A different take on retirement planning
Exactly what it means to retire “comfortably” has probably changed over the years. Most people’s standards of living have increased, taking expectations for the lifestyle that retirees are entitled too along with them.
But one thing hasn’t changed at all. Everyone has a sustenance level of income or wealth that they simply must have, no matter what.
And that means you have to separate your needs into two groups: “absolute must-haves” and “wouldn’t that be nice”, says York University prof Moshe Milevsky, the author of Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life.
And the amount that you absolutely must have has to be immunized with the safest investments possible, he adds – no matter how large a chunk of your money that represents.
As a result, someone 10 years from retirement should expect to hear the following from their advisor, Milevsky says: “Here's the amount of government pensions you can expect; here's the amount of personal pensions that you may or may not have, and here’s the gap. How do we fill that gap?”
You don't fill that gap with expectation, Milevsky says. You don't fill it with average. You don't fill it with high probability. You fill it with absolute certainty. And that means making sure that you have enough money today to buy a guaranteed investment that will generate that amount for the rest of your life – not a commonly held view within the retirement planning community.
Retirement is just one point in the your life cycle, not the end, says the other side. People live well into their retirements and need to ensure that they don’t outlive their money. And the best way to do this is by investing a fair chunk of your wealth in high-quality stocks.
What do you think? If you ever do retire, will there be stocks in your future?
By Gordon Powers, MSN Money
Posted by: Robert Baxter | Nov 30, 2021 7:39:28 AM
Stocks are too risky for retirees. Or, perhaps the market stress will kill them. Then they don't outlive their nest egg either....
Posted by: Lisa | Dec 1, 2021 8:25:48 AM
Cute...it's exactly what I'm doing. :) Yes, it's a bit risky Robert. Would it do any better to hide it under your mattress?? There's always a bit of risk in life. That is what makes us human and not God.
Posted by: Tim Landry | Dec 1, 2021 2:31:54 PM
And SERIOUSLY looking at the potential costs of long term care. Longer life expectancies mean more of us will need care for the last several years of our lives. A male age 65 has one chance in THREE of needing care before they die - a female? ONE IN TWO!
Posted by: Tim Landry | Dec 1, 2021 2:34:15 PM
PS - the youngest boomers can expect to pay $140K annually for BASIC care - $240K for "quality care" and $440K ANNUALLY for "top end"
Posted by: Steve | Dec 7, 2021 10:17:06 AM
I don't know why there is all this retirement hysteria. The largest population group (the baby boomers) are in their prime earning years so they'll be able to save lots of money, plus they have all helped to inflate real-estate markets to unbelievable heights. When they retire they can just sell their $800K 2 bedroom bungalow's in Toronto and retire the good life while their children slave away in Alberta on the oil patch just like all their friends. What could possibly go wrong? Oh right...
Posted by: dave jones | Dec 25, 2021 9:46:01 PM
i retired a couple of years ago , the age i retired was 66yrs old , i had no savings . plus i still have to pay alimony , my retirement income is 76% of my working earnings , i have a company pension plan , +cpp+oas+ oversea pension plan ,
i find that after calculating the numbers before i retired , and kept working until i was 66 yrs old , that last year of working really helped in reguards to my retirement income ,,
those people who have the idea of retiring in thier early 60,s lose too much money over the period of time , as what they get from cpp.+oas is lower than if they worked untill they were 65yrs old, like i said , i pay alimony for life . plus i am able to put away money for my income tax per year. plus run my home and my cottage , and live the way that i have been always used too
stock markets , thats like putting your hard earned cash into slot machines , you never know,,
Posted by: Clarence Morris | Jan 22, 2022 9:38:06 AM
STOCKS! Are you nuts! The first rule of retirement is PROTECT YOUR CAPITAL. Stocks are for when you're saving for reitrement. Three years ago I went to an upscale financial investor and gave him $100,000 of my wife's money. $50,000 I chose where to put and since she's 3 years from retirment I chose a Manulife (no I'm not an agent) guaranteed 5% investment with the possibility of more if the market surpassed 5% (it resets every 3 years). This is currently worth $$64,000. The rest he put in a special blend of stocks, but mostly select portfolio of mutual funds with high producing managers. THat fund is worth $42,000. It will take about an 10% return for maney years for it to ever catch up.
Posted by: Duane | Mar 5, 2022 11:47:17 AM
Thankyou for your good article. But there is more to the 'net worth supporting retirement' discussion that people (journalists and brokers/big investors) that spend all there time in the markets never seem to get to.That is the larger understanding about what you are/should be doing in pre-retirement is preparing for sufficient post-retirement cash flow. Another aspect (and there are likely more that I don't know about) of cash flow is that of 'rental income'. The BIG problem is this whole area of fincial planning is such a large one (and the schools don't adequately deal with it) when one triy to gets involved it is found to be overwhelming. You need a wholistic approach. One needs to start at 22 with the first job and develop an area of understanding in each decade of life. With this approach one could likely retire early. No, to answer the question, I got trapped like everyone else with trying to make a living and got distracted, trying to pay attention to the crisis at hand. Please, cannot someone start writing a series of help articles as to how beginners can link all thes aspects together to make it work?
Posted by: test | May 20, 2021 2:17:47 PM
Posted by: Sixpack | Jul 4, 2021 9:41:27 AM
Invested money either has a gauranteed return or it is gambling. It is that simple. If one want to play the stock with their retirement fund that is fine, but be aware what you are doing.
Posted by: vicky | Aug 2, 2021 7:59:57 PM
I like what Dave Jones said . By the way , in your article are you advizing people from the ''bank's point of view '' ? - or for their own good ?? I am not any ''smarter'' by your article . For exemple , you never aproach the point of view of those who arrived in this country just about 10 years before they retire !- or should be better retire earlier with a smaller pension but gain couple of good years of cash flow beside still working ? Those are the questions to answer us , not some stock market which you are itching ( as bankers) to advize us to invest in !
Posted by: Long Ago | Nov 23, 2021 10:56:34 AM
Annuities (guaranteed income for life and options for continuance on your spouses life - lower monthly income impact) are pretty good security. The only issue I have with them is that any remaining balance, if any, dies with you and or your spouse. They are like an insurance and if you had a few hundred thousand dollars left from the initial paid on an annuity bought, your family does not inherit what is left. The chances of out living the principal plus the interest earned is remote. The financial institute offering the annuity are pretty good at insuring they make money and at a good return.
Having a financial adviser with a reputable company (major bank or insurance co.) working on your behalf to invest in solid Companies paying Dividends (Companies invested in may change etc.) is fairly safe and offers a hedge on inflation etc. It is also lower tax impact. A proper mix is what is safest. Do not put all eggs in one basket - young or old!
Posted by: 6 month less a day | Jan 30, 2022 2:49:16 PM
Let me tell you my plan,
just turned sixty,selling all my rental property,should be left with about 7.5million after paying my taxes,
take canadian non residency 6month less a day most of my retired friends fight with their residency requirements,because of healthcare etc.
reinvest the money back into canadian investments with (mortgages,my sons business etc.a termlimit of more than 5 years,I have been getting up to 12%on these investments taxable at this point,if I don't pay anymore taxes because I am a resident of lets say Belize,I can lower my return and invest in a bit lower risk investment.
71/2 million gives me an annual income of 600,000.plus,healthcare is 30,000.00 per year(anywhere in the world) lets say I live and spend 150,000.00 per year,that leaves about 500,000per year,every 2years I can bank 1million,
this entire picture works for a lot less money as well,image the taxes I would have to pay on a gross income of 600,000.00
Keep your money in canadian dollars whatever you do at this point,it will be the savest currency in the next couple of years