Rebuilding the Ideal Retirement: A Case Study
Retirement often appears in people’s minds as an actual destination. In those cases, it can be treated like a permanent location where you will go – and stay – indefinitely. The truth is that this time in your life, just like any other, is a component of your journey, and will be impacted by change just as much (and sometimes even more) than any other period in your life. Set-it-and-forget-it is the hope, but not very often is it the reality – especially when it comes to things we cannot possibly control like market behaviours, economic changes, and global pandemics. Each month throughout 2020, we’ve been sharing stories (greatly modified to protect privacy!) of the amazing people we’ve had the pleasure of working with. Our goal is to demonstrate that each individual, couple, family, and business is unique in its own way, and the advice that they receive is just as unique. A “sample” plan won’t give a great deal of insight into the quality of advice and support you would receive from Spring Plans (if you aren’t already a client), but these stories will give you a lot more insight. So far this year, we’ve introduced you to:
- Troy and Annie, with 2 children in elementary school, more month than money, and a renovation to contend with;
- Zoe, who lost her husband at age 55 and wasn’t sure if she could fully retire on her own;
- Baby and Johnny, busy professionals with two young children, great incomes but a deepening line of credit;
- Terri, a single lady earning commission income that varied so much from month to month that she didn’t know how or when to save for retirement – or even annual taxes;
- Isaiyah, who was frustrated with her portfolio management fees and wanted to start managing on her own;
- Leela, a dual Canadian and U.S. citizen with corporations and money on both sides of the border;
- Jesse and Tulip, parents and tech professionals with 10 years in Canada, trying to plan for the lifetime care of their disabled child while sending the other to university and saving for retirement;
- Olivia, who sold her successful business, transitioned her career, and found herself far to busy to manage her own portfolio; and
- Moira and her daughter Alexis, who decided that Moira needed to leave her frustrating job and we found that she didn’t need to work at all.
Willow and Tara, Recent RetireesWhen Willow and Tara retired together in their early 50s, they had everything they needed for a comfortable life, including an incredibly close relationship with their kids, strong cash-flow management skills, deep community ties, a history of practicing contentment no matter what their circumstances, a paid-for house, million-plus portfolio, a pension, and a permanent insurance policy meant for their kids, with a healthy cash surrender value that was paying their premiums for them. Unlike many retirees who always intend to downsize but never get around to it, Willow and Tara even sold their house when their first grandchild was born, renting a condo in Calgary so they can live as close as possible to the baby without actually moving in. They had done everything right: worked hard, saved their money, cultivated gratitude, and invested in their kids and community. They were looking forward to being both comfortable and generous for the rest of their lives.
Willow and Tara, 20 Years LaterFast forward twenty years and some parts of the picture are the same: Willow and Tara are still close to their son Xander, daughter Anya, both sons-in-law, and grandchild Dawn. They still volunteer regularly with their local community centre, still manage their cash flow down to the penny, and are still practicing contentment. But twenty years, three market crashes, two great-on-paper but disastrous-in-real-life advisors, and two unindexed pensions have changed their retirement significantly. When Willow and Tara first reached out to Spring, they were rattled by the long string of losses to their investments and ashamed about what they believed were their own poor choice of advisors. Tara’s pension wasn’t buying nearly as much as it used to, their savings were in cash, they were scared of spending, and terrified of becoming a burden on Xander and Anya. If that wasn’t enough, they had just received no good, very bad news: after years of lower than projected investment returns and no premium payments, their permanent life insurance policy had no more cash in it. Willow and Tara would have to find $600 per month out of an already bare-bones budget to keep it in force. What we wanted to do was go back in time, give hard side-eye to the insurance advisor who told Tara and Willow to stop paying insurance premiums, build a sustainable retirement income plan, and monitor this retirement plan with them every year so that their course corrections could have happened sooner and felt smaller. Despite any rumours you may have heard to the contrary, we’re not witches or vengeance demons, so time travel as a financial planning strategy was off the table, as was turning their past advisors into rats.
Rebuilding Tara and Willow’s RetirementInstead of looking to the past, we asked Tara and Willow to look to the future and identify their must-haves for the remainder of their lives. These included:
- Enough money set aside to pay for acceptable end of life care independently;
- Life insurance policy preserved as an inheritance for Xander and Anya; and
- A minimum of $2,000 per month in today’s dollars from their portfolio for the rest of their lives, although more would be nice, plus an additional amount every year to make up for the declining buying power of Tara’s unindexed pension.
Sustainable RetirementThis work gave us two key pieces of information:
- How much of their portfolio had to be assigned to the job of guaranteeing acceptable end of life care, and
- How much income the remaining assets could reliably provide without collapsing before Tara and Willow do (result: not enough).