Are You Sure You Know How Much You'll Need for Retirement?

By Matthew Frankel

 

When it comes to retirement, a lot of investors have a specific number in mind that they would need to retire in complete comfort. What many people don't know is how to actually come up with an accurate estimate of how much money you'll actually need. Here's a quick guide to help you get started on your planning.

Estimate your annual expensesYou have probably heard of various estimates on how much of your previous income is needed to maintain a similar lifestyle in retirement, and around 75-85% seems to be the consensus. In other words, if your pre-retirement income is $100,000 per year, expect to draw around $75,000-$85,000 from your investments and other income sources.

However, this is not a one-size-fits-all formula. If you were a big saver in your working life, for instance, you are already used to living on a lower percentage of your salary. If you were paying a mortgage and your home is now paid off, that is an expense that no longer needs to be considered. So, it is very possible that the annual income you'll need in retirement is much lower than you think.

In your pre-retirement planning, it helps to try and eliminate as many expenses as possible before you retire (like a mortgage). Sit down and list all of your monthly expenses and consider how they might change once you retire. For example, if you have a long commute to work, you'll certainly be spending a lot less on gas!  Smaller expenses like that can really add up fast.

There have been studies that suggest that post-retirement expenses are not as much as experts think and that overall costs actually decline consistently after retiring. A recent study by the University of Michigan found that post-retirement spending is less than 60% of pre-retirement income, on average, so that is probably a more realistic goal to shoot for.

Don't count on help!While your expenses may be less than you may think, one thing that you should not count on (especially if you are under 40) is Social Security. The SS program may indeed still be around, but likely at either a lower rate or higher retirement age. If Social Security does in fact still exist when you are ready to retire, it should be a bonus, not a core part of your plan.

The same can be said for employer-sponsored pensions. Pensions are an endangered species, especially in the private sector, and just like Social Security, benefit cuts and/or increased retirement ages are becoming the norm.

How you want to investThe idea of equating the word "stocks" with "risk" in retirement is a flawed one. Not all stocks are risky and volatile any more than all corporate bonds are perfectly safe. Now, I would stay away from volatile tech companies, but dividend-paying blue chip stocks should always make up a substantial portion of any retirement portfolio.

Bonds can be great for income, but for retirement investors truly in it for the long haul, the concept of "total return" is what will keep your portfolio growing in perpetuity. The S&P 500, for example, has averages a total return (dividends and share price appreciation) of just under 10% since 1926.  Depending on the time period, an average of around 3-4% has come from dividend yields (income), with the rest coming from growth.

Is the "4% rule" right for everyone?The short answer is "no", but it can be a good starting point. The "4% rule" of retirement essentially says that if you withdraw 4% of your retirement portfolio per year and increase your withdrawals with inflation, your account will last for as long as you do.

The 4% rule should work if you have a healthy mix of investments, specifically, at least half of your money in dividend-stocks that will allow your portfolio to appreciate over time. If you decide that you need $60,000 per year in retirement, your "number" would be $1,500,000. 

This amount could drop tremendously if you end up getting the same Social Security benefits that are around today or if you actually collect a pension in perpetuity, but as I said before, these situations should be thought of as a bonus, not as a core aspect of your retirement planning.

Boomers Not Causing Rise In Youth Unemployment: Study

By Romina Maurina, the Canadian Press

TORONTO - Baby boomers are often criticized for many of today's economic woes, from creating the national debt to driving up tuition costs. But studies are discounting one of the biggest complaints -- that boomers lingering in their jobs are holding up the employment of the next generation.
"(Boomers) do take up a large part of the workforce, but there's absolutely no evidence that they're crowding out jobs that otherwise would be filled by young people," said Tammy Schirle, an economics professor at Wilfrid Laurier University.
"The unemployment rates of youth right now look about normal. A lot of what we hear from young people today is really just based on their expectation, as opposed to this being some unusual period that might relate to what's going on with another group of workers."
According to Statistics Canada, the unemployment rate for youth aged 15 to 24 was 13.7 per cent in 2013, down from 15.2 per cent in 2009.
That may seem high when you consider that for those aged 25 to 44, the unemployment rate in 2013 was six per cent, down from 7.4 per cent in 2009. But it's important to note that before the recession hit in 2008, unemployment rates weren't all that different for youth. In 2007, the rate stood at 11.2 per cent, and it was only slightly lower in 1989 at 10.9 per cent.
Overall, the current rate for youth unemployment is within historical averages and is down from a high of 19.2 per cent in 1983, which was the highest unemployment rate for youth since 1976.
Many Gen Y workers - those born between the 1980s to early 2000s - were just unlucky when it came to timing. They left high school and entered university in 2006 and 2007, when unemployment rates were near record lows, and well before the downturn in 2008 created tougher labour conditions for everyone.

The job rebound may be slower than many well-educated and eager grads would like, but the labour market and the economy have a way of adapting, as they did when women first entered the workforce and encountered a similar backlash.
"The idea was that all these women were going to come along and take up the jobs that men needed and were going to be crowding them out, and that just never happened," Schirle said.
"It was that idea that there was some fixed number of jobs and that they had to go to a certain group of people. But that wasn't the case. The economy more generally grew, the structure of jobs changed."
A 2012 study from the Centre for Retirement Research at Boston College in the United States found that the greater number of older persons employed led to better outcomes for the young, including reduced unemployment and a higher wage.
The study looked at what is known at the "lump of labour" theory, a hypothesis that dates back to 1851, and suggests that if a group enters the labour market (or remains past their traditional retirement age) others will be unable to find jobs or be given fewer hours.
But the Boston study concluded that there was no "consistent evidence that changes in the employment rates of older workers adversely affect the employment and wage rates of their younger counterparts."
"If anything," it said, "the opposite is true."
As older people stay in labour force, the college said, they are not only workers, but also consumers. The income they earn helps boost consumption, increase demand for goods and services, and in turn, create job opportunities for the young.
Lauren Friese, founder of TalentEgg.ca, a job and career resource website for students and recent graduates that also works closely with employers, says graduating from university and college and entering the workforce has always has been a challenging transition.
While graduates may find it a little more difficult to find work after graduation right now, she said, things tend to eventually work out for the students she deals with.
And the argument that pits younger and older workers against each other isn't helpful, she added.
"There are so many other things that are happening that have changed youth employment (and) that are probably more productive to discuss, because the retirement age is not something you can change," Friese said.
She said employers' perception of Gen Y workers are lazy or entitled, as well as a tendency for employers to compete for a handful of graduates from select universities are larger problems for young workers.
If some work could be done to change employers attitudes on those fronts, she said, it would improve youth's chances of employment.
Judith Leary-Joyce, 64, runs a business consulting company out of the U.K. and as well as a blog called The Second Act, which encourages women to share their stories about how they have thrived as they've grown older.
She says that while she's seen a lack of respect for older people in the past, the current generation of young people see the value of learning from the boomers, an age group that is now healthier, stronger and productive for much longer than ever before.
"There's so much wisdom in very dynamic active people who are absolutely not ready to kick back and relax and play in life," Leary-Joyce said.
"It's not right that we don't share that. For me, it's a sense of giving back now (and) I'm not prepared to stop helping."

How One Hospital is Dealing With Canadas Aging Population

Sandra Martin,
The Globe and Mail
Published Friday January 24th, 2014

To a casual observer, the two-hour surgery seemed like a small construction project – retro-fitting the back porch came to mind. The amazing part was watching Ms. Baker show off her dexterity and stamina two days later as she gamely made it up and down a hospital corridor with the help of a walker.
And then she was discharged, thanks to Sunnybrook’s Home on Day 3 initiative aimed at getting surgery patients in and out more quickly and freeing up beds in a hospital that, like many in urban Canada, typically runs at more than 100-per-cent capacity.
Leaving hospital so soon wasn’t easy for Ms. Baker. Even though she had family support, including moving into a ground-floor bedroom with adjoining bath at her son’s home, she found the aftermath gruelling. Recovering from surgery “is a slow process,” she says. “They need to spend more time on that aspect.”
It’s not perfect, but the “day three” program is one solution for the health-care conundrum about who should get hospital beds, how long they should stay in them and who looks after patients when they are released. Sunnybrook, like all hospitals, is faced with a growing number of aging patients who are living longer than ever and coping with more and more complex needs. At the same time, it is being squeezed by budget cuts. And, just like Ms. Baker, it doesn’t have much time to recover.
Ms. Baker’s short hospital stay and post-operative difficulties are symptomatic of a hospital system that is only just evolving to match the country’s changing demographics.
Back in the mid-1960s, when universal health care was instituted, mandatory retirement meant that people quit working at 65. Most of them conveniently died within the next decade.
Now, we never have to retire and life expectancy is heading into the stratosphere. A 60-year-old man in 2013 will live long enough to celebrate his 87th birthday, according to recent figures from the Canadian Institute of Actuaries. His female counterpart will likely reach 90. Whether either will be in robust health is not nearly so certain: Medical successes in combatting rapacious killers such as cancer, heart disease and diabetes means people are living long enough to be afflicted with dementia, depression and other chronic and complex diseases of old age.
In the 1960s, the average age in Canada was 27; now it is 47. “Our interaction with the health-care system tended to be in and out,” Deb Matthews, Ontario’s Minister of Health and Long-Term Care, says of the past. “If you needed your appendix out, you would go into hospital and get it out and then go home and be healthy again.”
Even “getting out,” though, meant staying in hospital longer, and there were more family members to help us recover when we did leave. Nowadays, a lot of those expectations have been passed on to patients. We are supposed to keep ourselves healthy and active, and to make arrangements ahead of time for post-operative care when we are briskly wheeled through the revolving hospital door.

For the complete article, go to http://www.theglobeandmail.com/life/health-and-fitness/health/the-hospital/how-one-hospital-is-dealing-with-canadas-ageing-population/article16492881/

SENIORS, YOUTH, UNITE THROUGH ANTI-AGEISM FILM PROJECT

Opal McLean hesitates to admit she used to believe some of the less-than-flattering ideas out there about what older people are really like.
The 16-year-old from White Rock, B.C., doesn't have a lot of exposure to seniors in her day-to-day life, and with a grandmother who isn't very cheerful, she was left with an outlook on aging that was more negative than positive.

Opal McLean, far right, appreciated the opportunity she had to take part in the Age is More film project with, from left, Hannah lohnes, Doreen Reid, Meg Fitzgerald and Bernard Beaudoin. (Submitted by Opal McLean)

It is, McLean says, "kind of embarrassing to say that I did believe the stereotypes.
"My one grandmother is quite grumpy."
McLean's outlook did a 180-degree turn, however, after she took part in a program that drew young Canadians and seniors together in a bid to fight stereotyping and discrimination against people based on their age.
McLean was one of about 20 teens in British Columbia and Ontario to take part in the initiative organized by Revera Inc., a provider of seniors' care, services and accommodation.
Through the Age is More program, run in conjunction with Reel Youth, a non-profit organization that focuses on youth and filmmaking, the teens were paired with seniors to make short videos delving into the older peoples' lives.
"It was amazing," McLean says. "It opened my eyes completely because I never considered ageism to be a really important subject."

'So enlightened'

The revelation came as a result of the time she spent with seniors Doreen Reid and Bernard Beaudoin. Everyone involved in the project — seniors and youth — came away feeling "so enlightened," McLean says.
"Some people, because of what they think of seniors, they're going to be too scared to go up to someone and talk to them and make a friendship because of the generation gap. It's a really big opportunity people are going to miss out on just because of the fear of them being mean and grumpy."
Such fears lie at the heart of ageism, something that Greg Shaw, a director at the International Federation of Ageing, says is probably one of the "most socially tolerated forms of discrimination in Canada."

'I think there are too many assumptions made by older people that youngsters are not capable of thinking any situation through thoroughly'- Bernie Custis

A 2012 report by Revera and the federation included research by Leger that found six in 10 seniors age 66 or older say they have been treated unfairly or differently because of their age.
More than three in 10 Canadians admitted to ageist behaviour, and, according to Revera, 71 per cent "agree older people are less valued in our society than younger generations."
"There's a misconception that as soon as you retire … it's like an expiry on a food product," says Shaw.
"Just because you've reached a certain age, it doesn't mean that you [can't still] contribute and the knowledge and the wisdom and the counsel that you can provide can't be valued.
"I think that's the biggest misconception that this [film] project and the Age is More program is actually trying to shed light on."
At the same time, research shows social contact can play a vital role for seniors as they grow older.
A report released by Statistics Canada last year found nearly 25 per cent of seniors say they want to take part in more social activities.
"The greater the number of frequent social activities, the higher the odds of positive self-perceived health, and the lower the odds of loneliness and life dissatisfaction," Statistics Canada said. "This is consistent with research that has found seniors with a wider range of social ties have better well-being."

Breaking barriers

For seniors who took part in the film project, it became a welcome opportunity to forge new friendships with young people, and learn a few things for themselves in the process.
"I think there are too many assumptions made by older people that youngsters are not capable of thinking any situation through thoroughly," says Bernie Custis, an 83-year-old resident at Appleby Place Retirement Living in Burlington, Ont.
Custis, who was a school principal for 33 years, also played football for the Hamilton Tiger-Cats, becoming the first black quarterback in professional football in North America in 1951.

Retired school principal and CFL quarterback Bernie Custis says people are judged 'far too often.' (Revera Inc.)

"Far too often people are judged," Custis said in a statement. "In my life I have been fortunate enough to break some of these social barriers, which is why I was keen to participate in making this film."
In his film for the project, Custis talks of his football career, starting in high school.
"I think I still have a message to deliver to people that let's judge everyone on their content of their ability, and then that eliminates all these other issues that we're dealing with in life," he said in an interview.
Norma Clark, a 91-year-old retired nursing instructor, and her husband Roy, an 87-year-old retired surgeon, enjoyed the time they spent on the Reel Youth Project. The couple, who also live at Appleby Place and were medical missionaries in Africa for 15 years, were asked by their young interviewers about the romantic side of their relationship.
"We just basically talked about how we met," Roy said in an interview. "And then they wanted us to kiss each other, so we did that."
The Clarks met in 1950 in the emergency room of Toronto East General Hospital, where Roy was doing his residency. Another nurse helped set the couple up. 
"Then we sort of fell for each other and we got married two years later," says Roy. "We've been married for 61 years. We've been together for a long time."
While the Clarks would have liked their video to explore their career experiences, they appreciated the opportunity to be part of the project.
"I think there was a good camaraderie in all of the relationships," says Norma. "When we signed up, we weren't all that sure it was going to be worthwhile, but it was really good. And then when they showed the pictures … it was excellent."

Natural fit

For the Reel Youth organization, the film project was a natural fit.
"We find this kind of inter-generational work really inspiring," says programs manager Zoe Miles.
"It's become really clear to a lot of us at Reel Youth how much those inter-generational connections are missing for a lot of people in our culture, in our society, and just how much magic there is … when people get to connect with folks of other generations."
That magic goes both ways, Miles says: older people come alive because they are feeling as if they are being heard and celebrated, and younger people appreciate not being treated like children and instead being honoured as contributing members of a group.
The videos have been posted online and will be spread through social media, YouTube and the Revera network. They will also be submitted to film festivals in which Reel Youth is involved.
Revera's experience with the film project has prompted administrators to consider how they might do similar initiatives in their other 93 communities across Canada, particularly in light of predictions that the seniors' population in Canada will double by 2036.
"Oftentimes as we deal with seniors in our society, there's a big gap between the seniors and Gen Y and Gen X, and there's not the opportunities really I think to interact," says Stephen Foster, Revera's senior vice-president of retirement living.
"This project has provided an opportunity for them to interact and I think that having this dialogue and creating this awareness really helps break down some of the barriers."

By Janet Davison, CBC News Posted: Dec 14, 2013