Getting it right

Springtime comes in a blaze of glory to Prince Edward Island. The land literally transforms before your eyes — from the dull, grey dead of winter to the lush, green promise of spring. Island residents who farm understand all too well the importance of the land’s renewal — their very livelihood depends on it.

It’s been more than 15 years since Ian MacDonald retired and built his retirement house overlooking the fields he once farmed. Until then, he and his wife Stella ran a thriving farm business, specializing in potatoes and poultry. Stella, a nurse, retired from her job when she married Ian and helped run the farm. Now 75, Ian’s livelihood no longer depends on the land. Rather, it hinges on the prudent use of his retirement savings.

Deciding to sell the business and retire was a momentous decision for the MacDonalds, as it is in the lives of all workers. With no regular income, retirees must devise a financial plan that gets the most out their savings and/or pension income. Problem is, there are so many unknowns. How long will you live? What will your health be like? How will your investments do? What about inflation? Considering the MacDonalds have managed for 15 years their retirement savings, they’ve obviously done something right. So what’s their secret?

Ian and Stella have different explanations. “I married a great woman,” Ian says directly, citing the couple’s 50-year marriage. For her part, Stella claims the pair has managed so well because they never lived excessively. She still bakes bread and rolls, for example. “We grew up in poor times,” she says. “That taught us to live within our means” — a lesson, she notes, many younger people seem to have forgotten. She also jokes that her husband’s Scottish heritage “might have played a role.”

The MacDonalds’ financial consultant says there’s more to their success than what the MacDonalds are admitting. “Besides living within their means, they’ve always been very savvy investors,” says Gordon Jones, who’s helped the couple manage their money for the last five years. For example, when Ian was in his 50s, he cashed in his life insurance policy and invested its proceeds. Risky, yes, but it’s paid off. “Farmers are always taking risks,” claims Stella. Ian has also shown an uncanny knack of knowing when to sell assets. At one point, against his broker’s wishes, he liquidated a large chunk of his assets just before the economy took a nosedive.

Jones says the MacDonalds’ investment strategy has become more conservative since they’ve retired. “They’re not trying to become millionaires,” he says. “They just want to keep their capital intact and stay ahead of inflation.”

Early on, Ian and Stella decided that dividing their assets was the best strategy. One portion they’ve designated as a legacy for their four children and 13 grandchildren, all of whom live close by. Jones looks after these assets, investing them for the children’s future use. The other portion, which Ian and Stella live off, is invested conservatively in mortgages, stocks, bonds, and Canadian and foreign equities.

The trick, says Jones, is to maximize investment returns while avoiding market volatility. As the MacDonalds are living off their capital, they can’t afford to go overboard with high-risk investments. Being an avid observer of market trends helps Ian. “I’ve always made my own investment decisions,” he says. “And I’ve never been afraid to say ‘no’ to a financial planner.” Perhaps most important, the couple has never lived a lavish lifestyle or spent frivolously. Family values play a strong role in this tightly-knit clan, particularly when it comes to estate planning. Ian and Stella have always been very open with their children and how they plan on dividing their assets. “When there’s no communication, people’s imaginations can run riot,” says Jones. Open discussion concerning all financial matters has always been the norm. The MacDonalds are by no means recluses, holed away in their home, watching every penny. In fact, they’re very busy with church and community clubs. Each year they run a charity drive, raising money for many local causes. Although Stella quit nursing years ago, she has cared for patients in her home. Ian is also active in the community, sitting on hospital and community boards. He walks four miles a day and proudly claims he lives without an “ache or pain.” At 75, he’s a marvel, often out cutting wood, walking the dogs or mowing the lawn.

Obviously, everyone’s retirement situation will not be the same. You must take stock of your available resources and decide which investment and lifestyle strategies make the most sense. The MacDonalds found that through a steady mix of business and common sense, they could stretch their retirement resources to the limit, allowing them to enjoy many more Prince Edward Island springtimes.