000,"  Griffin  explains.     He  adds,  "Granting  that  investments  nowadays  earn  around  5%  in  general,  this  would  mean  that  you   would  need  to  have  $480,000  worth  of  investments  in  your  portfolio."         So  if  you  have  an  investment  portfolio  that  is  currently  worth  $500,000  or  up,  go  ahead  and  retire!     Retirement  can  be  a  pretty  exciting  time  in  your  life,  having  worked  so  hard  and  so  long  for  it.    Make   sure  that  you  have  enough  money  to  afford  it,  not  just  by  reading  what  people  are  saying  but  also  by   looking  closely  at  your  own  situation.    If  you  need  to  earn  more  today  in  order  to  get  the  retirement  of   your  dreams,  there  are  some  retirement  strategies  that  would  work  for  you!