Today is Elder Abuse Day in Canada as Sharon Singleton points out in her article, Seniors should focus on estate planning.

Canada will mark Elder Abuse Day on Tuesday, with concern about retirement and pension planning mounting as the population ages. Nearly half of all Canadians from the baby boomer generation have not saved enough for their needs, according to a poll carried out for the Canadian Institute of Actuaries.

As lawyer Les Kotzer of Fish & Associates suggests that’s a recipe for exploitation of their elders. In his book, Where There’s an Inheritance, he collates about 80 anecdotes on how a lack of estate planning, or mistakes in working out a will, have led to abuses.

Longer lives and reducing financial resources give a double whammy to those who have done insufficient retirement planning. That can affect both the boomers and their parents. The boomers are hoping to inherit from their recession-era parents who are in turn dependant on over-indebted kids.

Kotzer points out that some of the most common problems come from giving up control to the children, without having proper protection in place. He cites a number of examples:

Children who had convinced their mother that she could save them money on taxes when she died by transferring her assets to them. They then paid her an allowance, though when she overspent one month, her daughter yelled at her.

An 80-year old woman was pressured by her son to put the house in his name to avoid probate taxes. What he didn’t tell her was that his business was going bankrupt and his creditors sent her a letter laying claim to the house.

A 75-year-old woman worked two jobs. She had loaned her daughter $100,000 and her son $150,000 and when her husband died asked for the money back. Her daughter didn’t have the cash and her son claimed it was never intended as a loan and she’d have to go to court and sue him for it.

It is important to keep good records and these documents need reviewing on a regular basis to reflect changes in life. Wills should be drawn up and kept up to date as grandchildren are born, or children get divorced. Putting such documents away and forgetting them is a recipe for a family disaster.

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Elder Abuse Day In Canada

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Your retirement savings account may have been what you hoped would provide the retirement you dreamed about.  The first upsetting factor may be a good news / bad news issue.  You will probably live longer than your parents lived and than you may have envisaged.  Yet you are in great health and feel you can go on for ever.

The second factor has affected a large number of retirees and that is the major recession that is now easing but leaving many funds in much poorer shape than they were before.  For either or both reasons you may find that you are short on retirement funds.  Here is what Rob Carrick recommends.  Don’t panic:  it’s a time for some strategic thinking.

Anxiety about not having enough put away for retirement is rampant in this country. Fortunately, there are solutions. If you simply can’t contribute more to your retirement savings plan, you can work longer. You can also try ramping up the risk level in your retirement portfolio to achieve higher returns, and scaling back your retirement lifestyle aspirations to comfortable but not extravagant levels.

If you feel that it is only you that is affected by this, then consider a recent survey commissioned by BNN, CTV and Standard Life.  They found that:

• only 35 per cent of participants are confident of having enough money to live on in retirement
• 41 per cent have enough to live on, although their standard of living may decline or they will have to continue working
• 16 per cent said they will have to rely on the Canada Pension Plan and Old Age Security to supplement their savings, and
• 8 per cent said they will not be able to afford retirement at age 65.

Given this, many are considering working in their retirement years and thus extending their retirement savings.

If you have strong nerves then ramping up the risk level in your portfolio with more exposure to the stock market is an option to consider.  However it is a tricky way for beefing up your retirement savings, so approach it with caution.

The safest way of addressing your concerns about a retirement savings shortfall is to scale back your lifestyle aspirations for your senior years. It will be something like the economizing that’s necessary when you’re raising children and carrying a mortgage. And for your leisure time, develop affordable hobbies.

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Retirement Savings Account

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Most seniors look forward to a good life in retirement.  However there are now two key changes that mean that this only comes through careful financial planning for your retirement. 

• Seniors are living longer
• The major recession has depleted the funds they may have accumulated to cover their retirement.

In other words, you may have to trim your spending to make your savings last.  Just consider one of the examples quoted in the Star news item:

When Janet and Bob retired at age 55, they were earning a joint income of $400,000. Both were senior executives in the corporate world.  Now in their late 60s, they live more frugally. No longer do they own a cottage up north, buy new cars, eat in restaurants or rent condos in Florida with friends.  They live on a budget of $60,000 to $70,000 a year, which doesn’t include debt, to make their savings last.

Statistics Canada published a report in 2005, which detailed the spending patterns of older people:

• Households age 75+ spent 73 cents of each income dollar on personal consumption.
• Food, shelter and transportation made up the lion’s share (61 to 68 cents) of each consumption dollar.
• Households pay more for government and private health insurance plans than 20 years ago.  There are higher out-of-pocket expenses for health costs not covered by insurance, such as prescription drugs, other medical equipment, dental services and eye care.

Here are some of the ways you can stretch your savings.

• Live frugally and cut out unnecessary expenses
• Stay healthy and vigorous
• Give up the automobile and walk, take public transport or taxis as needed.  You’ll be much better off
• Keep working part-time or make money out of your hobby
• Use senior discounts to the maximum
• Sell items on EBay
• Learn to cook and cut down on prepared meals
• Grow fruit and vegetables in your garden
• Invite people to your home instead of dining out.
• Buy any needed items on Craigslist or at Value Village
• Sell unwanted belongings on Craigslist.
• Have a financial planner and meet say twice a year to see if  you are still on track

As a retiree, you have fewer work-related expenses, you pay less in personal income tax and you contribute less to public benefit programs.  Since there is no need to leave an estate, with careful living you can enjoy what you have to the maximum and hope to die when your time comes just a little better than broke.

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Good Retirement Planning

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Even seniors who have done careful planning may be finding that their retirement plans are under severe pressure. Seniors are living longer yet savings may have been eroded by the severe depression. It was not surprising therefore to see that governments are reacting to these seniors’ concerns.

In December there was talk that Ontario was ready to consider a mega-pension plan.

Ontario is prepared to discuss every option to increase retirement income and broaden pension coverage, says Finance Minister Dwight Duncan – including an expansion of the Canada Pension Plan. He was meeting with fellow finance ministers to review research by Alberta economist Jack Mintz that was commissioned by Ottawa, as well as research done for Ontario by Bob Baldwin, a former researcher for the Canadian Labour Congress. Discussion of their reports will set the stage for further study and public consultations leading up to Council of the Federation meetings with premiers in the summer of 2010.

Fellow finance ministers from British Columbia and Alberta have been openly pressing for a national pension arrangement either linked to, or running parallel to, the Canada Pension Plan (CPP). However proposals for some form of mega-pension plan have raised the hackles of bankers and insurers.

Now Terence Corcoran is suggesting that the Canadian Association of Retired People (CARP) is over-reacting.

The implication is that the vast majority of Canadians are heading into retirement nightmares and need to be bailed out by another government income redistribution system — an implication that is not borne out by a half dozen studies recently commissioned by Ottawa. In a recent report on the studies assembled by Jack Mintz of the School of Public Policy at the University of Calgary on behalf of Finance Canada, the Canadian pension system looked far from being a nightmare. The studies found Canada’s pension system to rank well above the OECD average in terms of providing income security and replacement for the vast majority of Canadians. There are certainly gaps, although exactly where those gaps are remains an unresolved issue.

Susan Eng, Vice-President, Advocacy, at CARP disagreed with the tenor of Terence Corcoran’s article:

Mr. Corcoran argues that there is no need to fix Canada’s pension system. Leaving aside his opinion about the messengers who call for change – including one of Canada’s premier business schools with whom CARP is proud to keep company – the essence of his argument is that the experts engaged by the federal government think that Canada’s pension system does well enough for most.

But what would he propose for the rest? Even his Mintz report identified a significant number of people who are not saving enough. Anyone retiring without savings or a workplace pension is expected to live on $16,000 to $19,000 consisting of OAS and CPP/QPP topped up by GIS. That is fact, not rhetoric.

For those seniors, that is a very bleak and possibly a very long retirement future.

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Most Seniors Need Better Pensions

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Jack Layton, the leader of the NDP in Canada says that the Country faces a ‘national pension crisis’.

As you can find with a search on Google Insights, this same concern is expressed elsewhere around the world as shown by the following chart for searches on ‘pension crisis’:

Concern about pensions in the UK is several times that here in Canada and in the US pension concerns almost match those in Canada.

In a nutshell, the problem stems from people living longer while the global recession has severely damaged what people and pension funds had put aside for their retirement.

As Jack Layton said:

Fewer than 40% of Canadians have workplace pensions and those who rely on their registered retirement saving plans have seen “billions of those savings vaporize”. He urged the government to inject $700 million into the guaranteed income supplement to help 226,000 seniors living below the poverty line.

It seems quite clear that what was a Simmering pension crisis is now coming to a boil.

Monica Townson has written a succinct analysis of what is wrong and what can be done.  Her nine-page paper, commissioned by the Tommy Douglas Research Institute, contain two clear messages.

• The first is that there is no “magic bullet that will fix everything.” It will take a mix of reforms – some fast-acting, some long-term – to shore up the pension system.
• The second is that Canada has to get moving now.

Townson’s paper is available on the Canada Centre For Policy Alternatives website.

She highlights the weakness in each layer of Canada’s three-tiered retirement income system:

• Old Age Security was designed to keep seniors above the poverty line. One out of every seven unattached older women lives in poverty. It would take an increase in the across-the-board senior allowance or the low-income supplement to rectify this problem.
• The Canada Pension Plan was meant to top up the coverage provided by employers. But 62 per cent of workers have no employee pension. It would take a major expansion of the CPP – financed by another hike in premiums – to provide an adequate pension for all members of the workforce.
• Registered retirement savings plans were created to encourage Canadians to set aside money for their non-working years. Contributions are tax sheltered. But the vast majority of Canadians (69 per cent) don’t contribute.

Seniors have not been putting away savings anywhere else so the result is that millions of Canadians are heading toward retirement with too little to live on for the rest of their lives.

A solution will require that all levels of government work together and the Federal Government must provide the leadership in this if timely solutions to this pension crisis are to be developed.

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The Pension Crisis

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The International Consortium of British Pensioners (ICPB) had decided earlier that they would appeal a negative decision on the Frozen UK Pensions case and move to the 17-judge ECHR Grand Chamber. This appeal will now take place on September 2.

An article in the UK Telegraph outlines the case well. It is titled How saving the pound led to 54 years of injustice.

The real question is whether the appropriate resolution for these Frozen UK Pensions , should be deternined by legality, equity or morality. If it were based on equity or morality, then most observers agree on the outcome. Instead the UK Government has chosen to treat it only as a legal question and so far the answer has been no. Perhaps the ECHR on September 2 will come to a Yes view as the chairman of the earlier ECHR hearing did in his dissenting opinion. Some 500,000 UK pensioners around the world are watching with bated breath.

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UK Frozen Pensions Case Returns To The European Court Of Human Rights (ECHR) on September 2

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Herewith without comment: Glenys and Neil Kinnock have six state pensions – Times Online.

GLENYS KINNOCK, the new minister for Europe, has amassed six publicly funded pensions worth £185,000 per year with her husband Neil, the former leader of the Labour party. They have already received up to £8m of taxpayers’ money in pay and allowances, he as a European commissioner and she as a member of the European parliament.

The pair are already drawing payments from three of their taxpayer-funded pensions. Glenys Kinnock, 64, soon to be elevated to the House of Lords alongside her husband, is collecting a teacher’s pension and from next month is entitled to another from Brussels with an estimated annual value of £48,000.

Lord Kinnock, 67, is receiving one pension as a former MP and a second for his service in Brussels, together worth more than £112,000. Glenys Kinnock is simultaneously drawing a ministerial salary of £83,275. Her job entitles her to a further ministerial pension.

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Retirement Planning – Pensions Galore

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As we all live longer and healthier lives, many cannot wait to ‘retire’ and move on to a second career.

If you need any inspiration for that, check out the Vancouver Sun Profile of B.C. Supreme Court Chief Justice Donald Brenner, who has resigned after nine years at the helm of the province’s senior trial bench.

At 64, Brenner could have continued sitting until 75, but he said he was looking forward to new challenges.

After 17 years as a judge of the Supreme Court of B.C., including the last nine years as chief justice, I have decided it is now an appropriate time for me to step down. I will be leaving our court on Sept. 7, 2009. I’ve had five careers, I think. It’s time to reinvent myself again.

Among other things Brenner was at one time a commercial pilot with Canadian Airlines. He is setting a great example for us all.

Post from: Senior Money Memos

Second Career Or Sixth Career

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An HSBC Insurance study reveals that as far as pensions are concerned, a ‘Perfect Storm’ looms for an unprepared world.

A number of factors are in play:

• Demographic, individual and financial elements are poised to derail people’s retirement plans unless they prepare properly now.
• People’s short-term survival strategies in the midst of this recession are creating a serious long-term pensions ‘downturn deficit’.
• This all is occurring even though people are aware that they are likely to live longer.
• It is made worse by poor levels of financial understanding, education and access to advice
• People are more concerned with protecting their possessions in the short-term than ensuring they can look forward to a financially secure retirement

Stephen Green, Group Chairman of HSBC, said: “The ‘preparedness gap’ reveals that families need greater support and guidance to effectively handle their finances, not simply in schools and colleges but through ‘trusted advisers’ providing professional financial guidance. The cost of procrastination is likely to be high.”

More specific advice can be found on the HSBC web page on Planning For Retirement.

As Jonathan Chevreau points out Canada is affected by the aging trend that is occurring worldwide. HSBC projects that between 2010 and 2015, the number of dependent adults in Canada will pass the number of dependent children for the first time, a crossover point which will arrive much earlier compared with emerging economies.

To better cope, 48% of Canadians and 55% of Americans would like to see further tax relief on savings. 16% of Canadians think the retirement age should be raised and more support be provided to those who choose to work longer.

28% of Canadians viewed debt as a key obstacle to saving more. Many are trying to create a “buffer” of savings by cutting back on both large and small purchases while also paying down debt.

Nevertheless it is clear that many people will struggle to make ends meet when they come to retire, unless they urgently review their priorities and planning and have the means to make adjustments..

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Retirement Planning Faces A Perfect Storm – HSBC

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Seniors are living longer and for some that means that Freedom 55 offers new opportunities. Perhaps it is time to follow a second career. Or given that you are healthy and full of vigor, you may decide to stay on longer at your existing job since the company values your experience, knowledge and skills.

That was a view that was widely discussed. Given that times were tough, delaying the retirement day also meant that increased funds could be amassed to assure a long and enriched retirement when it came. Apparently that scenario is not working out for everyone.

We now read that Early retirement claims increase dramatically according to the LA Times.

Instead of seeing older workers staying on the job longer as the economy has worsened, the Social Security system is reporting a major surge in early retirement claims that could have implications for the financial security of millions of baby boomers.

Since Oct. 1 2008. claims have been running 25% ahead of last year, compared with the 15% increase that had been projected as the post-World War II generation reaches eligibility for early retirement, according to Stephen C. Goss, chief actuary for the Social Security Administration. Many of the additional retirements are probably laid-off workers who are claiming Social Security early, despite reduced benefits, because they are under immediate financial pressure. The numbers upend expectations that older Americans who sustained financial losses in the recession would work longer to rebuild their nest eggs.

The ramifications of this change in trend are profound for the new retirees, their families, the government and other social institutions that may be called upon to help support them. On top of savings ravaged by the stock market decline and the loss of home equity, many retirees now must make do with Social Security benefits reduced by as much as 25% if they retire at age 62 instead of 66.

Society and the economy can function better as people live longer, if seniors decide to continue working or even start off a second career. They can be contributors to the economy rather than needing support.

With Americans living longer, the elderly are increasingly at risk of outlasting their financial assets. That’s a serious problem for them and their families, who are often called upon to provide assistance. The full consequences of retirement decisions made in hard times will become apparent when people who retired early begin to exhaust their savings.

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The Early Retirement Paradox

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