YOUR RETIREMENT LIFESTYLE PLAN IS ABOUT PREDICTING THE WAY YOU WANT TO LIVE IN THE FUTURE

Last month as we sat with our financial advisor to review our portfolio one of the questions we were asked pertained to our retirement lifestyle now that we were 100% debt free. With a young child and in our early 40’s the last thing we want to think about is retirement but we both know that we must.

Depending on who you ask their retirement lifestyle might be painted as, resort-type community living (retirement villages), lavish holidays, mini-trips, restaurants, activities and organizations outside of the home. Others might be happy living a simple life in an apartment or their home hopefully mortgage free although for many reaching retirement years that’s not even happening.

What do you want your retirement lifestyle to look like? That’s what our advisor asked us and we both blankly stared at each other and said, I don’t know. We didn’t know but what we did know was that we had to keep socking away money to max out our retirement savings for future reasons.

Over the years Mrs. CBB and I have vaguely discussed what we’d like to do when we retire. So, here we are saving like ‘Ambitious Joe’ but with no clear plan for the future. Here’s the problem though, sometimes we push for the future without regard for the present only to find out there will be no future due to illness or even worse, you pass away.

I think most Canadians are afraid for what the future holds especially during their retirement years but also because of health concerns. After what we’ve been through this past 6 months dealing with the red tape and hoops of the health system in Canada we are frightened. It’s one thing to have money and it’s another thing to be alone.

The maximum annual combined CPP/OAS pensions for a 65-year-old is currently $20,770, but the average is only about $15,159 for someone who has lived in Canada for most or all their life. – Money Sense Mag

My mother-in-law who is widowed did not have any retirement savings put away as there wasn’t enough money with her working a minimum wage job and a very ill husband.

You have to keep the house going and proper transportation was needed which meant they bought a new vehicle and did what they could so their house would not fall to the ground. It’s more than some folks do who have two incomes which leads me to wonder where all the money is going and are we planning too much for a retirement lifestyle we may never even use.

What I mean is that we have been conditioned to save money from a young age into an Registered Retirement Savings Plan (RRSP) and now the Tax Free Savings Account (TFSA) as back-up to the back-up of government pension and perhaps the sale of a house and other assets. Add in the cost-of-living, housing prices and starting a family cue the Registered Education Savings Plan (RESP) of $208 per child and we’re falling off cliffs.

Related: Do you even need an RRSP to retire?

Statistics Canada reported average 2016 household spending (including taxes) for those age 65 and older at $58,121, Riza, so a couple both receiving the average CPP/OAS pension would only have $30,318 of income and a significant annual cash flow shortfall.

 

When your health fights back

What if you have no kids? What if your kids have moved away? What if your kids don’t speak to you any longer? We can’t rely on our kids for our future but many people do because that’s what we believe should happen. A parent raises a child and when the parent is frail or no longer able to care for themselves the child will care for them. This is not always the case.

I’m guessing we fall somewhere in between especially since we have been going through the process of dealing with my in-laws who had no clear retirement plan apart from having the mortgage paid off and government pensions. I will admit at that we are THANKFUL that they at least have something for my mother-in-laws sake.

For the folks out there without kids and perhaps no family around this becomes even more frightening because you have to rely on yourself for everything. It can be a lonely road and packed with a punch if your health is declining or in a state where you need constant care. Just recently we’ve hired a companion for my mother-in-law who suffers from dementia months after her husband has passed away at a cost of $25/hr which include gas for transportation.

That might sound outrageous to some people but we’ve been left with no other option especially since she wants nothing to do with a retirement home. She believes she is perfectly healthy and apart from her dementia she lives in the house fine however all responsibilities have been passed on to her children which includes health and financial well-being.

This also stems from her not being allowed to drive any longer which was in some ways a saviour but other ways a nightmare. She has a NEED to leave the house a few times a day and a NEED to have money available to her. It has been a struggle for everyone but what if there was no one there to help her? It frightens Mrs. CBB and her siblings enough to know that retirement is not just a future issue it is a BIG issue and something that MUST be planned for in advance.

It’s tough especially when you have a family of your own you are trying to keep afloat.

Government Funded Retirement Lifestyle

At the end of the day this retirement lifestyle makes her happy but this happiness is coming from her government income which includes Survivor Benefits Allowance (OAS) and pension money left from my father-in-law.

You qualify for the Allowance for the Survivor if you meet all of the following conditions:

• you are aged 60 to 64 (includes the month of your 65th birthday);
• you are a Canadian citizen or a legal resident;
• you reside in Canada and have resided in Canada for at least 10 years since the age of 18
• your spouse or common-law partner has died and you have not remarried or entered into a common-law relationship; and
• your annual income is less than the maximum annual threshold.

We can’t even begin to tell you how thankful we are to have found out he had this money. He thought he had enough to pay for his funeral when it actuality he had enough to pay the mortgage and then some. I wish we could tell him the good news, but it’s too late.

This is what happens when you don’t investigate your retirement savings and understand how they work instead of relying on someone else. It’s important to have someone you trust if you aren’t sure which is what they both needed at the time but failed to do. They are not alone.

The amount she currently receives will decrease next year as she turns 65 when she will get her Canada Pension Plan (CPP) and Old Age Security (OAS) which will put a strain on the money with her current allowance. She gets $800 a month to deal with all things related to her and nothing financial. Likely she will apply for the Guaranteed Income Supplement (GIS) to help cover any costs if she qualifies.

The Guaranteed Income Supplement (GIS) provides a monthly non-taxable benefit to Old Age Security (OAS) pension recipients who have a low income and are living in Canada.

Effective Jan. 1, 2018, CPP payments will increase by 1.5 per cent for those already receiving benefits. For 2018, the maximum CPP retirement benefit for new recipients age 65 will be $1,134.17 per month, which represents a $20 increase from the beginning of 2017. – Benefits Canada

We’re stuck though with red tape and can’t do a damn thing unless she gets admitted into the hospital. Ideally we wanted to sell the house and buy something smaller to free up some money but at this point she is not interested.

Clearly her home is too big but we are taking it one step at a time. She continues to live in the family home which has now been paid in full which was my father-in-laws dream and last wishes for her with any pension money he received from his working years.

This is her retirement lifestyle and surely not something she had imagined barely into her 60’s, then again she was so consumed with everything else that a simple retirement lifestyle was luxury to her. We all have different outlooks on what it is to be rich thus a simple life without stress, worry, arguing, health problems, caring for others, family problems IS living the retirement dream.

What our about our dream? Honestly, we have no idea what the future will hold for us and living the simple life sounds cushy to us at this point. I think the older we get and with all of the tribulations being able to pay the bills, live simply and just enjoy the company of friends, family and nature IS what we would like for our retirement.

Sitting with our advisor in our early 40’s and having a net worth of over a million dollars and potentially 25 working years left it boggles my mind how much money we might have. Here’s the kicker, we probably won’t need it all but it will be nice to have just in case or for our son if he’s around or alive to help take care of us. Are we saving it for him? Not particularly but if there is anything left he will get it. Retirement savings should be for the person (s) saving it not used as a savings plan for their kids.

That’s our retirement plan but we still aren’t sure we will need millions of dollars to jet around the world or to live in a retirement based community. This is the part about retirement planning that sucks the most because we don’t know and it’s a balance between living for today and planning for tomorrow, if and when it comes.

Our Retirement Lifestyle Plan

It will be interesting to read back on this article if Canadian Budget Binder is still up and running in 25 years to see how well our retirement lifestyle plan pans out. I’m betting it will change but I can’t say whether it will go up, down or somewhere in the middle. Risk and Outcome are two words in life that have so much uncertainty that it can eat you up alive but we must plan something.

Those who fail to plan don’t necessarily fail they just don’t get the outcome they may desire especially if their mindset changes when it’s too late. What I mean is wanting to save more for retirement but you’re already close to it or your dreams change and you want to do something magical with your remaining years.

Sure, you might pull it off but as we age so does our bodies which means health is a primary concern for all of us and we can’t always do what we used to. It seems like we have forever to figure this out but in reality forever might be today as we all know tomorrow is not promised to anyone.

In the midst of all the hoopla this year and chatting to our advisor Mrs. CBB and I have scratched together a retirement lifestyle plan so we can say we did one but also so we don’t look back with any regret. Will there be regret? Who knows. No one knows anything, that’s my theory and I’m sticking to it.

Your future, Your choice, Your Plan… it may work out for you, it may not and there may be regrets but the only regret you might end up having is not at least considering the future today even if that means chopping your budget, working more, getting a second or third job or doing without.

1. Travel once a year to see family if our health is good
2. Garden vegetables, fruits and flowers
3. Building things and continue with a hobby
4. Being able to enjoy eating out or coffee shops once or twice a week.
5. Making sure we have a plan in place to cover our health-related needs
6. Moving to a smaller house in an affordable city nearby to hospitals and doctors
7. Owning a reliable vehicle (are there any out there, haha)
8. Enjoying plays or theatre productions in our local community
9. Participating in local organizations with other seniors

I’m not sure if our above retirement lifestyle will run us into the millions of dollars but that’s what we see and most likely will change as we age. We are not widely lavish with our money and continue to shop at second-hand shops and likely this will be the way we continue to live into our senior years. Travelling would be great if we are healthy and certainly part of our agenda but it won’t make or break the simple life we hope to live.

Will we need those millions we are investing for today?

I wish I knew but what I know right now is that when you retire having some money put away is better than having nothing at all. If you look at the stats for government pensions you’ll see that you may run short if you don’t have some sort of financial plan to fall back on.

Oh, and having a WILL is a must and knowing who will help look after you if your health fails or fades is critical at least for us. This was the biggest chat of our retirement lifestyle plan because that is the only part of the future we know we can count on, death.

Discussion: What does your retirement lifestyle plan look like?