I Don't Have Enough Money For Retirement, Now What?

If you are worried that you may not have enough saved up for retirement, you are not the only one. Studies show that 69% of Baby Boomers are worried about not having enough money set aside to live a respectable retirement. But why is this and what can be done?

First off, I think it's important that we talk about the why behind this problem. Boomers are traditionally associated with great economic growth and abundance so how could this be a problem?

2008 financial crisis: This will be one of the moments in history that we all remember. I remember exactly where I was that morning when I heard the news about the mortgage crisis. People that had their investment portfolios overexposed to stocks took an enormous hit and wiped out sometimes decades worth of growth. Depending on your age this could have been disastrous. The 2008 crisis came on the heels of prolonged economic growth where people figured the good times would keep rolling which lead to many Canadians not adjusting their portfolios to their time horizons (the older we get the less risk we should take). What made this extra painful is that many people pulled out of the market after taking big losses to their portfolios only to miss the days that the market spiked. Selling on a loss and missing out on the gain.

Low-interest rates: Building off of the above problem. Some Boomers either rushed to purchase bonds after selling out of their portfolios or were overexposed to bonds in the first place. After the 2008 crisis, interest rates were historically low for a long period which drastically undermined bond performances. Couple this with a plateau of wage increases and Boomers had an extremely difficult time putting some extra money together before retirement.

Divorce rates: Boomers have seen the highest divorce rate with rates doubling since 1990. Some figures show anywhere from 35-42% of Boomers being divorced with alarming rates having “grey divorce” which is a divorce after age 50. These situations can life-changing and in my experience are one of the main reasons why people are outliving their money. It’s important to note that not all divorces end up in a respectful 50/50 split of assets. Every situation is different but one thing is common, You don’t have the money or the plan you thought you did. On average these “grey divorces” lose about 42% of their assets. If you couple this with longer life expectancies then you can see how this is pushing a lot of retirees close to the poverty line when they are older and in their most vulnerable state.

Loss of income in main earning years: Whether it was a period of unemployment or loss of income due to illness or injury. This has affected lots of retirement portfolios. Sometimes the monthly contributions were stopped and forgotten about when the income started to flow again. However, the real problem is when there has been a prolonged window, and money was taken out of investments earmarked for retirement. Canadians found themselves in a losing situation, first, the money comes out of the portfolio and is not being invested then there are sometimes tax implications and penalties associated with this.

What Can Be Done?

If you find yourself in this situation here are some suggestions you can discuss with your financial planner or trusted friends.

Location: The cost of living is not the same everywhere. This can hurt or help you depending on where you live. I live in the lower mainland BC, one of the most expensive places in Canada to live. However, that could also present an opportunity for me in retirement. Many Canadians are starting to look elsewhere for retirement and cash in on their equity in their homes. If you live in a more expensive part of town you could downsize, move to a cheaper nearby city, or join the many retirees that are enjoying their retirement in different countries that they have vacationed in before.

Stretch out payments: Not many things bring peace of mind like having low monthly expenses. Realistically, most Canadians will not pay off their large debts in their lifetime and perhaps may not need to depending what their succession plan is. One thing COVID-19 has taught us is to not underestimate the power of making a phone call to your lenders and working out payment plans that better fit your cash flow. Lenders prefer to keep you indebted to them and not default on loans while having lower expenses can mean a more enjoyable life for you. Pick up the phone and call your mortgage broker and lenders to see what can be done.

Monetize your passions: The internet provides many opportunities for everyday people to earn income for sharing their passions. Whether you are someone who loves to make items that could be sold online, have a skill that can be taught on YouTube, or wants to share your knowledge that you have learned over your working career or successful marriage. There are millions if not billions of people out there waiting to see what you can offer. Reach out to someone computer savvy to help set you up and start watching how much your passions can create additional revenue for you.

This of course is not a full list however I hope these points get your mind thinking and help ease your stress. Although you may find yourself heading into a problem, there may still be time for you to pivot and paddle down a more enjoyable path.

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