Thinking ahead financially

joyfulguyNovember 14, 2003

Sometimes retirees, (often ones who lived more frugally than average, or sometimes a couple who never had children) have told me, with a satisfied (even rather gloating) smile on their faces, how they've never had it so good - their income in retirement is larger than it was during their earning years.

Many retirees have either a privately sponsored pension, or income from a farm which they used to operate, or from investments purchased with the proceeds of its sale.

In Canada, most us us have two government-related pensions: a (compulsorily contributory) Pension Plan, and another non-compulsory one (that carries some residency requirement to qualify).

I've suggested to some that, since it is unusual for a retired couple to depart this earth at the same time, that it might be well for them to give some thought to the situation after one is gone.

Quite a number of such families were one-earner ones, with the worker who contributed to the pension plan being the male.

In the somewhat infrequent situation in which the stay-at-home female departs first, usually the pensioner will continue to receive the full amount of the private pension and the full amount of the contributory government pension. If the non-employed spouse (usually female) qualified for the non-contributory government pension, one of the two of that kind of pension would disappear. The post-decease income would be something like 80% of the former level.

In the more usual circumstance in which the male, who'd contributed to the pension systems, departs first, quite often something approximating the following scenario applies for the non-employed spouse.

Private pension drops to often about 60% of the former amount.

Government contributory pension drops to about 60% of the former amount.

One of the two non-contributory government-related plans disappears.

So - the (on average) longer-lived non-contributory female's ongoing income may be something like 57% of the former income level enjoyed by the retired couple when both were alive.

When some have done calculations related to this situation, they have decided that it would be a good idea to invest some of the current income in order to provide extra income for the surviving female, should the husband depart this life first.

This situation may be one which it would be wise for many couples to consider.

Good wishes for a happy, healthy, prosperous retirement, shared with a number of interesting activities and good friends.

joyful guy

(former farmer as a teen, seminary student, overseas missionary helping dispossessed reestablish after a devastating war, clergyperson, milk truck driver, security guard, mutual find salesperson, school bus driver, bartender, personal financial advisor and retirement consultant)

(did I miss any?)

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That's interesting. Not being Canadian, I didn't know how the retirement plans worked there! Are the non-contributory plans dependent on your work history or does everyone get them when they reach a certain age? That must be quite a big amount the government forks over all the time. Are those depenedent on how much (or actually how little) you have in the bank or in other assets?

    Bookmark   November 30, 2003 at 7:16PM
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Hi again, Ginger,

The non-contributory pension, Old Age Security, is one that people generally get when they apply at age 65, whether they were employed or not - a boon to many females who were never employed, a number of whom rejoice to finally have some funds in their hands that they can use in any fashion that they choose.

There is a residency requirement - I think that it's something like 20 years. Which makes it rather difficult for recent immigrant families.

We have difficulty with the contributory one, Canada Pension Plan, as it was paying benefits to many early recipients, including my father, who delayed retirement in the late '60's partly to qualify. I've heard him say that he received more than he ever contributed.

It was not actuarially sound, that is, beneficiaries did not receive only the amount that their contribution and that of their employer had grown to.

That was O.K. years ago, but now the baby boomers are approaching retirement, so will be making big demands on the fund, but a declining percentage of more youthful workers, the ones paying the shot.

So they are raising substantially the amount of annual contributions that employees and employers must make.

Young people are getting quite unhappy about the issue, as many feel that when it comes time for them to benefit, there'll be few assets to pay them.

We have a city called St. Thomas, about 20 miles from here: rather different from your St. Thomas, I'm sure.

But temperature today about -20 degrees C (about -5 degrees F.), somewhat colder effective experience when one allows for a substantial wind.

A good time to be walking or working in the forest.

Number one issue under those conditions - dress in layers, so that some layers can be removed when working, exercising so as to be just comfortable. It's essential to avoid sweating, for that soaks clothing, which then chills and not only does one get really cold afterward, it's difficult to remedy. One must replace the sweaty clothing, which is the last layer down, right next to one's skin.

Enjoy your New Year, all.


    Bookmark   January 15, 2004 at 3:28AM
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Keep warm Joyful. I grew up in Chicago where 1 above zero was cold to us. I can't imagine the cold you and others are feeling. I agree about the layering. I found that wearing a snug shirt next to the skin prevented drafts when the other layers shifted. During our ice storm a few years ago when left without heat, phone, water, electricity, My Sterno stove kept the water hot to fill and refill small orange juice bottles. I used them as hand warmers, tummy warmers for me and one for each cat!!

    Bookmark   January 15, 2004 at 4:54AM
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Hi again, Minnie in Taxes,

While having gas tank installed in little car, using van, but think choke partly on, as it's using gas like crazy.

Credit Union in town 30 miles away called today to say not enough in account to cover cheque - so I agreed to take money to them today. A cheque written to a charity, by the way.

Drove van to hamlet just out of town, hitchhiked about 20 miles to the Credit Union, temperature about 15 degrees F. - two rides going up, one with guy returning home after treatment for quite severe Psoriasis, second with young fellow from Quebec whose English is somewhat sketchy and who has little Dodge Colt like mine, but 1993 (his has 158K. km. (about 100,000 mi.). Mine, 1990 model, has 282K km. (about 175K mi.)

On return journey, three rides, one with new truck extended cab to a few miles out of town, second with old man who's driven to distant places, once picked up couple who complained of it being old car, not too stylish - but driver told the guy he could boast to his friends that he'd ridden in Rolls Royce - 1933 model, sold it ten years ago when short of money. Last with Kuwaiti who driving limousine, trained in India as microbiologist, passed our local Univ. grad test with A standard - but they said he'd have to take a couple of years of courses. Could he work for department to pay for fees? No. Couldn't afford two years' univ. - we charge much higher fees to foreign guest students.

I wasn't really cold - had several layers of clothing - actually, enough to be starting to sweat while driving my van, even though I didn't turn on heat. Important issue when dealing with cold is to have several layers of clothing, remove some as necessary to avoid sweating, as it makes one really cold when one gets cold. Usually feet most vulnerable -I was wearing dress shoes and galoshes (overshoes). Didn't get uncomfortably cold en route.

Last summer my daughter, while living in AZ, worked it out to spend hottest month up here. Nice to be working on internet - can work wherever you wish, as long as have necessary internet connection.

From Christmas she's been renting a sailboat with friends in Martinique and Virgin Islands for something over a month - to be back a month from now.

She's asked for very little financial help, over the years - bought a fixer-upper home a few years ago, a couple of years later she and hubby broke up, sold home for a loss.

Son has received substantial financial help, over the years.

So I'm planning to set up joint investment account with daughter, to be available to me if I need it during lifetime, but to be hers at my death.

Then my assets, apart from charitable contributions, to be split evenly with her brother.

Neither married - no grandkids.

Good wishes for the New Year. May it bring some unexpected pleasures.


Car not yet ready,f

    Bookmark   January 17, 2004 at 4:23AM
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