I don't expect to retire - I'm going to work until I die

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.

I don't expect to retire - I'm going to work until I die

Postby Norbert Schlenker » 22 Feb 2005 20:58

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Postby Jo Anne » 22 Feb 2005 21:27

Well, our annual income went from around $120K to $35K after we retired /became unemployed. Our "standard of living" is about the same. Except maybe for the fact that I keep the heat turned down a bit lower than I used to. If I find that I'm broke, I'll stop drinking, and maybe I'll stop spending >$100/week on groceries for the two of us.

Another bullshit article by a mutual fund salesperson insisting that any retiree with less than $2 million will be living in a cardboard box under a bridge
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Postby NY152 » 23 Feb 2005 08:10

This article hit the nail on the head.

The number of people that I speak to who are in the "boomer" generation and have less than $100,000.00 in their RRSP is utterly amazing. And what is more so is their attitude that everything is going to be fine for them in retirement.
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Postby Twilight » 23 Feb 2005 09:23

I've always wondered where the 75% came from? I know a few retiree who said they managed to have a very comfortable living (not glamorous but comfy) at 30-40% their working income.

I work with a lot of boomers in the office and some of them still have lots of debt and little retirement savings. To me their situation seems quite scary but many of them think they will just work longer and everything will be fine.

I myself am not planning to work until I die. I am not even planning to work until I am 65 8) . I am planning to be able to retire around 50-55 (I am 31 now).

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Postby Friendly Dragon » 23 Feb 2005 09:28

I agree with Jo Anne on this. I think the "retirement crisis" is mostly a red herring propogated by a self-serving personal finance sector. The article states:

The 75 percent standard is a pretty basic goal for retirement planning. You might even feel you need more money to live. But ask yourself this: Could you live on half or less of what you're making today?


75% is the "basic" goal? Says who? Probably a mutual fund salesperson who wants to get you into a higher MER equity fund. What they neglect to mention is that you living expenses go down quite a bit after the mortgage is paid off and your children are old enough to make their own way in the world without your financial support.

Could you live on half or less of what you are making today? I have travelled through developing countries in Asia, where the average person lives on quite a bit less. I am not saying you can live as cheaply here as there, but the experience taught me that I don't need as much as I think I need to be content.
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Postby brucecohen » 23 Feb 2005 09:53

The 75 percent standard is a pretty basic goal for retirement planning.

My eyebrows shot up when I read that. The "standard" here in Canada is 70% and it's only a rule-of-thumb. While researching The Pension Puzzle, I tried to find out where it came from. Nobody could tell me. The best I got was that it was derived 40 or more years ago during the design of defined benefit pension plans. Most public employee DB plans, for example, are designed to replace 70% of income after 35 years.

Research by Statistics Canada and actuary Malcolm Hamilton -- using real numbers from real people -- found that most of today's retirees replaced 50-60% of income. The higher the income, the lower the replacement level.

At the start of The Pension Puzzle, we show how it was very easy for a BC woman to retire on 70% of her $50,000 income. More than half of the $15,000 she "lost" was money she never had because it was siphoned off her pay for income tax, CPP and EI. Add on the pension/RRSP contributions she no longer makes and you've covered more than two-thirds of the gap.

Malcolm Hamilton keeps making a salient point that just doesn't seem to be registering with people in general and the financial industry in particular. The typical Canadian has far more discretionary income in his/her last few years of work than over the rest of their careers when they were feeding kids and mortgages. What income level are you replacing -- the current, abnormally high one or the lower one that likely seemed OK for most of your adulthood?

That said, I often worry about the poor state in which many boomers will enter retirement, especially in the US where the income tax code perversely encourages people to pile on debt. People will muddle through -- they always do -- but they and the economy will be in for gigantic change. That's why, when I developed the Pension Puzzle retirement calculator, I wrote code that lets people work in retirement. I wish all retirement calculators did that.
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Postby yielder » 23 Feb 2005 10:09

Jo Anne wrote:Well, our annual income went from around $120K to $35K after we retired


OK so here we have a statistic instead of a rule of thumb. It's possible to retire on 29% with a standard of living that is "about the same".

For our situation, we are "retired" (I don't know what that word means anymore) on 20% with a standard of living that is "about the same".

Anyone else care to toss in percentages.

George, how much data do we need to be statistically significant? :) Yeh, yeh. The survey is extremely biased with a questionable survey technique.

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Postby Shakespeare » 23 Feb 2005 10:15

Aboout 50% with a slightly better standard of living.

But I always did like spending money on toys.

P.S. At least right now, this forum doesn't have open poll privileges, but any registrant can start any poll they want in Admin. I just figured that any polls were of the community and were for the community.
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Postby Bylo Selhi » 23 Feb 2005 10:19

Friendly Dragon wrote:Could you live on half or less of what you are making today?
Also I suspect that there's a disconnect between wants and needs. Everyone wants to retire with 100% of their former income, but they don't necessarily need to.

Moreover people have options beyond continuing to work. I wonder how people would respond to a poll question similar to, "Suppose you're 55 and your retirement nestegg is now large enough to cover 50% of your current income. Your financial advisor has calculated that you need to work until age 65 in order to fund a retirement at 100% of working income. Would you (a) retire now, adjusting your lifestyle to the lower income (e.g. by moving to a smaller, less expensive community) or (b) continue to work to age 65?"
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Postby Shakespeare » 23 Feb 2005 10:38

Would you (a) retire now, adjusting your lifestyle to the lower income (e.g. by moving to a smaller, less expensive community) or (b) continue to work to age 65?"


A lot of that depends on whether you love your job or hate your job. That, in turn, depends on whether you're the controller or the controllee.

I was the controllee. I quit. My new job (in practice I'm semi-retired) is portfolio management. It's a part-time job, I'm my own boss, and I can tell the boss to go ____ himself and take the day off whenever I feel like it.

Freedom is wonderful. 8)
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Postby Fee Only Planner » 23 Feb 2005 20:59

BruceCohen wrote:The 75 percent standard is a pretty basic goal for retirement planning.

My eyebrows shot up when I read that. The "standard" here in Canada is 70% and it's only a rule-of-thumb. While researching The Pension Puzzle, I tried to find out where it came from. Nobody could tell me. The best I got was that it was derived 40 or more years ago during the design of defined benefit pension plans. Most public employee DB plans, for example, are designed to replace 70% of income after 35 years.

Research by Statistics Canada and actuary Malcolm Hamilton -- using real numbers from real people -- found that most of today's retirees replaced 50-60% of income. The higher the income, the lower the replacement level.

At the start of The Pension Puzzle, we show how it was very easy for a BC woman to retire on 70% of her $50,000 income. More than half of the $15,000 she "lost" was money she never had because it was siphoned off her pay for income tax, CPP and EI. Add on the pension/RRSP contributions she no longer makes and you've covered more than two-thirds of the gap.

Malcolm Hamilton keeps making a salient point that just doesn't seem to be registering with people in general and the financial industry in particular. The typical Canadian has far more discretionary income in his/her last few years of work than over the rest of their careers when they were feeding kids and mortgages. What income level are you replacing -- the current, abnormally high one or the lower one that likely seemed OK for most of your adulthood?

That said, I often worry about the poor state in which many boomers will enter retirement, especially in the US where the income tax code perversely encourages people to pile on debt. People will muddle through -- they always do -- but they and the economy will be in for gigantic change. That's why, when I developed the Pension Puzzle retirement calculator, I wrote code that lets people work in retirement. I wish all retirement calculators did that.


Very good post Bruce and I fully agree with your comments.

I'd like to add a couple of points.

I have clients who don't max out their RRSP's every year and never will. These people usually own property and have other non registered resources such that they will do fine in their retirement. This never seems to get mentioned in the scheme of things. It really doesn't matter how much you have in RRSP's per se, in general, what ultimately matters is that you have the financial resources to equate to roughly the disposable income you've had or had most of your life. If you can accumulate this outside of your RRSP you actually require less resources. This can be applicable to those who are accumulating wealth by means other than T4 income.


Strangly enough I have one client who called today and I told not to put money in his RRSP because he's way beyond the point of having a secure retirement and he should be focusing more on enjoying his current years and watching his cashflow. This particular individual owns 6 houses worth about 5M (less 2M in mortgages), has no children and a defined pension plan. In his case he's better off avoiding debt, especially non deductible debt.
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Postby Fee Only Planner » 23 Feb 2005 21:05

The other point I wanted to add and forgot to, is that someone like myself is never likely to fully retire, unless health reasons force me to. Others I have talked to said they would be bored if they fully retired and are working part-time in their retirement. Certainly not everybody is in this boat but working in retirement is not as drastic as many make it out to be, if it's by choice and/or you enjoy what you are doing, rather than if it's by necessity and you don't like what you are doing.

Too often it's assumed that if you are working during your retirement you automatically fall into the later category.
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Postby ghariton » 23 Feb 2005 21:30

Of course, some of us plan to start a brand new career at 59. My cut in pay to do that is somewhere around 80%.

On second thought, maybe I'll stay in school forever. There's an LL.M. and a S.J.D. just waiting to be earned. Then I can go back and finish off that engineering degree that's still hanging...

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Postby treetops » 02 Mar 2005 08:38

Semi-retired, spending about 35% of last full-time salary. Only lifestyle adjustment has been (much) fewer restaurant lunches and dinners and a major holiday every 2 years rather than one. Kid-free, spouse-free, debt-free, own my home.

A student boarder helps out, and a part-time job. Without either, I'm at about 25%, and it's still manageable - My cat is the only one eating cat food.

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Postby ghurst » 03 Mar 2005 12:26

This thread ties nicely with my article in the February issue of Benefits Canada, which has just been archived to the 'Net here (free registration may be required): http://www.benefitscanada.com/content/legacy/Content/2005/02-05/rethinkingretirement.pdf
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Postby Vexman » 03 Mar 2005 15:01

You can retire with far less than 70% of post-retirement income but only if you are not carrying significant amounts of debt into retirement. Unfortunately for them, many boomers are not paying off their debt fast enough and some - don't ask me why - are actually taking on new debt despite the fact that their likely working years are coming to an end.

One more point about the 70% number...

You can live on far less than 70% if you want to maintain a similar or lower fare lifestyle. The problem is if you actually want to use your golden years to do all of the things that you could not do while you were working (e.g. long multi-month vacations to exotic destinations). If this is what you want, you need to plan on saving more.

My parents are in this conundrum. They are retired comfortably with about 55% of their combined pre-retirement income. But they simply don't have the accumulated funds to buy a second vacation home in a warmer climate, buy a vintage "play" car or spend 3-4 months vacationing abroad.
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Postby Norbert Schlenker » 25 Apr 2005 14:35

Now that there are indications that retirement - never mind early retirement - is looking a little out of reach, you're going to get sold the tale that retirement is bad for you.

The refrain that runs through many of our heads during our working lives goes something like this: "I'll work really hard now, putting in such long hours that there's no time to pursue other interests or take really good care of myself, because at some point I'll retire completely and not have to work at all anymore. Man, won't that be great—whenever it finally happens." But, according to Steve Vernon, an actuary at human-resources consulting giant Watson Wyatt (www.watsonwyatt.com) who has spent 30 years helping companies and executives design retirement plans, that old all-or-nothing approach to work and retirement is unrealistic. Instead, he says, longer life expectancies and greater financial uncertainty will lead most of us to work at least part time after we retire, so the key to a happy old age is to start thinking and acting differently right now. ...

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It makes me wonder how far from retirement these people are themselves. Turning lemons into lemonade is one thing. Suggesting that changing your attitude so that working into your 70s is seen as desirable sounds like something closer to, "I screwed up. How about you?"
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Postby Jo Anne » 25 Apr 2005 17:53

"I'll work really hard now, putting in such long hours that there's no time to pursue other interests or take really good care of myself, because at some point I'll retire completely and not have to work at all anymore.


And then I'll have a heart attack and die.

THE END.
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Postby Brix » 25 Apr 2005 18:34

It makes me wonder how far from retirement these people are themselves.


Hard to judge from his photo just how old the 'expert' Steve Vernon of Watson Wyatt is:

Image

But it's amusing to note that he wrote a book entitled Don't Work Forever!, Simple Steps Baby Boomers Must Take To Ever Retire. That was in 1995, though. Guess he reckons his message didn't get through. :)
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Postby nadreck » 25 Apr 2005 20:38

treetops wrote:Only lifestyle adjustment has been (much) fewer restaurant lunches and dinners


After our first 6 months of semi-retirement I can observe that our restaurant bills increase proportionally with the amount of work we are doing. If we have free time we like cooking, if not then more often then not we are being paid which offsets the restaurant costs.
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Postby nadreck » 25 Apr 2005 20:45

Vexman wrote:You can retire with far less than 70% of post-retirement income but only if you are not carrying significant amounts of debt into retirement. Unfortunately for them, many boomers are not paying off their debt fast enough and some - don't ask me why - are actually taking on new debt despite the fact that their likely working years are coming to an end.

One more point about the 70% number...

You can live on far less than 70% if you want to maintain a similar or lower fare lifestyle. The problem is if you actually want to use your golden years to do all of the things that you could not do while you were working (e.g. long multi-month vacations to exotic destinations). If this is what you want, you need to plan on saving more.


Alternately some people find themselves living on a lot less than they earn and even retiring to 35% of the income is an increase in standard of living. I know for myself not only were we living on less than 35% of our gross income but as well we were paying $15,000 - $20,000 a year in expenses that just disapeared when we moved into semi-retirement.
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Postby AltaRed » 26 Apr 2005 22:16

I know for myself not only were we living on less than 35% of our gross income but as well we were paying $15,000 - $20,000 a year in expenses that just disapeared when we moved into semi-retirement.


That is a substantial drop in expenses. I cannot imagine where all that would come from. I am not sure spouse and I could see more than $5000 or so change in expenses and we've been doing some estimating of the change when we retire in the next year. Care to share somewhat where that $15-20k was?
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Postby AltaRed » 26 Apr 2005 22:17

Well, that is interesting. The quotes got turned around the wrong way for some reason....??
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Postby Shakespeare » 26 Apr 2005 22:25

You didn't have the closing quote [/quote] in the right place.

Note that you can edit your own post to fix it.
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Postby Jo Anne » 26 Apr 2005 22:30

AltaRed wrote:That is a substantial drop in expenses. I cannot imagine where all that would come from. I am not sure spouse and I could see more than $5000 or so change in expenses and we've been doing some estimating of the change when we retire in the next year. Care to share somewhat where that $15-20k was?


When we "retired" we lost the following expenses:

Income tax, CPP, UIC - $25K at least
RRSP - $10 at least
Mortgage - $12K
Property taxes - $1K
Car insurance - $1K
Commuting expenses - $2K
Clothing - $2K
Eating out - $3K

We also picked up some expenses. We have to pay for our own dental and drugs now, for example, and our heating costs more.

But it sure is cheaper to not be working.
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