Longevity risk, or the risk of outliving your money, is the biggest threat facing the majority of retirees. As gold-plated company pensions slowly disappear, millions of Canadians must carefully manage their retirement nest-eggs (on their own, or with the help of an advisor) to make sure they have enough to meet their needs as they get older.

It’s a tricky balance. We’re living longer, and with that comes the risk of diminishing health and cognitive skills. Your spouse or children might not understand how you manage your money, where all of your accounts are held, how you invest, and whether or not you want to leave a legacy. Ben Carlson shares three ways baby boomers can protect themselves from the risk of cognitive decline as they age.

Carlson also looks at why there’s a retirement crisis and he’s determined that we simply don’t, or didn’t save enough. Historical returns from stocks, bonds, real estate, and even cash have been tremendous since 1980 – it would have been nearly impossible not to make money during that time.

“We can’t control what returns financial assets will have going forward but we can control how much money we set aside. With life spans, and thus investor time horizons, expanding, saving money for long periods of time to allow compound interest to do the heavy lifting for you will be more important than ever.”

Rob Carrick doesn’t buy into the cliche of the poor senior living on a fixed budget. CPP and OAS benefits both keep pace with inflation, and most defined benefit pensions offer some type of inflation protection. These income streams help with longevity risk, too, since you’ll receive the rising income for life.

Finally, on preparing for our longer lifespans, Andrew Hallam shares the key to living longer – constantly exploring new places and experiencing new things. He’s putting that to the test, buying a Winnebago and travelling across the United States:

“Money doesn’t make us happy. Acquiring the latest iPhone or television doesn’t enhance our lives. But experiences do. If we can buy time, and a way to bring us something novel, that’s worth the money.”

Longevity Risk Edition

This Week’s Recap:

On Monday I explained why you should avoid the mortgage life insurance sold by your bank – get term life instead.

On Wednesday Marie offered three reasons why DIY investors fail.

And on Friday our career expert Jon Reisinger explained why accepting a counter-offer from your employer is probably a bad idea.

Over on Rewards Cards Canada I reviewed what is arguably the most flexible and easy-to-use rewards credit card on the market today.

Weekend Reading:

An excellent Freakonomics podcast with some really smart people discussing the stupidest thing you can do with your money.

Are you firing your underperforming money manager for the right reason? Dan Hallett explains.

Could the popularity of index funds reach a danger point? Andrew Hallam says that’s unlikely.

Investing is a choice, and Carl Richards explains why you’re no coward if you’re keeping some money out of stocks.

A buyer walked away from a real-estate deal in Surrey, B.C. has been ordered to pay $360,000 – or the difference between the price he offered and the price the home ultimately sold for months later.

As the Toronto housing market cools off, realtors are bracing for the coming storm. Incredibly, there are more than 48,000 licensed realtors in Toronto. By comparison, there are just 13,500 agents in Chicago.

Another growing issue in Toronto is the rental market. Renting has become a total nightmare:

“There are 1,125 condominium units available for rent in the city of 6.2 million people, down 13 per cent from last year, according to second-quarter data from Urbanation Inc. It’s also a record low for the period in Toronto.”

Meanwhile, rents jumped 11 per cent in the last year, blowing past the $2,000-a-month threshold for the first time, to $2,073.

In the latest Canadian Couch Potato podcast, Dan Bortolotti chats with MoneySense’s David Thomas about the magazine shifting from print to digital, as well as the future of financial news media.

Whenever the Canadian dollar starts to swing higher or lower, investors want to know whether currency-hedged ETFs will better protect their portfolios. Dan Bortolotti is not a fan of currency hedging, and explains the pitfalls here.

Wade Pfau shares the third and final instalment of the retirement researcher philosophy of retirement income.

Michael James shares a thought-provoking post on why you can’t have your Sears cake and eat it too.

Finally, before he lived in Middle-earth (and got wealthy), Elijah Wood grew up financially insecure in Iowa. Read why spending $1,000 still makes him nervous.

Have a great weekend, everyone!


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