Two vital areas where financial advice can fall short touch Inflation and Lifestyle. If a time horizon were short, neither of these would matter so much. But as you think about your personal goals and how we secure the path for your future, Inflation and Lifestyle are absolutely vital to our planning.
INFLATION, getting personal about …
A younger person is saving for a home while costs are jumping 10% to 30% a year! Consumer price inflation is 2% but that’s meaningless if housing costs are going wild. Will homes ever be affordable again? Why does it have to be so hard right now to get a solid foothold to own your own home?
An older person sees looming costs in a different area. Homes are worth more than ever, but it can be frightening to decide whether to sell today or hold on for more. And all of it could get poured down the drain of health costs in later years. A woman said to me, “if I have to be in ‘a home’ I want it to be ‘a better type’” …but that retirement home could cost $8,000 a month and whittle down her life savings (and family inheritance) in a hurry. Especially so, with rising costs of health care and essential comforts.
Regardless of our age, our personal inflation experience is not what the news is publishing. Countless choices come to mind that make this a very personal journey. New or used? Home-cooked or restaurant? Vacations or stay-cations? Name brand or generic? Private or public school? Government funded or private care? High needs in any of these areas can sow seeds of punishing, high costs.
Consider your own spending patterns. What distinguishes your needs, desires, and comforts from other people? And what impact does this make for your money, and the personal inflation you happen to be experiencing right now?
3Ds …. Delays of various types can hit a child’s development. Disabilities can hit the income of your working years. Dementia can appear with aging (but not necessarily). Any or all of these can amplify our personal inflation rate and ignite our cost of living.
Solutions? … our personal financial planning addresses each of these areas. We touch briefly on these here below . . . and when we are meeting to review your needs and goals.
LIVING STANDARDS REPLACEMENT RATIO.
Just as vital is the Lifestyle you want to be enjoying when you stop working to earn money. This too affects us differently as we age, because young families have rising needs with growing children, while retired persons gain an urgency to live their dreams “today” and enjoy their lifestyle.
“Young people?” you ask? Yes. If a young woman faces eight years of disability, or a young father doesn’t make it home on a slippery highway, such homes will be looking seriously at their replacement ratio. How do they live if a major income (or their only income) is suddenly removed? Kids today will be bigger kids tomorrow …with all the extra expenses you didn’t realize were coming. That’s why we offer a clear, personalized plan, substituting a new income for the one you lost. For young households it won’t be from investment plans (as they’re not yet brimming with money) but from the insurance planning you and I arrange in advance (life, disability, critical illness) to assure a healthy family income for the next 20, 30, 40+ years.
Empty nesting …or older? You probably heard you’d need 70% of pre-retirement earnings to enjoy a good retirement. But on a rule of thumb we have to ask, “whose thumb?” Bill did so much traveling in his working years that he wants to stay home, get involved in local community, build new friendships and artistic activities that will float well on 35% of his pre-retirement earnings. Marjorie and her husband enjoyed short Caribbean cruises but their hearts now are set on the Mediterranean, rivers of Europe, far east Asia, being away twice a year for 2-3 months each time. Crunching the numbers, they want 120% to 150% of their pre-retirement earnings for the next ten years. With such uniquely personal lifestyle goals, a rule of thumb won’t help much at all.
This is why I’ve always asked, “What is most important to you about your money …and your life?” We continue on this question over the years because we’re identifying the “lifestyle” you want to enjoy, then setting a budget to fit that lifestyle, and putting it all on a solid plan with your investments, incomes, and overall net worth.
It’s personal! Your life; your money! We align these so you enjoy the life you choose.
PROTECTING VALUE FOR LIFE.
In an aging society (more seniors than children now) we’ll see twenty more years of super-inflation in the things seniors want most. Investing at 3% would sadly yet surely destroy wealth.
Children of those seniors can ponder the disappearing inheritance, as their own retirement shrinks while paying aging-parents’ health and nursing care. Someone replies to say, “the Government will pay” but not when workers are outnumbered by the rising tide of seniors!
1- Life Income Mandates offer a rising income that compensates for higher inflation, and protects future lifestyle needs. This is also how the strongest pension plans are growing. If we’re talking about real estate income this is nothing like the news about Home Capital or Waldon, but instead, a diversified global focus on commercial and multi-unit residential developments. Global infrastructure income adds further strength from all kinds of development projects worldwide. Dividend income focuses on global corporations (giant and smaller) with strong, rising earnings paid generously as dividends to the investors. With fixed-income in a global perspective we gain vigorous income from countries and corporations whose bonds are paying much higher interest.
2- Insurance planning offers an added foundation for higher income. One example was a colleague of mine who cleared over a million dollars of health bills with his wife’s life insurance. (See more at “estate insurance”.) Another example are people we've helped to arrange in advance, even $10,000 for every month they’ll be in long term care (at home or an institution).
3- Connecting money to your desired lifestyle is most vital …also to anticipate certain life changes that naturally occur along the way. This is a unique process which you and I continue to develop together. Bill (see above) has low-budget dreams, yet if he lives to 95, inflation & health costs will require vigilance and care to keep him and his family safe and secure. Marjorie and her husband (above) see 10 or more years of high spending, followed by an easier lifestyle …yet they too will face high costs of aging that we already build into our planning today. These conversations continue year after year as we continue reviewing how you’re enjoying life, what new ideas are arising, and how to match your assets and spending to keep the future safe.
GUIDING, GUARDING YOUR FUTURE TODAY.
With your own unique circumstances, we know that life’s journey will hold bumps and potholes for everyone. The planning we do together addresses all this. Regardless of age – young, middle, boomers, seniors – we can keep life’s path as safe as possible, and you’ll have what you need for life, leisure, and loved ones.
Yours in Financial Security for LIFE!
Brian Weatherdon, Certified Financial Planning, Retirement Coaching.
905-637-3500 x 223. 1-877-937-3500 x223. Brian@SovereignWealth.ca
Author: A Lifetime of Wealth... Protecting Life... Halton Retirement Study...
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns whether historical or forecast are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.