Just because you have successfully retired, that doesn’t mean you can relax. You will want to make the most of your money every year for 20 to 30 years into the future.
Why, you say? I’ve saved my money for years, and now I want to enjoy it! Well that makes sense. But several factors are working against us, to use up our money, to see it fall short. Rising income taxes, very low rates of return on your investments, rising costs for healthcare, requests for loans from children and grandchildren. One of our friends with very adequate income just spent all his savings on cancer care for his mother.
Even inflation, which has been down and out for years, is about to come back and rob retirees of precious savings. What can you do about it?
Protecting your savings and investments requires a constant vigilance over your financial management practices. You will need to be constantly aware of ways to cut your costs, gain extra returns on your money, reduce fees and expenses, seek out safe ways to get better yields on your investments. You cannot be complacent about your money. Some examples:
Many Canadians are paying 2.5% annual fees for money management. You just don’t know it because it isn’t clearly reported on investment statements. This should change in January 2017 when new securities laws will make this disclosure mandatory. You will see what advisers are charging you.
This same legislation will require that your investment statements clearly spell out what returns you are getting, alongside published returns on comparable securities indices. At last you will clearly know what you are spending and what you are getting for your fees. This information is needed now more than ever, because what may have seemed fair 20 years ago, when you had less money , and returns were higher, is not fair today when you have ten times the savings and returns are quite low. And what about brokerage commissions? $300 a trade used to be acceptable. But now the going rate is $40 to $60.
You need to ensure that you are getting good advice for your money, and paying a reasonable price for it. You would not be wise to do it all yourself, unless you are a market pro. But you should get good advice and attention, at a reasonable price, and hopefully on a tax-deductible basis, so that tax savings cut the price in half.
The same should go for other business services you buy. From haircuts to suits to clothes to tax fees to cleaning charges. Also look for opportunities to change fees to tax-deductible fees. And do pay for advice that is going to help you make your savings grow, like good income tax planning advice and professional investment management.
The point of all this is that you are going to enjoy retirement for 20 to 30 years or more. So why not save $5,000 to $10,000 a year over this time and live and travel free with the annual savings you make. Last week we helped a family save over $30,000 a year in investment charges. You can do this too.
Kerr Financial Services
Matt Del Vecchio is a Certified Professional Consultant on Aging (CPCA). He is the founder and president of Lianas - a company specializing in retirement residence search and senior transition support.