Thursday, April 26, 2012

Where is Retirement Going?

I think we need to get out of the mind set of retiring at a particular age or any age. I know people 65 plus who are still working. They have jobs that they love. Healthy seniors are active. They are working or volunteering or have a hobby. They exercise. They socialize.

You might think that this is laughable comment coming from someone living on investment income. However, I have not stopped working, I just have changed jobs. Personally, I have always enjoyed working and I still do. I run, I blog, I socialize. Healthy retired people are active people.

Recent studies that I have read show that the best way to keep your mind alert is to exercise. Here is one link but it is not the one I had read a while back. See Pick the Brain site. Here is another link on this subject at BBC.

I think that if you are looking forward to retirement, you probably need to change your job. We are living longer and longer. In the 1920’s Canadian men and women could expect to live until of 59 and 61 years on average. By 1940’s, the ages had moved to 63 and 66. By the 1960’, the ages had move to 68 and 74. By 2008, the last year that I can find, ages were 79 and 83. See Stats Canada.

Do not forget that I am quote mortality average mortality rates. That means that by age 83 for women, half the women would be dead and half alive. These mortality rates are from birth. Also, if you are 65 today, men can expect to live 16 more years or until 81 and women are expected to live 21 more years to 86.

Going back to the problem that mortality rates are average. I would not plan to have enough money to live until 86 when there is a 50% chance I would live longer. A lot of retirement planning is to age 90 or 100. My plan goes to age 100. JDM Actuarial has an article on this subject on their site.

In actual fact, I have really designed my retirement money to last forever, not just to 100. The age 100 is just when my spreadsheet end. I do not want to be old and near the end of my life and not have money. I will leave an estate, I realize that. It was not my main intention, but that is how it will work out. I do not want to be old and not have money.

The other thing is that I know that both my in-laws and parents spend lots of money in the last few years of life. The potential is to need money and quite a bit, like a $100,000 or more. Yes, you can get some help from the government, but probably not enough. If you want to stay in your home you might have to hire someone to come in a help with cooking and cleaning. This is not cheap. It is also not cheap to get into a reasonable retirement home. Do you really want to go into a government home where they have been scandals about the ill treatment of seniors ever since they have been set up?

So, we are not going to have a few years in retirement; we are going to have 20, 30 or more years in retirement. What are we going to do with so much leisure time? And, how are we ever going to pay for it? Indeed, that is the big questions. We are already bearing huge governmental debt and boomers retirement is just getting started.

If a person today retires at say 55, they have the potential of working for only 33 years, but living for another 35 years after retirement. Was any pension plan every designed with this in mind? I do not think so. If you retire at 65 after working some 43 years, you might live another 25 years. I do not think that retirement plans were designed for this neither.

We have an aging population. Can we afford to have a huge portion of adults not working? The next generation is looking to have a long retirement and we cannot support our current retirees. If you think this is untrue, you have obviously missed the debt problems in the western world. We are in deep problems and it will probably get worse before we are forced to fix our debt problems. Politically, we tend not to do the hard things until we are forced to.

Yes, I know that we paid for our parents’ retirement plans. However, there were lots of us and few of them. The problem with the next generation paying for ours is that there are still lots of us but there are few of them. The generation coming after the baby boomers are not only a lot smaller than our generation, they are having and probably will continue to have trouble getting and keeping good jobs.

If we do not do something to get our debts down, then the economy will not grow and if it does not grow there will be few jobs for younger generations. It is not just that the last recession was harsh and long lasting. The real current problem we have is debt.

I live in Ontario and the provincial government has unrealistic plans to balance the books sometime within the next 5 or 6 years. That means that the debt will grow by each year’s deficient for another 5 or 6 years. And do not forget, I said that they plan does not seem attainable. The deficient is the new debt we incur each year and we are only currently discussing cutting this. There are no plans to pay down the debt. And, Ontario is not as bad off as other provinces, states or countries.

The other problem is that most of our debt was run up to pay for social programs. The problem with using debt to pay for social programs is that there is no pay back. When the USA built the interstate highway system, it increased commerce and increased tax flow to the governments. The US economy boomed. You do not get this reaction from going into debt to fund social programs.

I also noticed an article in the Globe and Mail asking Is 75 the new 65? See G&M.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

Tuesday, April 24, 2012

Comment on TSX

If you look at Globe Investors there is chart for the TSX. If you click on the chart, it will show you what TSX has done for the past year.

A while ago the TSX was trading in a narrow band, and then it broke down (never a good sign). Now again it is trading in a narrow band. Often when an index is trading in a narrow band, it breaks either up or down. A lot of investors are worried about Europe. Europe is not going to fix their problems until they really have to. Tough decision will have to be made. In democracies, tough actions are not taken until they really have to be.

I notice that a number of analysts have suggested if we have stocks we want to sell, now is the time. They may be right. I cannot image things changing anytime soon. You next selling opportunity might just be next year, if you do not sell now.