COLUMN: Ask the Money Lady – Do I have enough?

Dear Money Lady,

I am now finally retiring at 66 after working all my life in retail, since I was 15 years old. I am looking forward to not working, but I am still worried about not having enough money. My condo is paid for, I don’t have any debt, but I also only have $120,000 in savings. Do you think that is enough?

Gemma

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Dear Gemma – it might be enough. You will now be receiving your OAS and CPP, plus any LIRA/LIF income from company pensions. The fact that you own your condo free and clear and have no consumer debt is also a very good thing. Let’s talk about the costs of aging since I know many Canadians may also be wondering if they have saved enough as well.

If we look at the time you will be retired based on a standard life expectancy for a single woman, you would need to plan for about 25 to 30 years (that would make you 91 to age 96). Planning for out-of-pocket expenses must be something you keep in mind as you age. The 3 most common expenses for seniors today are dental, hearing loss, and vision. I know many will think these are not important, but these are needs that can lead to many other issues if overlooked or ignored. Thankfully the Canadian government has many programs available for their aging population.

The Canadian Dental Care Plan (CDCP) is available for all seniors over 65 and children under 18. Aging is hard on the teeth, and everyone should go to the dentist once a year to ward off tooth decay and oral cancer. Hearing loss as you age doubles your risk of dementia and severe hearing loss makes dementia five times more likely to occur. Almost 50 percent of Canadians over 75 have significant hearing loss. In Ontario and Alberta seniors are covered for hearing aids and other provinces have different programs, for example, Manitoba seniors receive $2,000 towards hearing aids – so it’s a good idea to check what is available where you live. The days of the obnoxious, oversized hearing aids are now gone. Today you can join in on conversations by using a small, discrete hearing device. Glasses are a fact of life for most seniors and the Canadian government helps out with this expense too. Here is a link for those interested.

https://www.canada.ca/en/health-canada/services/healthy-living/your-health/lifestyles/seniors-aging-vision-care.html

The key to not running out of money for all seniors is to try to find ways to create multiple streams of income and keep your expenses to a minimum. And this should be easy enough to do, since by the time you get to retirement, you really should not be needing to buy the “big-stuff” anymore. The government security benefits will make up one stream of income, but then you will need to find more. This could include a part-time job, having a boarder in your basement, company pension plans, rental income, RRSPs and TFSAs, or annuity strategies. As a single in retirement with a small retirement savings, (less than $400,000) why not consider a straight-life annuity that protects against longevity risk and will provide a guaranteed income for life.

A solid fixed, straight-life annuity with a good rate of return would be a great option for you Gemma. The annuity will provide you with a guaranteed monthly income for life from your $120K investment. My worry would be that you might make excessive withdrawals from these savings in retirement for expensive hobbies, travel or just simply increasing your lifestyle, and then find that the funds deteriorate faster than you thought. The annuity will provide you with a life-long income that you can plan your new retirement budget around (along with other incomes: pension, OAS, CPP, etc.). Another tip before you retire would be to also take out a secured line of credit on your condo. I know you don’t need it, but having this available in the event of an unseen emergency will make it easier to use some of your home equity if you are short on funds. Good planning and forward thinking will always ensure you live comfortably your way.

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Christine Ibbotson is a Canadian finance writer, radio host & YouTuber. For more advice check out her YouTube channel: ASK THE MONEY LADY – Your Canadian Finance Coach.