Am I Financially Able to Retire?

Posted Friday, October 14th, 2011. Filed Under Financial Empowerment

There is a great article inthe Financial Post about retirement. Patricia Lovett-Reid author of the article is the senior vice-president at TD Waterhouse. She says that retirement will have to wait. She says that the dreams of full retirement for this new generation of baby boomers, is fading. Some do not have the means to do so and others are not quite ready for retirement.

There was a time when the kids grew up, moved out and the parents could focus on paying down their debt/mortgages during their peak earning years. One issue is that people are getting married later in life so their peak earning years are not coinciding the same way.

The other issue is that people are living longer and therefore require more money to live in the same lifestyle. They are often supporting an aging parent (sandwich generation) as well as their child. A Stats Canada 2009 Canadian Financial Capability Survey says one in three retired individuals aged 55 and over have some form of debt. The good news is that for more than half, the amount owing is less than $25,000.

So how can you put yourself in a good financial position? What choices can you make?

First off, and I have said this before — take care of your debt. This does not necessarily mean the largest dollar amount, rather, pay off the amount owing with the highest interet rate. This is often the credit card which carries an interest rate of approximately 19% (or more).

Second, if the interest yield or potential rate of return on an investment portfolio is less than the interest rate on the debt owed, it may make sense to sell your investments and pay down debt.

Third, get an idea of your spending habits as well as choose to spend less on discretionary items. I do not believe in sacrificing the essentials. The issue in Noth America is that we confuse the essentials with our needs and wants. You need to get a good idea of your cash flow position – are you spending more than you are earning?

Fourth, be patient. Some people want to upgrade their lifestyle. Only do this once you know you can handle any debt load.

Finally, you may want to choose to ease into retirement. When you have worked your whole like, stopping can present its own challenges. Men typically identify with their work so once they stop who are they? What is their role and purpose? Phasing in this step for financial and emotional/mental reasons may alleviate some of the stressors you may be feeling around the idea of retirement. Look into flexible work opportunities offered by your employer – job sharing or just switch to part-time status. Another option is become a consultant in your field of choice. Today with the pending job shortages in many fields (law, insurance to name a few) you are still in demand. You can therefore charge your worth and choose your hours.

While the days of past are no longer (yes everything does change), Boomers (who are the next group to retire in large numbers) can still spend their golden years with strong financial health by adapting their approach to spending and embracing a new view of what it means to retire.

Enjoy! Embrace! Live!

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