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The "new" retirement is no retirement

Friday, May 06, 2011

In our parents’ time, ideas regarding retirement were much different than we baby boomers are finding today. Retirement was mandated at 65, or earlier for public sector work, if you met the formula. Life expectancy was relatively low (72-74) by our standards today. But for a typical couple today, at age 65 there is a 63% chance that one spouse will live until age 90.That’s a dramatic change and requires planning to ensure couples don’t outlive their money.

There are a number of trends that are helping this generation avoid that unpleasant outcome, and getting “saved” by a big inheritance shouldn’t be high on your list to ensure you don’t wind up living on only government pensions after you turn 80.

Work longer

Forced retirement has now disappeared, making it easier for functional workers to keep working as long as they are productive. Most companies are pleased to keep older workers on, because they have great experience, and the new, younger Gen X or Gen Y worker pool is much smaller.

Working full time, part time, or consulting will all help delay the start date of capital drawdown, continue building CPP instead of taking a smaller amount earlier, and allow your investments to grow naturally or even faster with added capital before you fully retire.

Many seniors today are finding that besides the financial benefits of retiring later, there are other benefits too. Our parents worked 30 to 35 years and then simply retired. Many had to adjust mentally to having more time and not being “Mary Smith, the teacher,” but simply being “Mary Smith, retired.” That wasn’t easy for many people. Moving to part-time work or consulting allows you to slow down and adjust mentally to the idea of retirement while having more spare time to build or grow hobbies that will keep you active and fulfilled during retirement years. In addition, you don’t have to feel that you are being pushed out of your job even though you are still healthy and productive simply because your birth certificate says you are now 65.

New career opportunities

What researchers are finding is that this “new retirement” work is often very different from what you had done for the past 35 years. Nurses who start a dog-walking business or open a small café, for example. Teachers who open a small landscaping company to get outdoors more. Many people seem to be starting new with something fresh and have no desire to continue doing what they had done for so many years in the workplace. There is also growing evidence that people who stay employed longer at jobs they enjoy live longer and healthier lives. The key is finding something you enjoy that pays most of your current living expenses.

Thus, there are mental and health benefits to working in the “new retirement” besides the obvious financial ones. So don’t worry if you are approaching retirement and really don’t feel like you want to stop work altogether and go golfing five times a week. There will be more and more people who decide to take a different path to retirement than their parents did.

However, the key is to continue working because you want to, not because you are forced to through lack of planning. If you are approaching 50 and don’t have much of a nest-egg yet, you had better get moving, as these are normally your years of highest earnings, and 65 will come quicker than you think. You must build that nest egg in case you run into any health problems that don’t allow you to continue working into retirement.

It’s never too late to start planning, and qualified financial planners have a whole playbook of planning ideas and strategies no matter how old you are.



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The foregoing is for general information purposes only and is the opinion of the writer. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. However, please call the author to discuss your particular circumstances.