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Thursday, December 23, 2010

Financial Stress and Retirement

This blog entry is a beginning of my journey into the topic of financial considerations for retirement.  Hopefully I will, at some point, have a deeper understanding about this part of retirement. As I increase my confidence and knowledge more finance related posts may follow. Relevant knowledge can be a key element in reducing stress.
         Almost everyone experiences stress. It’s wired into our bodies. Sometimes it triggers activity that saves our lives. At other time’s it takes us in the other direction. There is strong evidence connecting negative feelings and stress in our daily activities. I imagine that everyone visiting this blog has experienced stress and the negative feelings that go with it.
         Resilience is the process that helps us cope with stress that has been created by daily concerns such as health and finances.  It has been found that the more resilience we have the easier it is to recover.  Without resilience we will likely face extreme anxiety and depression. A growing body of research supports the idea that, in general, older persons who have reached retirement age tend to get better at regulating stress and negative feelings.  Perhaps resilience is one of the characteristics of wisdom.
         Worries about work income or retirement finances are major stressors for many people. Everyone who works or has worked for a living knows that there stress is associated with work life.  Books have been written about work stress. Coping with it sometimes requires a great deal of resilience.
         Two key sources of retirement stress are poor health and family finances.  I am still in pretty good physical shape but over the last several years I have become more stress conscious when I think about what my family’s financial status will be following retirement.   Those who have been following this blogspot couldn’t help but have noticed that up to now I have avoided commenting about the financial side of retirement.  Concern about having adequate finances is one of the most stressful things I experience. I am ready to make some changes.
          Taking a baby step forward, I recently purchased a book entitled Retirement Planning for the Utterly Confused written by Paul PetilloIt’s scary but I intend to study it.
                  My current retirement workshop says that it’s not just about the money. The fact is I know almost nothing about it. The financial side of retirement, compared to social issues, is discussed frequently on the Internet. Obviously, like paid employment, these concerns are part of the foundation for successful retirement. To open a discussion about finances I have relied on sources, like the one cited at the bottom of this blog entry.
         More than a year ago all Canadian provinces with the exception of New Brunswick abolished laws that allowed employers to end employment of workers once they turned 65.  Many people still choose to retire at that age or sooner. It appears that at least three economic factors lead workers to retire at 65. (1) Some persons with good pension plans can actually earn more money in retirement than if they were working. (2) Most private pension plans begin to pay full benefits when a person reaches 65. and (3) Along with Canada and Quebec pension benefits OAS and GIS, if we keep working past 65 we lose benefits in taxes.                              
         People’s timing of retirement decisions appears to be connected with the size of the monthly pension benefit and its rules. In addition the monthly dollar value of social security benefits and expectations of adequacy of these main incomes over the future years of retirement are influential factors.

        Below are some beginning analysis questions on Sun Life’s Financial website. The questions on the website are multiple choice. Here I just introduce them as “think about this” questions. 
1.   What does retirement mean to you?
2.   What is your biggest financial worry in retirement?
3.   What is your biggest emotional worry in retirement?
4.   Where do you plan on living in retirement?
5.   Do you plan on retiring early?
6.   An ideal vacation for you is: ____
7.   Do you anticipate that you will make major purchases in retirement such as vacation home, going back to school? A new motor home, a luxury car or cottage?
8.   What are your wishes about leaving an inheritance (modified from original question)
9.    What type of entertainment will you spend your time doing in retirement?
10.      Do you plan on working in retirement?

         (For the complete questions and more go to the SunLife site)

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