What’s your biggest money fear? The answer likely depends on your age and stage of life. Twenty-somethings might say they fear living in debt forever, or that they’ll never be able to afford a home. Those in their thirties might fear they’ll never stop living paycheque to paycheque. Forty-somethings might fear losing their job and having to start all over again. The biggest money fear in your fifties might be whether you’ll ever be able to retire.

But the number one concern for retirees is whether they will outlive their savings. It’s a legitimate fear, especially for women over the age of 60 who worry about the prospect of outliving their money and becoming homeless (see: Bag-Lady Syndrome). Indeed, careful planning is required for those who retire without access to a defined benefit pension and without sufficient savings in RRSPs.

For many retirees, the anxiety felt about outliving their savings is overblown. One reason is the fact that Canadians enjoy very generous government programs such as CPP, OAS, and GIS that provide a financial floor that keeps seniors out of poverty.

On the other end of the spectrum I’ve also found there’s an irrational obsession with generating income from very substantial portfolios without ever touching the principal.

I spoke with one potential client over Skype from his vacation home in Mexico. The 75-year-old claimed to require $80,000 per year in income – $15,000 of which came from CPP and OAS benefits. His assets were in the $2.5M range in his RRIF and non-registered investments (in which he still actively traded stocks), plus a paid-for home in Calgary and the vacation home in Mexico.

His chief concern was that a 2008-style market crash would wipe out half his savings, yet he insisted on holding aggressive investments that would achieve a target return of 8 percent or more each year. He had no desire to leave a large inheritance, and so the only logical reason for his behaviour was a deep-seated fear of outliving his savings.

How do you know when you have enough money in retirement? A good financial planner can run retirement projections across a number of pessimistic and optimistic scenarios to show you exactly where you stand. At some point the desire to accumulate more should reasonably give way to the need to decumulate and enjoy retirement.

My biggest money fear? It’s not about living in debt, or not saving enough for retirement. I’ve got that covered. It’s not about losing my job. I’ve developed other skills that I know will allow me to keep earning money as long as I want. It’s not about running out of money in retirement – although that’s decades away.

No, my biggest fear is losing my mental capacity to understand information and make decisions. As the head financial decision maker in our household my goal is to optimize our financial outcomes with the simplest solutions. That way, if my wife or children need to take over at some point, they’ll find our finances easy to understand and, for the most part, in one place.

This Week’s Recap:

On Monday I wrote about whether outsourcing is the key to happiness. I’m happy to hire out some tasks but some things are just easier or more enjoyable to do myself.

Many of you have asked about my post on how to transfer your RRSP to Wealthsimple. I have first-hand experience with the process and now with the Wealthsimple platform and I’m very impressed.

The dashboard clearly shows your balance, time-weighted returns, and fees paid (14 cents!). It also shows the make-up of your portfolio, the cost of each individual ETF, and how each one has performed.

I now have three recommendations for readers who ask me where (and how) they should invest.

1. Wealthsimple for getting started and for portfolios of less than $250,000.
2. Nest Wealth for portfolios greater than $250,000 (lower fees due to its capped monthly fee structure)
3. One-fund ETF solution (VBAL, VGRO, VEQT, or XBAL, XGRO) for the DIY investor <— need to open a discount brokerage account.

Weekend Listening:

I’ve been getting more and more into podcasts lately and so I wanted to share a couple of excellent episodes from this past week.

The first is a new podcast started by one of my favourite authors, Michael Lewis, called Against The Rules. In episode two, The Seven Minute Rule, Lewis describes his own encounter with identity theft and looks into why the victims of identity theft need to jump through so many hoops to clear their name when in many cases the financial institutions are to blame.

My second recommendation is for this week’s episode of the Rational Reminder podcast: The Future of Canadian FinTech. In this episode Cameron and Ben interviewed the always enjoyable Randy Cass from Nest Wealth. They discuss the challenges and opportunities facing the financial services industry and agreed on their biggest frustration with the big banks – long wait times and obstruction on account transfers.

Weekend Reading:

Why pay your bank or advisor when they are not offering any advice? Dale Roberts explains.

Remember the Financial Consumer Agency of Canada’s investigation into big banks’ aggressive sales tactics? Well, documents obtained by CBC Go Public reveal a ‘cosy’ relationship between the government, the banking industry and its watchdog.

Are low-income savers still in the lurch? Here’s a look at TFSAs after 10 years.

From this research, Global’s Erica Alini explains when cashing out your RRSP at age 65 makes perfect sense.

Can a hedged-ETF protect your investments? Dan Bortolotti debunks the old “protection on the downside” myth.

Warren Buffett is perceived to be a stock-picker but in this video, Ben Felix explains why Warren Buffet is not a reason to pick stocks:

Why is it so hard to talk about money? Here’s Nick Magguilli on the money we don’t talk about.

“Stories can inspire and motivate large groups of people to do things that would seem unimaginable. But there are also harmful stories we often tell ourselves that can hold us back.” – Ben Carlson shares a few of them here.

Why we should have a tax-free option for our workplace pension plans.

Jason Heath shares an easy guide to income splitting for seniors.

How will a pension buyback impact your income tax return? Alexandra Macqueen explains.

We’re not quite here yet, but Frugal Trader at Million Dollar Journey explains what to do when you’ve maxed out your RRSP and TFSA.

Are dividend paying stocks a good substitute for bonds?:

“While retirees might use dividend-paying stocks or funds to supplant a portion of their bond exposure, I get nervous when retirees use them to take the place of bonds altogether. And I think retirees should get nervous, too.”

As a new home owner, how can I pay for expensive ‘surprises’ without tapping family or credit cards?

Big Cajun Man Allan Whitton got his income tax return reassessed last year and the outcome is still in progress. So what does that mean when he filed this year’s taxes?

Here’s the always entertaining Mark Goodfield with confessions of a tax season accountant – 2019 edition.

Finally, a follow up to the college admissions scandal showed that UCLA new about the cash-for-admissions deal years before the scandal. Their athletics department had been placing “athletes” who never competed in high school onto their teams after receiving generous donations from parents.

It’s frustrating to feel like you’re not making any progress with your finances. Maybe you haven’t got a raise for a while, or you’ve been slogging away at debt payments for months at a time, or a stock market dip took your investments right back to where you started. Some people get desperate to make a big financial move and instead make a big mistake (get rich quick schemes, anyone?).

My goal is to make steady financial progress – to move the needle forward a little bit at a time so that eventually all those little steps add up to a giant leap.

That’s why this sketch by The Behaviour Gap author Carl Richards is so powerful. You don’t notice the steady improvements you make in real time as you knock an extra $100 off your credit card balance, or when you slide $50 into your savings account. But over time all those little steps do indeed add up to a massive improvement in your finances.

There was a great discussion initiated by J. Money on Twitter asking how far you’ve come with your finances since 2012:

*** If you’ve got a pen and paper handy, jot down what life/money was like in 2012 and then compare to how different it is now in 2019! ***

I bet you’ll be amazed at how much things have changed!https://t.co/RzYTbpCPFK

— J. Money (@BudgetsAreSexy) April 5, 2019

Scroll through the comments to read some pretty inspirational money stories.

I wasn’t tracking net worth on this blog back in 2012 but I do have an Excel spreadsheet (of course!) charting my financial progress for the last decade.

In 2012 we had been in our new house for a year and welcomed our second child into the world (our oldest turned three). We had emptied our TFSAs to top-up our downpayment, and then after purchasing a new vehicle (2013 Sante Fe) we were in full on debt repayment mode.

I felt like we weren’t making any financial progress because instead of contributing to our TFSAs we were paying $800+ per month towards the new vehicle. Two years later we took out a line of credit to finish our basement, digging ourselves another $30,000 hole.

Fast-forward seven years and our vehicles are paid off, the line of credit is paid off, we’re contributing heavily towards our RRSPs and TFSAs, the kids’ RESPs are fully funded for their ages, and we’re making significant progress on our mortgage. Here’s a side-by-side look at then and now:

I’ll be honest, it’s really gratifying to see how far we’ve come in just seven years. That’s a half-million dollar leap forward!

Sure there have been bumps along the way, but our financial plan is the compass that has guided us so far and will continue to point us in the direction of financial freedom.

What was life like for you in 2012 and how has it changed in 2019? Leave a comment below, I’d love to hear your story!

This Week’s Recap:

This week I wrote about women, wealth, and retirement.

I applied for a NEXUS Card at the end of December. Applications were taking longer to process due to the U.S. government shutdown but finally in late March my application has conditionally approved and I was invited to schedule an interview at an Enrollment Centre.

I did that on Friday at the Calgary Airport. It’s ironic that I drove 2 hours each way to apply for a program that might save me a few minutes in the security line at the airport and at border crossings for the next five years.

As a side benefit, I got to see exactly where we’ll depart from on our flight from Calgary–>Chicago–>Edinburgh in June. I was also pleasantly surprised to see the Marriott’s lobby opens up right into the airport near the international departures. We’re staying there the night before we leave and the location will make our early morning flight that much less stressful.

Promo of the Week:

One reason why I applied for the NEXUS Card, other than out of sheer curiosity, was because a credit card I signed-up for offered to rebate the $50 application fee.

That’s right, the CIBC Aventura Visa Infinite Card has an enticing offer that pays up 20,000 Aventura points, a $120 travel credit, and a NEXUS application fee rebate. Plus, get a Priority Pass membership and 4 complimentary visits per year at over 1,200 airport lounges.

Weekend Reading:

A decade ago, as the world began to piece the financial system back together after an epic credit crisis, there was agreement on one thing: Too much debt had caused the crisis, and so there must be a huge de-leveraging. It has not worked out like that.

A brave post by Nick Magguilli (Of Dollars and Data) on the importance of knowing yourself.

Morgan Housel asks how you deal with volatility:

“The last three months of 2018 was the worst quarter for stocks in seven years. The first three months of 2019 was the best quarter for stocks in 10 years.”

A Nova Scotia family is now stuck paying the mortgage on their home almost two years after it was swallowed up by a sinkhole.

There’s a new digital bank in town called Motusbank, an offshoot of Meridian Credit Union. Motusbank offers a free chequing account, a savings account paying 2.25 percent interest, and mortgages with fixed rates across 1-5 year terms.

Gordon Pape shares why you might want to avoid using your RRSP to buy a home.

10 questions on annuities answered on the My Own Advisor blog by expert Money Gal Alexandra Macqueen.

Here, a My Own Advisor reader shares a reader story who reached financial freedom at age 52 and now wants to know how to draw down what he’s worked so hard for.

Frugal Trader at Million Dollar Journey argues that the ultimate FIRE indicator is once you’ve reached your financial freedom crossover point:

“It’s a fairly simple, but motivating, concept that shows the point at which your passive income grows enough to meet (or just about exceed) your recurring monthly/annual expenses.  In essence, it’s the point where you reach financial independence or FIRE (financial independence/retire early).”

Squawkfox Kerry Taylor shares three behavioural science tricks to help you pay off debt faster.

100 square foot apartments and 5-foot-10 ceilings: Harrowing tales of Millennials renting in Toronto.

Finally, music fans can access a nearly identical library of songs on Spotify, Apple Music, or Google Play. So why is the streaming video market so fragmented? Ben Carlson laments his experience cutting the cord.

Have a great weekend, everyone!

One of my very first financial planning clients was a single woman in her late 40s named Rachel who lived in Toronto and worked as a self-employed consultant to the not-for-profit sector. She made good money but lacked the confidence to manage her day-to-day finances and save for the long term.

Moreover, Rachel provided care for her aging parents and was under a tremendous amount of stress – enough for her to worry about her own health and whether she could maintain her current workload.

We worked together to establish a budget and cash flow projections for the next 12 months. During that time, we checked in monthly to ensure her income and expenses were on track and updated her plan accordingly.

Having always come from a place of fear about her financial future, Rachel quickly realized the path was not as bad as she once made it out to be. Most importantly, I never made her feel bad for things she didn’t understand – I just offered support and encouragement, along with tools that were easy to understand and implement.

After just one year she felt empowered about her finances and confident about her financial future. This new-found confidence also shone through her consulting business as she managed three straight years of record revenue growth to help further strengthen her financial position.

Meanwhile, her parents’ health continued to decline and so Rachel decided to scale back her workload and spend more time with her mom and dad. Now she only works on enough projects throughout the year to reach a specific annual income target that meets her monthly spending and savings goals. She has enough confidence in her financial plan to turn away other business opportunities to focus on her well-being and spend more time with her parents.

Rachel now joins a growing list of financially well-prepared Canadian women. Earlier this year, RBC Insurance conducted a survey of Canadian women over the age of 45 with household income of $60K+. The survey found that women are relatively well-prepared financially, but still express varying degrees of confidence when it comes to their financial future.

Highlights include:

• The majority of women over 45 have a very clear idea of what they would do with a sudden lump sum of money, with only a quarter worry about being able to manage the money properly.
• Canadian women have also mastered the household money matters. More than nine in 10 (92 percent) agree they have a strong understanding of their finances.
• Yet despite this, 24 percent say they won’t be able to maintain their household’s financial situation if their spouse or partner were to pass away and one-third are not confident that they will be able to afford the lifestyle they want to live through retirement.
• Interestingly, single women were only slightly more likely than married women (36 vs. 34 percent) to cite a lack of confidence in their ability to afford their lifestyle in retirement.

Retirement planning is a challenge in any household, let alone one in which a spouse dies early. If that spouse happens to be the household’s chief financial officer, what’s the surviving partner to do?

Even though I manage our day-to-day finances and retirement savings I do want my wife to have an understanding of our financial position – both current and future. I want to set up our finances in a way that’s easy for her to manage in the event of my untimely demise. I also want to ensure that she can maintain a comfortable lifestyle in retirement.

I’ve made sure to include my wife as the beneficiary on my RRSP. That way, if I died, she could have my RRSP assets transferred to her RRSP through a tax-deferred rollover.

I have a term life insurance policy in place that will be enough to pay off our existing mortgage and provide another $300,000 or so to live on.

I also have a defined benefit pension through my current employer. If I died, she would receive 2/3 of the pension I was receiving for the rest of her life.

Annuities: A Missing Piece of the Retirement Puzzle?

The idea of guaranteed income for life is appealing to me as a way to simplify our finances in retirement. I might not have the sharpest mental faculties as I get older, and my wife would be reluctant to manage a do-it-yourself portfolio of investments.

An annuity provides a predictable income stream for life. Nothing protects you from longevity risk quite like guaranteed lifetime income. Annuities aren’t subject to the whims of the stock market, so you’ll get paid regardless whether markets rise or fall.

Finally, for women like Rachel who are not as confident with investing in the stock market, an annuity can help “pensionize” a portion of her nest egg. Unlike an investment portfolio, an annuity does not need to be managed once it has been purchased. You can even stagger your annuity purchases to help increase payouts.

Curious about annuities in retirement? Read more here.

Final thoughts

Women face unique challenges when it comes to saving for retirement. They often face lifestyle and economic issues that require special consideration. Women tend to earn less money than men and take more time away from the workforce to care for family members, giving up their income stream and losing out on raises and promotions. They are less likely to have access to retirement benefits at work, plus they live longer than men.

Single women face other retirement planning challenges, whether they’ve always been single, or are now divorced or widowed. Singles can’t count on a spouse’s income to help increase their retirement savings or take advantage of tax splitting and credits. Plus, they are shouldering all the costs of pre-retirement living themselves.

They’re entirely on their own to make sure they are financially secure. It’s no wonder they’re worried.

This doesn’t mean a comfortable retirement is out of reach. But it does mean extra planning for your financial future.

Start with a realistic look at your financial resources. How long will you need to work? Should you change careers to generate more income? Determine whether you’ll need to pare down discretionary spending or explore alternate living arrangements, either now or during your retirement years.

Take control of your finances now by learning about budgeting, cash-flow, and retirement savings. Do it on your own or with a trusted advisor. Take these steps and you’ll soon feel as confident and empowered as Rachel does about her financial future.

This post was brought to you by RBC Insurance. All opinions are my own.