How can we plan to FILL THE GAP IN OUR SAVINGS ...to enjoy life now and in our future? 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... Now moving ahead to question 7 we explore the ways we're prepared to save up our gold and put a silver-lining around our future.
Your response to Survey Question #7:
To Secure Savings for Retirement I can . . .
This is a key area in shaping our future. How will we undo years of damage incurred by persistent high expenses, inadequate savings, U-turns of career, health, or marriage that burned money and left us short for retirement? What are we prepared to do immediately (or soon) to boost savings and safeguard the dreams we have for retirement living?
First to mention, 12% in business and 8% outside business skipped this question as they are the happy few who believe their resources are sufficient and need no further attention. One only wishes more had reason to feel this way.
In all my survey groups, mid- and later-career, employees and employers, near 45% felt they could immediately raise their monthly savings at least 5%. Considering the choices between saving more now (or later) or other influences on wealth, these are prepared to cut expenses and delay other gratification today, to better secure their tomorrows. Not surprisingly, others felt this to be too difficult. Or is it simply the challenge of making an immediate change in our spending patterns?
Funny perhaps, another third said that in 6-to-12 months they could boost savings at least 10%. Twice the challenge, but it’s a “future commitment” rather than an immediate one. Research into motivation and behaviour (with financial and other goals) shows it is easier to make a future change than a current one. And many actually carry through with their intention when the future-trigger arrives. Use this to your advantage; if things are tight right now, put aside any guilt or self-judgment and ponder what changes you can imagine making some months from now …and set a plan to do so. You could happily surprise yourself.
If 45% of us will invest more today, and near 32% will commit substantially higher investment in the next six months or year, such sacrifices will certainly boost our wealth and ongoing security. This also demonstrates a key value of owning a FINANCIAL PLAN because this helps you “see” your future and clearly discuss the commitments you’re willing to make in achieving your personal and future goals.
“Optimize the value of selling my business” drew 25% response in the business group, and 18% in the wider response group. I'm writing further on this in an upcoming book because up to 80% of businesses are liquidating or selling for far less value than they could have received. I remember a respected local business that closed doors, ignoring any who might have paid to carry on a new chapter in that enterprise. Not every business will sell; sometimes the business is really about “you” – a personal service that may not migrate to a new owner/operator. But have a look again at Pat’s story in A Lifetime Of Wealth …how she turned her pension into seed capital for a business that she plans to sell ten years later. Ponder the opportunities you can build with personal vision and a helpful team.
Some say “Winning a Lottery is my only hope”. Near 15% of my wider surveys, and even 7% in business, rank themselves here. They are worried about their future. They see government benefits and home-equity as their main assets for retirement. Without some kind of windfall they fear a bleak future. One couple said to me, “We spent when we could, went on cruises, did what we wanted, because you never know -- you may not have a future!” Yet time has passed, the future has come. The house is gone. One is living with their mother, and there’s no evidence of a windfall. (See chapter 4, LoW on impact of winning, and strategy not to lose it.)
“Expecting a good inheritance” attracted just 6% response. Kindness, wisdom and love combine here: people aren’t just lining up for their share of the supposed $1Trillion "wealth transfer" as an older generation passes on. You can realize too that with seniors living longer than ever, their health expenses may eat up that inheritance. So it's best not to count on an inheritance filling any shortfall in your own financial planning: you don't know how much you might receive, or when, or how long it would keep you. (See chapter 3, LoW on strategies to safeguard values of a family inheritance.)
What does this mean for your pension choices?
It's personal. Listen to others if you like, but ponder this in terms of your own feelings and circumstances. There are five key stories you may want to review in the pension section of LoW to help consider such questions as the following here:
- Is pension your #1 nest egg or just one area of your wealth?
- Do you anticipate living a shortened- or a longer lifespan?
- How will you cover health costs: personal, spouse, family?
- Are you intending a predictable flat-spending retirement, or will your lifestyle be better served with more flexible income streams?
- Are you feeling that a pension plus government benefits will assure all you need and desire?
- Are you satisfied if a pension leaves nothing for your family to inherit?
- Or do you want more options, to live and share with your loved ones?
As well remember -- pension estimates are not a "guarantee" of future income. People make a mistake on this but you've probably been hearing that many pensions today are only 50% to 85% funded. I'm not repeating here what I've written and given in seminars on this subject (summarized in chapter 2, LoW.) “To secure savings for retirement” you would want to assess and adjust to risks in your pension plan. Then as needed you can consider home equity and other tax-sheltered investments and insurance to cushion life's bumps along the way.
Imagine you had $75,000 saved ...or compare with having $750,000 saved in current values, quite aside from your pension plan. Which would better cushion life’s gaps, needs, changes along our future journey? How will you decide what savings you want for your future? How do you motivate yourself to achieve this? One last story for today . . .
Sue is a retired teacher who combined pension and other savings. Despite having four children she and her husband often saved 10% of their income in one way or another. Today Sue has great friends and a wonderful home and garden, all of which cost very little. She also travels to other countries and world-class cities a few times per year. She happily affirms that the rewards of saving along the way have offset any costs: they always enjoyed their life, and retirement has given them rich rewards and a happy lifestyle.
Time for professional support? Let's discuss how to protect and enjoy your life forever -- 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