How many "Horizons" do you see in your future? What Lifestyle will pensions and other assets provide to satisfy your joy and thrill in living? In this 9-part pension series from recent surveys and interviews we've been discussing: (i) LIFESTYLE ... (ii) PURPOSE... (iii) LEISURE.... (iv) TIME... (v) IDENTITY AND ROLES... (vi) ANXIETIES... (vii) SAVINGS... (viii) and CERTIFIED PLANNING to secure the way forward. Now moving into our final Question #9 we explore how you see the future unfolding -- one or two stages, or even three to four horizons to express the Life You Choose.
Your response to Survey Question #9:
How many horizons/seasons in your retirement?
This question arises in part from my frustration at the “flat-line” planning that is so common …suggesting for instance that if you retire today and draw $xxx from now to age 90 you’ll be out of money …which is absolutely silly because lifestyles and needs inevitably change as we illustrate simply in Life Horizons Analysis and its accompanying "Life Horizons Life".
This question also arises because I’ve been encouraging people since at least 2001 to “VISION” the life they want to enjoy in retirement …and we help them develop and share the stories they want to be living! Think of it this way; if people can tell a story, lift it into conversation as if this were a movie, and then step into this movie, they could absolutely create their future. And doing so, we can then determine the cash-flow that aligns with this future and makes it possible. Like the story of Rick and Lynn shared earlier (page or link) we can prepare the flow of life through early, middle, and later retirement years …and how your money will fuel and safeguard these stages or horizons.
So here’s the thing. Most financial modeling for retirement is done as if it’s a single and final stage of life, and the money terminates at the end of that period. But is that what you want? I had no idea our survey responses would come through so very strongly.
1.9% are saying, “Retirement is a single ‘flat-line’ to the end of life.” I’ve no explanation for this response unless people feel they’ll be out of money and have to die then. And yet, most financial planning happens to follow on this flat-line model.
6% look ahead and see “Two stages: early activities and travels, then a decline.” This perhaps fit some of our parents who retired to travel around North America and when illness arose or money fell short, they settled into less activity until their time was done.
27% of our main survey (and 31% of business owners/execs) will accept nothing less than “3 horizons: early activities, mid-relaxation, and later decline.” This is the Life Horizons Line as I’ve illustrated earlier. In early retirement we catch up on places to go, experiences to enjoy, foods, music and culture…endless opportunities we can match to our time, money, and imagination. When we eventually feel less active we still have stories to tell, pictures to share, and so spending can drop considerably. Sooner or later various ailments take focus, frailty of body, mind, or both. Health and personal comfort may require a higher income than ever. And all the while we want to ensure in advance that our wealth will last as long as we do, else the burden on ourselves or our family can be punishing.
65% are the visionaries who want “4+ horizons with various engagements; live long and healthy!” Indeed why wouldn’t anybody want a rich life, abundant in every way, clear to the very end. We’re limited only by our imagination and our health and financial resources. This is why I bring “visioning and values” into my financial planning so we can see the future as YOU choose to see it, and align wealth to fulfil your goals as much as absolutely possible.
What does this mean for your pension choices?
The traditional pension is often suitable for a “one horizon” type of plan. Someone retires. Let’s say they receive $5000 a month then as long as they live. If higher expenses don’t arise, and if under-funding doesn’t cut promised values of the pension, with or without inflation-indexing the pension should be able to support a flat allowance for life.
If you see retirement as two stages – early activities and travels followed by decline. Some would commute the pension to spend more of it in the earlier period. Certified planning is vital to ensure you’re preserving sufficient funds for later-life that can go on indefinitely. One might buy a Life Annuity as a foundation for guaranteed life-income, with other savings going into early-travels and lifestyle. This way you can live large for a time, yet never run out of money. <<See GI4L on Annuities>>
Three-or-more horizons are on order by nine out of ten respondents. Our planning becomes even more vital now as we acknowledge a third stage where health expenses accelerate due to aging. 85% of healthcare spending hits in our final five years. Governments will be increasingly pinched by aging demographics, and thus forced to reduce public coverage. We and our families (and the advisors who serve them) must be aware that if we have fun in season 1, and relax more in season 2, there will be a sizable bill for comfort and personal care in season 3. Here again review how we picture the life horizons line.
- “Advice on health preparation is comparatively scarce among financial planners… There needs to be more planning for health management and its financial implications. Financial advice needs to address health-related issues, both in terms of saving for retirement and in terms of managing spending during retirement. … Health issues have been under-estimated as a source of potential financial disruption. … Two-thirds of households age 75 and over have major health problems they need to manage. … Advice on coping with health and associated financial issues is the next frontier for top financial advisors and their firms.” Financial Life Stages of Older Canadians, by Brondesbury Group, for Ontario Securities Commission. Spring 2015.
I thrilled as 66% chose 4+ horizons. This is a variation of 3-horizons but celebrates the spirit that says, “We want more! More travels, more money, more life and health, more engagement and ways to contribute, more time with family and friends, more ways to celebrate life!” Don’t accept any less. Shoot for 4+ and we’ll explore and discover what this can become …and we’ll root this in the financial- and life-planning that lets you write your own movie and step right in.
We want to enjoy bigger dreams and rewards all through our retirement, beginning to end, on our own terms. We know costs may drop when we’re doing less, staying near home. Eventually end-of-life, six months to fifteen years, may cost more than the first 80 or 90 years combined. No one wants to outlive their money: it’s a cruel and bleak world if that occurs. So we need the plan that assures our comfort and abundance through every season!
Pension values like other assets, are vitally linked to our financial security and personal satisfaction for Life. Aligning your pension choices to fit your lifestyles and future security requires a plan – not hastily assembled but diligently drawn up in a substantial life guide – a Certified Financial Plan for Life and Loved Ones, Retirement and Family Estate.
Closing thoughts on Pensions.
Having come to this point, and if you’ve spent time with all nine pieces in this series, you undoubtedly have a pension or someone dear to you is wanting to make the best choices for their pension plan. We start with evaluating the life you want to enjoy, the lifestyle that suggests a fixed or a flexible source of income through your life seasons. We evaluate the pension itself as to its security and any additional benefits. As a result you can freely choose the strengths and variations that best align such a pension to fit your personal needs and lifestyle.
Key questions to consider further:
- Will you have enough money?
- How will you design your "new retirement"?
- Can you enjoy the life and leisure you choose?
- Will time be a problem; will boredom creep in?
- Who am I ...what are my roles and identity?
- Are we avoiding worries that would threaten our success?
- How can we optimize and secure financial results?
- Do we own a Plan that certifies and promises lasting results?
- How many "horizons" are in the Life that keeps expanding?
Ponder such questions. Reflect on the survey, discussion, and how you’d answer these questions. Share this with family and trusted friends – gain their insights. Realize the value of a truly certified planner (80% calling themselves financial planners are unaccredited) to help develop your map and flight-plan for the years ahead, and accompany you on this journey for Life!
Time for professional support and certified financial planning? Let's discuss how we can protect and preserve the LIFE you choose -- phone or email me today.Brian Weatherdon, MA CFP CLU CPCA CRC, MDRT. 905-637-3500 x 223 627 Guelph Line, Burlington, Ontario. L7R 3M7. 1-877-937-3500 FREE x 223 Certified Financial Planner. Certified Retirement Coach. brian@SovereignWealth.ca