How to Make Good Decisions for Your Retirement

Two women discussing how to efficiently plan their finances based on the lifestyle they intend to lead post their retirement.

What does it mean when the Globe and Mail introduces an entire section of its on-line paper to retirement? The important thing it means is that baby boomers are an audience worth targeting. And that means that retirement is big business. As reported in our last blog, there are now more than 6-million seniors living in Canada today.

At this blog we know that retirees, or the soon to be retired, are looking for answers to a multitude of questions. These pressing questions include:

  1. Should I downsize or stay in the family home?
  2. Should I move to a condo?
  3. Should I rent?
  4. Would a reverse mortgage work?
  5. Have I saved enough for my retirement?
  6. Do I have the right mix of equity to fixed income in my retirement investment portfolio?
  7. Should I support my adult children with cash infusions?
  8. Should I allow my adult children to live with me?
  9. Do I have enough life and health insurance?
  10. Is wintering in the U.S. feasible given the low Canadian dollar?
  11. What would happen if I required long-term care?
  12. Should I continue to work past 65?
  13. Should I work part time after retiring?
  14. How early can I retire?
  15. What happens if my spouse passes away or I am divorced?

These are fifteen of the most pressing questions boomers are asking themselves as we approach or are living in retirement.

How to find the right answers to these questions isn’t simple. Finding your own way through the maze of retirement decision-making has become an art. Let’s face it: everyone’s situation is different.

In my case, downsizing to a condo just before retiring was an ill-conceived decision that I made prematurely without testing the alternatives. When I reversed that decision to move back into a house, I’d squandered $100,000 and was back in debt.

A hefty dose of financial advise from newspaper gurus influenced my decision, but now you can do the math yourself, by clicking on the Globe and Mail’s calculator, which accordingly shows how little you’ll save by downsizing.

Additionally, I recall when I first considered buying a large home back in 1994, my investment advisor of the time, cautioned me against it. He wanted me to invest my savings with him and buy a smaller home. I chose to ignore his advice and it was one of the best financial moves of my life. By the time I sold my house, 17 years later it more than doubled in price. Not so my investments. Not by a long shot.

Lesson learned is to be cautious when making life-altering decisions. Be skeptical of the know-it-alls. Financial predications by experts can be wrong. Don’t make snap decisions about anything concerning your retirement future without discussing it with those you trust. One-size-fits-all advice may not suit your situation.

One thing that is certain is that most everything is always changing and that’s a fact that becomes harder to accept the older you get. Let’s say you counted on earning 8 to 10 per cent yearly profits on your investment portfolio before the Great Recession knocked that down to minus 30 per cent in 2008, or you locked down your mortgage before watching interest rates nose dive. You might have done better investing at 6 per cent rather than paying down a 2.5 per cent mortgage.

What if your kid decides to attend graduate school when your RESP accounted for only an undergraduate degree? Or your job disappears before 65? There will be things you can’t control but there are usually ways to meet adversity, such as taking a home equity line of credit or a reverse mortgage, investing in ETRs, with considerably lower management fees, or sharing living quarters with other seniors in innovative, cost-efficient arrangements.

And then, there are the certainties. Children do grow up, even Millennials. Although it’s taking our offspring much longer to get off the payroll, eventually most do.

Expenses go down as you age. My favourite cousin and I were discussing how much we enjoy being at home these days. Travel, that was once a must for me, seems less alluring. I wouldn’t say no to a spring cruise on the Mediterranean, but I’d be just as pleased to install a fireplace in the master bedroom and upgrade the furniture. It’s less expensive and the buzz lasts longer.

That’s not to say that I’m done with fun. Not by a long shot. It’s just different. It’s quieter, but no less intense and sometimes unpredictable. The special times with my spouse can be spectacular like last Sunday when we relaxed on the backyard deck basking in an Indian summer sun, drinking coffee and reading the New York Times.

I used to be in a hurry all the time. Hurry to work, hurry to get the job done, hurry to return home, make dinner, sort the dishes, get my daughter to bed and do it all over again the next day. Weekends were catch up time: grocery shopping, errands, dinner with friends and relatives and then those itty bitty hours late at night when I could settle down and prepare for the next week.

Looking back, I see now that I worked hard to buy time for my senior years. If you think of retirement that way, you won’t feel guilty or frightened about occasionally digging into your savings or staying on in your good-sized home where you are most comfortable.

One more word of caution: make your financial decisions based on the life you want to lead, rather than attempting to short change yourself. There are many ways to enjoy senior years. Pick the one that’s right for you and you won’t regret your decisions.

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