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(Anders says to draw up such documents for loans of more than $25,000, since he considers this the maximum amount average clients can lose during retirement.)
Each child promised to pay him back, but never did. As
a result, the man was cash-poor, and had to downgrade to
a studio apartment. He became so broke, in fact, that he couldn’t even cover basic expenses, and began depending on his daughter—the only child who never borrowed from him. While she let him eat free at her high-end French restaurant, he felt embarrassed.
That man lived into his late 80s, so he struggled nan- cially for nearly a decade.
This may seem like a one-off situation, but an increasing number of clients are choosing to gift money while alive, even as they live longer.
“Besides wanting to build retirement savings and help family, they wonder how they’ll be remembered,” says Elizabeth Lunney, president and CEO of Fiduciary Trust in Calgary, Alta.
But rather than prioritize families and legacies, warns Anders, retirees should make sure they can cover basic and health-related expenses well into their 90s.
O. SANTA CLAUS RUNS: BAREFOOT
Claus, who competed in the 80-84 category
at the 2009
World Masters, ran the 100-metre dash barefoot.
His 10-km time was 1:03:35.
Choosing a plan’s end date
When calculating sustainable drawdown rates for retirees, many advisors use actuarial tables in CRM software, most of which assume people won’t live past age 90.
Yet those mortality assumptions are outdated: Statistics Canada predicts there will be more than 17,000 centenarians in Canada by 2031, and close to 80,000 by 2061. As of 2011, there were 17.4 centenarians for every 100,000 Canadians.
Still, says Anders, too many accountants and tax special- ists think plans can be reworked if income and longevity projections are wrong. But “if you don’t create a plan on the assumption that it’s correct for at least the rst few years of retirement, then why even do the plan at all?”
He asks retirees to consider how they’ll fare nancially if they live to age 95, or even 100. He creates long-term plans based on that assumption, and usually revisits them bi- annually with retirees.
Many plans, he says, “are 30 or 40 pages in length. But unless clients have a complicated set of circumstances, such as multiple marriages, businesses and children, they don’t have to be.” He suggests ve- to six-page plans because clients can review and understand them more 14
6 QUESTIONS FOR RETIREES
Chris Buttigieg, a senior manager at BMO Financial Group in Toronto, asks clients the following questions before creating retirement plans. He revisits their answers every year during portfolio reviews.
If clients aren’t forthcoming, he says, then book meetings two times a year speci cally to go over complete retirement plans. Your goal is to assess their physical and mental health, and ensure they have family and community support.
1 What are your hobbies or pastimes? This reveals how active clients are, as well as whether hobbies drain or add to income.
2 How often do you see family and friends? This shows how much support clients have, which is important for mental health.
3 Does your family have any history of illness, and how do you plan to stay healthy? Genetics, family history and longevity need to be determined because it provides insight on how long to run a client’s projections, based on how long she might live.
4 How often do you exercise, and what types of activities do you do? Physical activity promotes health.
5 What are your spending habits? You need to keep track of this each year.
6 Have you encountered any extra expenses over the last year? A jump in spending could be due to one-time expenses, or could signal a lifestyle change.
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