Work longer or live smaller

Back in the double-digit-returns world of the 1990s, plans for early retirement were almost a given for 50-somethings — and even for some 40-somethings. But now, these same boomers are kissing goodbye their retirement dreams of cruising the South Pacific, painting watercolours in the south of France or teeing off on a different course every day. Many are wondering if they can ever afford to retire.

“I had planned to retire on my 55th birthday,” says an insurance professional in St. John’s, Nfld., who passed that milestone in April. “But my wife and I were fully invested in equities – even my pension had a high equity exposure – and we’re down 40 per cent. Every second person I talk to, it’s the same story.” He figures he’s stuck in his job for at least five years.

He’ll have lots of company. Seven out of 10 Canadians aged 45 and up feel that the poor market performance has impacted their retirement plans, and 60 percent of this group say they will postpone retirement five years or longer, according to a 2003 RBC/Ipsos Reid poll. Another 2003 survey, conducted by Decima Research, found that 72 per cent of non-retired Canadians a strongly considering working in some capacity after they retire.

Not all doom and gloom
It’s not all doom and gloom, says Toronto demographer David Foot, co-author of Boom, Bust and Echo: Profiting from the Demographic Shift in the 21st Century (Stoddart, 2001). Foot says, “We’re so wrapped up in the last two or three years. Most people who invested in the last 10 years have not lost. They’re still ahead, but they got spoiled.” He adds: “Most people had always planned to work till 65. What did happen to a lot of people was when the stock market took off, they thought, Now I can retire at 58. Today, they’re back to thinking, I can’t retire till 65.”

That’s not necessarily a bad thing, say David and Diane Bond of Canmore, Alta., authors of the new book Future Perfect: Retirement Strategies for Productive People (Douglas & McIntyre, 2003). While contemplating retirement (he’s 65, she’s 53), the couple found many people like themselves who, after years of productivity, multitasking and the social and intellectual stimulation of work, wanted a little more leisure time – but not unlimited leisure time. “Leisure is like wine,” says Diane. “The first glass is nice, the third less exciting, the fifth a blur.”

Here are profiles of three people who have been forced to go to their Plan B: delaying retirement, working part-time after retirement, downsizing their house or minimizing their expenses. It hasn’t been easy, but it’s working out. And all realize they may have to change their plans again: retirement isn’t a destination, it’s a journey.

Next page: Working longer, spending less

Working longer, spending less
Teresa (48) and Hans (49) Heinrich, Newmarket, Ont.
PLAN A: Retire in mid-50s
PLAN B: Work part-time, sell the house

When Teresa and Hans Heinrich married 12 years ago, they had a dream to retire in their mid-50s, buy a motorhome and tour North America. They would keep a paid-off house in Newmarket, Ont., which would serve as home base for themselves and their four grown daughters – two from her first marriage, two from his. Hans would have a full pension by age 57, supplemented with ever-increasing RRSPs and a whole life insurance policy that would pay handsome returns.

Then, harsh reality intruded. Eight years ago, Hans was downsized out of his job as financial supervisor for the trucking division of a corporation. He opted to take his $50,000 in accumulated pension contributions and roll it into mutual funds, untouchable till age 65. A month later, Teresa was laid off from her bookkeeping job with no severance. Hans was out of work for six months, Teresa for 14. Finally, Hans found a job with a much lower salary and no pension plan. After a couple of unsatisfactory, short-term jobs, Teresa got a position in accounts receivable for a golf club and was able to start contributing a minimal amount to her RRSPs again, which were largely invested in mutual funds. Things were looking up.

Less capital, less income
“Then, everything took a dive,” says Hans. His original $50,000 of pension money, which had doubled to $100,000, now stands at $79,000 (because of the change in the market). They still have a mortgage, and they still have one daughter, age 20, living at home. Their gross household income is about $75,000, much less than they had hoped, and their combined retirement investments total $155,000, down 15 percent from their peak. The Heinrichs had been counting on living off their whole life policy investment, but when they discovered what anemic interest rates had done to their returns, they cashed it in and bought regular term insurance.

So what’s happened to the Heinrichs’ dream? It’s still there, albeit somewhat altered. “Instead of complete retirement at 55, we’re looking at semi-retirement,” says Teresa. They’re thinking now that they could still afford to spend fall and winter travelling through the southern United States. But during the half-year they’d be back in Canada, they will have to work.

Lowering sights
When the Heinrichs went to an RV show recently, they realized a $75,000 motorhome was out of their budget, so they lowered their sights and are now considering a $25,000 RV that they’d pull behind their car. As for their house, they may have to give that up. Teresa says, “The bulk of our investments is our house, so if we can’t keep it, we’ll just have to sell it, and that’s fine. We may end up renting.” Since they bought the house three years ago, it has jumped $50,000 in value to $300,000.

While other people may be anxious at the thought of giving up their house, Teresa says, “I’m not going to worry. I think we’ll be okay. We don’t have a high lifestyle, and I’ve always been on a budget, but I’ve managed to reach my goals.” As a struggling single mother before she met Hans, Teresa nevertheless managed to hold down a job, buy a house and even take her daughters on a Caribbean vacation. “We won’t be rich, but then we aren’t rich now. We’ll have a good, simple life.”

Next page: Making the most of simpler living

Making the most of simpler living
Maria (64) and Domenic (61) Rizzo, Vancouver (names have been changed)
PLAN A: Retire in comfort
PLAN B: Discover the joys of thrift

Maria Rizzo of Vancouver knew exactly what she would do when she retired from her job as a senior university lecturer and administrator. “I had envisioned quite a bit of adventure travelling to places I hadn’t been before, such as Asia or hiking along the Inca Trail. My husband and I would eat out whenever we felt like it and spend freely on expensive food items if we had the whim. I’d get my hair done more frequently and even make the occasional trip to a spa. I’d join a gym. And I’d have lots of time to do extensive volunteer work.”

Four years ago, after 25 years of university work, Maria was suddenly laid off. She took the money that she had accumulated in her company pension and put it all into equity mutual funds and individual stocks – including the ill-fated Northern Telecom. “I hadn’t invested in dot-coms, but I didn’t really expect Nortel to collapse,” says Maria. “At my age, you’re not sure you have the time to rebuild your investments. I felt devastated and frightened.”

Meanwhile, her husband, Domenic, a computer consultant, switched careers to do something he loved: restoring old cars. He enjoyed it, but when he realized he needed to make more money, he felt he had no choice but to go back into the computer field, becoming an on-call consultant with a small company. The work is unpredictable, and the company has no pension plan.

Time becomes money
During their formerly busy working lives, the Rizzos had a chronic shortage of time. Now they were facing a chronic shortage of money. To help them make the adjustment, they took a hard look at what they truly valued. “You think about what means the most to you, and for me, that’s family and friends,” says Maria, who has three grown children. “So, instead of going out to restaurants, we have people in for dinner. I cook and bake everything from scratch, which is not only cheaper than prepared food but much healthier.”

Exotic travel is out of the question now. “I could bemoan that I’m not going off to Nepal, but with all the unrest in the world, I’m not sure I want to go anyway,” says Maria. She loves to walk, and while she won’t be hiking Peru’s Machu Picchu anytime soon, she realizes that British Columbia offers some of the most spectacular trails in the world. She joined a walking group (which, with its fitness benefits, saves her the cost of joining a gym).

The Rizzos even cancelled their newspaper subscription, reasoning that with news available on the radio, television and Internet, they didn’t need a daily paper. They don’t miss it, and they say that with everything that’s going on in the world, they’re probably happier without it. Maria gets her hair done only two or three times a year, and she has the occasional facial not at a fancy downtown spa but at a small neighbourhood salon; it pleases her that she’s supporting local small businesses.

Creative outlet generates income
After being forced into retirement, Maria decided to indulge a long-standing interest in gardening. She took a master gardener’s course, which not only provides an outlet for her creativity but has evolved into volunteer work and even helps to generate a little income. She also works occasionally at nurseries to give gardening advice to customers, which offers her some of the social interaction she enjoyed in her job.

With Maria’s CPP, which she started collecting at age 63, and with the continued possibility of occasional short-term contracts for Domenic, the Rizzos hope to manage on a total income of somewhere slightly more than $30,000 a year. As Maria says, “Before we spend money on anything, we always ask ourselves, Do we really need it?”

Next page: Working it out

Working it out
Gideon (53) and Betty (53) Randell, Clyde River, Nunavut

Plan A: Retire at 49 in Newfoundland
Plan B: Keep working on Baffin Island

The last thing that Gideon Randell thought he’d be doing after retiring from a 30-year teaching career was more teaching – and certainly not in a remote Arctic community. He had enjoyed being a high-school math and physics teacher, but frankly, he was looking forward to retirement. He and his wife, Betty, would live in their mortgage-free house in Norris Point, Nfld., which sits in the stunningly beautiful Gros Morne National Park, and by their mid-50s, they would live on their combined company pensions of about $46,000. It hasn’t quite worked out that way.

When Gideon retired four years ago, a few months before his 50th birthday, he was in serious debt. “I had lots of bills,” he says. “I had one kid who was finished university, one who was still in it and a third who would be starting in a few years, and it was costing me $12,000 to $15,000 a year for each kid.” The children scarcely made a dent in that expense from their summer jobs, and they weren’t eligible for government student loans since Gideon was making almost $50,000 a year, and Betty, who does domestic work in a hospital, was pulling in a much smaller but steady income. Then, there were other expenses, such as the children’s flights home for visits. “I had been withdrawing money from my RRSPs, and I even had to remortgage our house,” Gideon says.

A new – and far-flung – job
After staying home for a year and watching his debts grow, Gideon decided to apply for a teaching position in a northern community, where he would start at close to $100,000 a year – almost double what he had made in Newfoundland. He applied for half a dozen jobs and received just as many offers. He chose Clyde River – called Ka-ngiq-tu-gaa-pik in Inuktitut – a Nunavut community of 850 on the rugged east coast of Baffin Island, much closer to Greenland than to the rest of Canada.

Isolated doesn’t begin to describe Clyde River. It lies more than 700 kilometres north of the capital, Iqaluit. The closest big town (population 1,250) is Pond Inlet, 400 kilometres away. “A lot of teachers come here and don’t even last the year,” Gideon says. “Some take one look and get right back on the plane.”

Although he’s very well paid, Gideon says that the teaching conditions are the most challenging he has ever faced. The language barrier and the drug problems combine to produce high rates of absenteeism and failure. “In a class of 20 students, you may have two or three who come regularly,” he says. “In our school of 320 students, you’ll get two or three graduates a year if you’re lucky.”

Gideon has outlasted many of his colleagues. He has finished his third year in Clyde River. He sees Betty only in summers and at Christmas. “It’s not easy,” he says with characteristic understatement. “This year has been the hardest.” He’s hoping that Betty will be able to spend some time there with him next year, which will be his last. “I came up here with the intention of clearing up all my bills, and I’ll do that next year.” And maybe go home with a little to spare.