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Winnipeg Free Press - PRINT EDITION
'Simply' retiring not so simple
Life after work no piece of cake
FREEDOM 55 appears to be a thing of the past -- with low interest rates, volatile investment markets and a shaky economy, more people are staying in their jobs past the traditional retirement age of 65, much less getting out earlier.
Government changes to Old Age Security that will eventually force Canadians to wait until age 67 before collecting the benefit will keep people in their jobs longer, as will low investment returns and a struggling economy.
Diane Voth-Stewart, a Vancouver career strategist, said many of her clients are older people ready to leave full-time careers to work part-time, start businesses or become consultants.
"I see it more now than 10 years ago, and we will be seeing it more and more -- the boomer generation are all going into retirement," Voth-Stewart said.
Just three in 10 Canadians plan to fully retire by age 66, according to the Sun Life Financial Canadian Unretirement Index, released earlier this year.
Voth-Stewart herself is juggling aging parents, children with health problems and career changes, as well as grandchildren. Although she's approaching the traditional retirement age, she said, "There will be no such thing for myself. I don't think I can stop working, unless my mind goes. I will do it in some capacity or mentor others to do this."
She said many clients say they don't have a choice about working but are worried about changing jobs because of their age. Older people need persistence to get hired but have a lot to offer in terms of experience, she added.
"There is no price you can put on wisdom," Voth-Stewart said. "It also pays to stay sharp by eating the right foods and getting exercise -- it oxygenates the brain."
The decision to work after age 65 could have tax implications, such as when to begin collecting from the Canada Pension Plan or whether to continue making contributions once already collecting the pension, said Saskia Muller, partner at accounting firm Galloway Botteselle and Co. in Vancouver.
Employment income can affect OAS benefits which will gradually be clawed back if a person's income exceeds $67,668 per year from all sources, Muller said.
After age 70, Registered Retirement Savings Plans need to be converted to Registered Retirement Income Funds -- a person has to start drawing income from the money, which is taxable, Muller said.
In this environment of low investment returns -- which may continue for quite some time -- retirement income has shrunk but expenses have not, Vancouver fee-only financial planner Adrian Mastracci said.
"Retirement today has become a little more challenging. When everyone was making more money, it wasn't as hard," Mastracci said.
"The people who are really paying for this recession are the retirees and the people who are saving, because they're not getting the returns."
If you're ready to make the leap into full retirement, the first thing is to assess how much money you need and for how long, Mastracci said.
"I tell people to assume they will spend the same during retirement as they did while they were working," Mastracci said. "The composition or the allocation of those expenses may change somewhat but the bottom line will stay about the same.
"The trouble with retirement is that if you have time on your hands, you tend to find ways to spend your money.
"Once you know how much you need, the key is to calculate the return on investment that will provide the necessary funds, but within your risk tolerance, he said. "You want to be very prudent."
Mastracci advises clients plan for an income to last until both spouses reach age 95 because people are living longer today and to plan for "retirement spoilers" such as large losses, high inflation, low returns or hefty health costs.
Expenses such as prescription costs or dental expenses may go up as a person ages, and medical care or a move to a retirement home could be needed.
"That could be $5,000 a month in today's dollars, or if you want the Cadillac version, it could be $8,000. Hopefully if that happens, it's not a surprise and you're ready for it," Mastracci said.
"It's important for a person to ask, 'What are the what-ifs for me?'"
-- Postmedia News
Republished from the Winnipeg Free Press print edition July 21, 2012 B11
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