Life is full of irony! While my retirement goal is to stop being part of the rat race by 35, we see more and more people working pass the “normal” age of retirement of 65. I must admit that most of us will define themselves according to our job:

“Hello Mike, nice to meet you, tell me, what are you doing in life?”

A)   I am me.

B)   I am a father.

C)   I am a passionate man who loves watching hockey, playing golf, blogging, play soccer with my son and making pony tails to my little girl, and.. and.. bla blab la…

D) I am a financial planner / web entrepreneur

I can tell that most people will answer “D”. So if we define ourselves according to our job, what do we become if we quit working?

75 is the new 55

I don’t know if you remember this advertising campaign by London Life but I really liked it!

Many baby boomers dreamed about freedom 55. However, now they have reached this age, they realize they are in a much better shape than their parents or grand parents, that they are at the peak of their career (or close to be) and…. That they still have a mortgage!

Not so long ago, reaching the age of 65 meant that you had not much longer to live. Therefore, retiring at 55 while you are still able to get into a plane to travel down south (forget about backpack trips ) seemed logical. Now, we know that most people will live till 80…85… and probably 90! My own 2 grandmothers are still alive and they are 88 et 89. The worst part is that they are “top shape”; one of them take the plane twice a year, the other one only takes half a pill per day.

Retiring at 55 brings a lot of problems

Funny enough, retiring so young can bring it loads of problems:

#1 Money

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How can you finance 35 years of retirement if you have start working at 30 and start saving at 45 once the kids are old enough and that your mortgage payment is not struggling you to death anymore. Unless you have a bullet proof pension plan, you will need more than 1M$ in cash at 55 if you want to retire.

#2 Society disconnections

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As I mentioned before, we all fine a great part of our life in our job. If we don’t have it, what will we become? Stats show that several young retirees go back to work or fall into a small depression 12 months after they left.

#3 Economic issues

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Having to finance your own retirement is one thing, but the “system” still needs 55 years-old workers. Who will finance the Government pension? The healthcare system? Our schools? For one of the very first time on this blog (and in my life in general), I am talking about a left wing idea. But seriously, if we want our kids to grow in the great country that we know as Canada today, we better keep working and pay our taxes… sigh… it still feel awkward to see those words written by my fingers

#4 Too many people golfing!

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Hey boomers! Think about us! If you all quit at 55, how can I be able to have a place on a golf court! You must stay at work while I can enjoy life

Your take: When do you want to retire?

As I mentioned previously, my goal is to end the rat race sooner than later, however I don’t think I will stop paying taxes and make money that early. But what about you? When do you want to retire? Do you think you will be able to retire at 55? 65? Or never?

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Being a financial planner, I create retirement plans for my clients every week. I speak with them to know about their goals, their dreams and their fears about retirement. We look at where they are right now and how they can achieve their financial goals for the next 10, 20, 30 years.

Having money to realize your dream is a prerequisite. Money doesn’t buy happiness? Well let me tell you that if you have some, you will surely be able to buy a few happiness coupons here and there .

All these discussions got me thinking about my own retirement. Having started working 4 days a week at the age of 28, I now make the joke that I will be retiring at 35… This is actually the foundation of our online company: becoming millionaires by age 35. While this is a huge challenge (huge is actually a small word ), I think it is important to have dreams if you want to achieve something in life!

Do I really want to retire at 35?

If retiring means not working, going down south and drinking Strawberry Daiquiris all day, I will not retire at 35. However, I have discovered through discussions with my clients that retiring doesn’t necessarily mean to stop working. It means the end of being forced to do something.

Most of my clients are wealthy and they intend to work until they are 65 or even older. While several of them could afford to retire at the age of 55 (yup, freedom 55 still exists!), they want to work. The only difference is that they will do what they really want most. Many of them have side projects or new careers in mind. This is what brings me to my definition of retirement.

To me, retirement means…

-         Not having a boss looking over my shoulder. Being  financially independent and be able to make my own decisions.

-         Working but not all day, everyday, week in, week out. If I can work 20-30 hours a week, I’ll consider myself as retired.

-         Doing what I want. I don’t mind working on my stuff since it doesn’t feel like working. It’s like being paid to do a hobby. While I would love to be paid to golf or to play with my kids, I still have to find something that will actually bring home the bacon .

-         Definitely quitting the 9 to 5 job. I am already not doing the 9 to 5 every day, so I just don’t want to do it anymore .

-         Spending more time with my wife and children. Life is too short to not spend quality time with the ones you love!

-         Be able to work around the world. My online company provides me this option, I can work anywhere in the world as long as I have a functional laptop and a reliable internet connection.

I don’t really see retirement as not working at all, waking up at 9 or 10 am every day and wandering around all day… this must be quite depressing!

In the end, I guess that I am not looking too much toward retiring young but more towards financial independence!

Your Take: What do You Expect from Retirement?

I would like to know if you aspire to Freedom 55? Or if you think that you will never retire? Do you have any projects for your retirement?

image source: kevin dooley

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Now that I have more time since I am done with my MBA, I can make more researches and find some interesting stuff for my blog . There was a recent survey done by TD Waterhouse (their 9^th annual survey) revealing interesting facts about how men and women handle their personal finance. Apparently, we, men, are as dumb as our ancestors (read monkeys!), while women seemed to learn from history and become smarter (I hope my wife won’t read this post!).

Women want more and they are willing to take the risk to get it

Remember I told how women want more? Well they are also willing to take more risk to get it! According to TD Waterhouse survey, 73% of women surveyed didn’t change their investor profile nor their asset allocation. Regardless of the current economic situation, they are willing to take the bet the market will come back up. So here’s my first question; Women didn’t change their investor profile because:

a) They are smart and know that the market will come back up before their retirement.

b) They receive their investment statements and use them for the kids so they can make some drawing without looking at their returns.

c) Their spouse took their investment statements away from them because they have been trading with their RRSP account and they don’t want her to see what they have done.

More seriously, I think women are more responsible and are able to make the difference between a moment of panic and bad investments. Actually, 52% are worried about their investments and only 21% of them have sold a part of their equities to find piece in bonds and other fixed income.

The recession has changed their spending habits.

However, while most of women didn’t touch their investment portfolio, the economic situation has made them change their way of living:

- 48% have postponed a major purchase

- 46% have spent less on their credit cards

- 40% have stopped buying non-essential goods

Then again, they seem more responsible than men (I actually bought a brand new truck and keep spending money on non-essential goods such as a laptop bag and a Black Berry ).

They aim for their goal:

97% of them say that a comfortable retirement is one of their major goal but only 20% say that they feel confident of achieving this financial goal. I guess that most of them are looking for a good financial advisor these days

Savvy women:

It is impressive to see how women can be savvy when they put their shopaholic super hero suit in their wardrobe . The following stats surprised me:

- 97% easily manage their budget.

- 96% save money in case of an emergency.

- 90% are reimbursing their credit card balance.

3 sound financial advices:

Those savvy and smart investor women have 3 great financial advices for us, stupid and emotional men :

- Spend according to your means.

- Start investing sooner than later.

- Do not get indebted.

Fortunately, I already follow the first 2 advices while I seem to not be able to quit leveraging. You are making money with other’s people money, isn’t that right?

Note: This survey was done with 1432 women of 45-65 years old that have exclusive or joint financial management habits.

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It has been less than a year since the TFSA was created by the Federal Government and we are already generating a completely new set of strategies with this new tax saving tool. I just came back from a financial planning class where we got a few additional facts and tricks to be used with a TFSA.

The TFSA mixed with the HBP

Don’t we love acronyms? The TFSA, HBP and RRSP can now team up to efficiently create a healthy down payment when buying your first home ;-D

Instead of contributing directly into your RRSP and then use the Home Buyer’s Plan (you can see a very nice description of the HBP over @ Million Dollar Journey), you should now consider using your TFSA first.

Accumulating cash down for a property may take a few years. If you start accumulating at a young age, you may not earn much and your tax rate is usually lower. Therefore, it would a better idea if you start accumulating money within your TFSA.

Then, once you are close to purchasing your property, withdraw from your TFSA investment to contribute into your RRSP in order to trigger a higher tax return. You can now benefit from the HBP by withdrawing from your RRSP (after waiting more than 89 days), you receive a nice tax return and you just created additional space in your TFSA (assuming you made money with your investments). Isn’t that great?

Parents can help boost your TFSA

It can be even better if parents want to help. As there are no tax implications with the TFSA, no attribution rules either. As such, parents can fully contribute to their children’s TFSA (starting age at 18) and nobody will ever get taxed on the investment return

When should you die?

When considering the best timing for death, I would choose January 2^nd. In this way, my estate would benefit from an additional 5K to invest in my TFSA (which will be rolled over to my wife). Your estate liquidator will be able to use your previous year’s income to contribute to your RRSP as well. Since we all have to die one day, I reserved my date already

Creating contribution room or avoiding high tax investments?

There is a big debate about the TFSA with regards to its usage. Should we invest in bonds and CDs since they become tax free (instead of being taxed in the highest tax bracket) or should we invest in the stock market in order to create additional contribution room upon withdrawal?

I say it depends on your goal. If you do not plan on using your TFSA funds for several years, you may want to invest in the stock market and hope for the best. On the other hand, if you want to buy a house in 12 months, you might consider safer investment products such as bonds

The TFSA was created for poor people in the first place

Did you know that the TFSA was created to protect poor individuals? At retirement, all sources of income are calculated when it comes time to decide if you are entitled to receive additional subsidies from the government or to know if you qualify for tax credits.

So, if you withdraw a 2-3K per year from your 20K RRSP, you may pay up to 50% in taxes (considering the loss of tax credit and additional government support). This is why transferring money from your TFSA to your bank account can be very interesting for low income individuals.

So, this is what we had looked at during our TFSA class… Do you have any other strategies you want to share about your TFSA?

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I recently had a client in my office for whom I did a full financial plan. The cool thing about financial planning is that you cover several aspects of personal finance. One of them is estate planning. Most people underestimate the numerous tasks related to estate planning and wrongly identify a close (and trustworthy) person to be the sole liquidator. However, managing an estate is more complicated than simply writing a few checks! Fortunately, for those who can afford it, you can name a professional among your liquidators. I have listed the reasons why your estate should pay fees once you are dead to have someone manage your assets:

Time

Picture this: you are working 50 hours a week, you and your wife are stuck between work and picking up the kids at daycare, the older one is playing hockey 3 times a week and your younger daughter takes dance class on Saturday mornings. You get home one day and open your mail; there is a notice stating that you have been named liquidator for your (single and rich!) deceased uncle that lives in city far, far away. Do you really think you have time to get there, make a list of all assets, find the will, have it homologated, open an estate account, etc.? You would be relieved to see that there is another liquidator in the notice, a professional, perhaps an estate lawyer from his financial institution who will be there to assist you

Emotions

I think that I would not be able to be the only liquidator for my parents or my wife. It is a hard task when you have to go through a lot of emotions at the same time. You may not take the right decisions or think about everything. A professional can manage the estate considering tax implications and legal aspects.

Family

If you have brothers or sisters, taking care of your parents’ estate could create tension in the remaining family. One may have his own thoughts about how to best manage the investment portfolio or split the rental properties. A professional will be there to ensure a non-biased perspective and respect the will in its entirety. In this way, the decisions may be easier to accept by all family members. They have seen that the process is managed by a neutral party not related to the family.

Experience (legal aspects and tax efficiency)

Unless you are in the midst of a string of serious bad luck, you won’t be the liquidator too often in your life. You might not feel at ease with the legal aspects related to the liquidator’s tasks. It’s even worse if you are not a fan of personal finance to begin with! So, instead of getting stuck with such nightmare, you can ask a professional whose job is to liquidate estates. Even though there are fees charged, he will not only take the burden off your shoulders, he will probably provide sound advice. This will help the estate save money and pay for a part of the fees (if not totally).

One last piece of advice when choosing a professional liquidator is to pick 1 or 3 liquidators in your will. If you pick your brother and a professional and they don’t agree, no decisions will ever be taken regarding your estate. With an odd number, at least there can be a tie-breaker. Depending on the services offered, a professional liquidator usually charges in the neighbourhood of 2% of the estate assets. It may seem pretty high but it is not that much to buy piece of mind and professional advice during a difficult time in the lives of your family and friends.

Other post in this series:

Basics of Estate Planning Part 1

Basics of Estate Planning Part 2

Basics of Estate Planning Part 3

Basics of Estate Planning Part 4

Basics of Estate Planning Part 5

image source: Matthew Stewart

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