The road to retirement

Remember when retirement used to be a major event? Parties, golden handshakes, a fancy watch for 30 year’s work well done? Remember, too, a time when retirees could expect to spend the rest of their days in relative comfort, with substantial company pensions, topped-off by a half-decent government contribution? Sure, it still happens, but not for everyone – and certainly not without a great deal of effort. As well, people are experiencing longer and longer spans of retirement – 25, often 30 years without that automatic pay cheque coming in. So what can you do now to pave the way for a smoother ride towards and onto the road to retirement?

According to the experts – financial planners, investment counsellors and the like – the onus for financial comfort in retirement is increasingly being placed upon the individual. Governments, these experts are quick to point out, are no longer prepared to allow retirees the luxury of a pension unsullied by tax deductions, or unaffected by an individual’s savings or post-retirement income – the proposed Seniors Benefit is but one example.

In short, you’ve got to maximize your retirement potential now. For example, always try to contrite the maximum allowable to your RRSP- even if you have to borrow to do so – and seek creative ways to avoid, not evade, paying excessive taxes. All tried and tested strategies, and all dealt with in greater detail in publications such as CARPNews or in countless books on personal finance.

An area many “soon-to-be-retirees” often overlook is housing – a careless omission when two of the most important retirement decisions one ever makes are the type of dwelling in which one lives, and where that home is located. And consider this: Those four walls which once housed an entire family can be put to good use generating income when it’s most needed.

It’s called downsizing, and for the millions of folk destined to do poorly in the private-pension/investment lottery, the steady increase in real estate values over the past two decades is good news indeed.

Take a 50-something city-dweller as an example. With children gone, and still 10 or more years away from retirement, Mr. X can expect to live another 20 or more years after leaving his job. And with a home that costs, say, $20,000 a year to maintain (mortgage, taxes, utilities, repairs etc.), he will have to save close to $400,000 just to afford to stay put for that period of time. Even if Mr. X could sock away $10,000 a year in an investment with a return of 10 per cent (ask any financial planner, they’ll say that’s optimistic), it’ll take nearly 20 years to reach his $400,000 goal. By then, of course, his hoped-for retirement date will have come and gone, and who knows quite what twists and turns his health – let alone the economy – will have taken in that time.

But if Mr. X had sold and moved to a more affordable neighbourhood, he could have saved a large chunk of that $400,000. Here’s how: If he’d sold his existing home at the asking price of $300,000 – and bought a smaller home (maybe a condo) for $180,000, he’d instantly have a sizeable amount of money to invest. The new home’s running costs are close to half what they were (now around $13,000). All of a sudden, things are looking rosier for Mr. X’s retirement.

Practice makes perfect
But there’s more to retirement than money. What of relationships?

Chances are you’ll be entering the home-stretch toward your retirement goal with a partner. If so, it’s a good idea to evaluate the nature of the relationship prior to retirement. Even after years of co-habitation, it’s possible – thanks to busy work schedules and family obligations – to find yourself sharing your living space with a virtual stranger. In order to avoid any unpleasant surprises take time to get re-acquainted. Get away from work, family obligations and concentrate on one another – hold hands, talk, listen. Reminisce about what it was like when you first met. And there’s no time like the present to arrange an hour of conversation about something utterly impractical, involving neither money nor work.

Time on your hands
Alright, you’re nearing the end of your formal workplace years. The housing situation is in good order, the financial plan is in place, and your relationship is rock-solid. But aren’t we forgetting something? Or rather, aren’t we forgetting someone? How will you fill all that new-found time? Can you handle an unstructured day? Sounds attractive now, but it’s amazing just how ill-equipped many of us are to fill that gap left by an all-consuming career.

Take hobbies as an example. A CARP member who spends her precious pre-retirement time working in a senior’s day program bemoans the fact many of her elderly clients, particularly the men, were unable to get involved in crafts classes or discussion groups. “They simply never learned how to exist beyond retirement,” she says, adding: “It’s as if their lives suddenly ended. They had never taken up a hobby, never even figured out how to talk about anything other than work… it’s sad.”

Sad, yes. Unavoidable? Not at all. An individual who takes the time now to discover hidden talents – whether it’s acting, crafts, photography, a sport or volunteering – will find retirement a smooth and rewarding phase of life.

More importantly, they’ll find their own particular journey doesn’t just end when they punch that clock for the last time.