So. Retirement planning. Yeah. I really need to get on that.
Don’t get me wrong, I have a defined benefit pension plan that will happily pay out a percentage of my yearly working wage until the day I die. The only thing I have to do is work for them for twenty years. There are other ways of accessing the money but to get the full amount, I need to be with them for two decades. That’s quite the commitment. So maybe I need to do something different. But things are not looking really pretty out there.
A recent survey by Sun Life Financial* shows that over one third of Canadians (32%) believe they will be working past the age of 65 years old. Since the survey’s inception seven years ago, this is the first year that more Canadians believed they’d be working past retirement age than not. In addition, only 44% of today’s workers feel they’ll be satisfied with their pensions and savings versus sixty percent of those currently living off their retirement earnings and investments.
There are generally two camps for those considering work past retirement age: those who want to work and those that believe they’ll need to work. Of those, 59% believe that working will be a necessity and 41% who believe it will be a choice. I don’t know about you but I want to be in the second camp. While we are in the middle of our own financial crisis reprioritizing, it’s easy to get short-sighted about the future. The invitation is there to dig into our investments – again – and spend a lot of money to maintain our current lifestyle (with modifications, of course).
So how do we protect our future while paying for our today? The Sun Life survey showed that Canadians are first concerned with paying down their debt (23%), then saving for a house (20%), and then retirement planning. I think those are important priorities too but I want to be sure that I’m looking after all these things in a realistic way. I don’t want to pay for my shortsightedness because I wasn’t flexible enough to see other possibilities. I think we need to consider the small and the big picture when we’re managing our finances.
Sacrifice a Little Now:
A girlfriend of mine is married and they have weekly amounts they pay themselves for “fun money”. I believe it works out to be about $100 a week for her; of that, she puts money into her brokerage account so she can purchase stocks. Along these lines, I can put $25 into an emergency fund if I forgo a couple of lattés every week.
Since we’re currently living on one income, I’ve been foregoing the lattés anyway. I can take some of this money and put it into an emergency savings account. While we can’t afford to put this money into retirement fund at the moment, I can build up our buffer so we can stretch our emergency fund a little further.
Be a Conservative Budget Planner:
My husband made a living as a Mechanical engineer in the oil and gas sector. The thing about oil and gas is that while it pays ridiculously well, it’s also ridiculously volatile. We made the mistake of basing our budget on his $100,000 salary so now we have to figure out what our next steps will be. While it’s scary and I’m worried about what our future will hold, I’m keen to appreciate this for the opportunity it is. Matt and Mom and Dad Money speaks personally about his job loss and his decision to embrace the opportunity that it brought. They had budgeted conservatively and had many months of income they could live from while they decided what they would do next. They did all this without touching their retirement savings.
We have some retirement savings but we’ve had some setbacks which have started to take their toll on our resources. So now it’s time to change the game and find a way to make our lives more budget-friendly. This will help us be more prepared for the next crisis-de-jour that comes our way.
Have an Escape Plan:
Sometimes things just don’t work out. It doesn’t matter how much you save or what sacrifices you make, it just doesn’t come together. Do you want to spend the next however many months scrimping and saving to preserve what you have, or do you want to find a way to exit on your own terms if you have too? Probably a combination of both but it’s important to know when to cut the cord so you aren’t over-extending yourself more than you have too.
That’s what we’re talking about right now. While we didn’t have the foresight to have many months of income saved up (outside of retirement savings), we can make a plan for surviving our new status as broke-asses. We’re talking about selling a car and renting out our house and getting a cheaper place in Calgary, if need be. This is terrifying but the unknown is even more terrifying. The last thing we want to do is spend the next ten months draining our retirement savings, and still end up trashing our credit rating and losing our home because we didn’t plan ahead.
Diversify Your Income:
This is actually what’s saving us right now. We have monthly income coming from renters at $750, tutoring at $450, and freelance writing at $250 which helps supplement my “day job” income. While it has the added benefit of helping us be more recession proof, it helps me feel more in control of what’s happening to us. This gives us the flexibility to respond to our situation with something beyond hysterical screaming and running around in circles. We’re S-M-R-T like that. Well, sort of.
In summary, we’re just going to have to live and learn. Some things we can deal with now and some will just have to come with time. I am not excited about the transition but I am happy that we will have a plan in place to save our retirement savings. Or as much of it as we can.
* Sun Life Canadian Unretirement Index surveys how working Canadian’s attitudes and expectations about retirement change in response to economic, health and personal factors. Over 3000 working Canadians and 300 retirees were polled in this year’s survey.