Retirement now looms large for many baby boomers—and to be frank, many of us are scared. For many years, we’ve been used to making pretty good money; and it’s quite daunting to contemplate how much capital it’ll take to replace those big incomes.

Let’s say you’re one of the fortunate ones, and earn $100,000 a year. If you want to continue earning that income with the proceeds from a rock-solid, guaranteed investment, the fact is you’ll need a lot of dough. The five-year GIC rate is currently around 3%, so $100,000 a year will require you to invest $3,333,333 of capital. Of course, few investors put all their eggs into the GIC basket, and many can count on some higher returns from variable assets such as stocks and real estate. But any way you slice it, it takes a lot of assets to replace a big income.

Today, though, there’s yet another variable added to retirement planning: many people are not retiring completely from their work. The equation has changed quite a bit from its historical model. Stopping all work made a lot of sense a hundred years ago, when people may have toiled for 12-hour days of back-breaking labour. You downed tools with relief at 65 because, like an old tractor, you’d ploughed your last furrow.

Even today, we still tend to think of retirement as dropping all sources of income and living only off our accumulated assets. There’s absolutely nothing wrong with this view, provided it’s what you want, and you can manage it. But we needn’t necessarily have our minds locked into that old paradigm.

Many of my “retired” clients have found that conventional retirement doesn’t work for them. Most often, they take a break, then return to some form of work—not necessarily because they have to, but because they find they enjoy their lives more with some kind of work to do. Many people work well into their eighties—even famous ones. Personally, I think Clint Eastwood makes better movies today, and George Burns became funnier with each passing decade.

Even for us ordinary people, it’s time to rethink retirement. For one thing, the combination of longer lives, disappearing pension plans, and market meltdowns means that for many people, conventional retirement is a dream that can never be realized. But I’d like to put a positive spin on that, and suggest that the old concept is dying a natural death anyway.

Here’s my view: when it comes to financial planning, many baby boomers often ignore a huge retirement asset—their decades of work experience, plus all their valuable skills and relationships that enabled them to be big earners. The good news: this asset doesn’t have to be written off when you retire. You can, if you wish, continue to view your skills as an income-generating asset. If you have what it takes to earn a $100,000 income, that makes your skills worth some $3 million.

Such an “asset” is not to be treated lightly, and writing it down to zero is a really counterproductive idea. Sure, if the daily grind is wearing you down, by all means take some time off. But don’t put yourself out to pasture entirely. Consider a gradual transition to retirement—one that keeps your work skills alive, and keeps the paycheques coming, but that benefits your mental health rather than detracting from it. (It might be useful to think in terms of retiring from “the things you don’t like about work,” rather than retiring from work completely.)

Perhaps you could take a leave of absence, followed by a return to part-time work. Look at your retirement figures and consider: what would you have to do to earn just half your present income? The new equation involves all your savings and your existing assets—including your professional skills. They just might be the cornerstones of the “new retirement.”

To help people put their finances into this new framework, we’re offering a series of seminars that focus on retirement and other late-life issues. The next, a lunchtime session, is entitled “Cash Controls For Busy Boomers,” and will be held at noon on August 5. Lunch will be served. The session is free, but space is limited—so please reserve your spot: call Kathy Brunelle at 613-788-8010, or e-mail her at kathy.brunelle@RichardsonGMP.com.

Alan MacDonald is an Investment Advisor with Richardson Partners Financial Limited. Alan helps investors with over $500,000 of assets make smart decisions about money. For more information please visit www.alanmacdonald.ca or email Alan at Alan.Macdonald@RichardsonGMP.com.

Many baby boomers are now having to come to terms with the idea that conventional retirement must be postponed for a little while – or a long while. Knocking off the daily grind may now seem like that elusive pot of gold at the end of the rainbow, for a variety of reasons.

The stock market decline of 2008 will likely go down in history as one of the largest ever, but the forces that will keep many of us at work are not necessarily just financial. Other realities of modern life are that we’re living longer, our adult children may be remaining dependent on us for longer, and we may also have aging parents who need care and financial support.

So, given that we may have to work for several more years, let’s examine the concept of retirement. The first thing to realize is that it’s a very recent, and man-made, creation. There’s no natural law that requires us to down tools at 65 years of age: a century or so ago, the notion of stopping work entirely while you were still able-bodied was unheard-of. The notion was first introduced in Germany, in the late 1800s, by Otto von Bismarck, who was worried about a revolution by the country’s restless and jobless youth. He wanted the older workers out of the way so that younger people would be able to work, and hence have less time and inclination to think about overthrowing the government.

North America got into the retirement game a little later, in the early 1900s. After World War II, the workforce came to be dominated by large companies with established bureaucracies. These and government bodies created specific roles for their workers, which ended at a set time. When your 65th birthday arrived, the gold watch and pension plan kicked in, and you were put out to pasture on the golf course.

Today, obviously, the game has changed quite a lot. Outside the government, pension plans have become virtually non-existent. At the same time, as our life spans continue to increase, the costs of paying indexed pensions for 30–40 years is simply beyond the planning capacity of most businesses.

This means we need to re-think the whole idea of retirement. When most people contemplate it, after all, they usually focus on retiring from the stuff they don’t like doing. But that may not be exactly the same thing as retiring from work altogether. Think about it: what are the elements of the workplace that you do like?

Throughout my career, I’ve watched many people retire. For some, it’s a smooth transition; for others, unfortunately, it’s not. Work gives us all a purpose and a routine, and contributes significantly to our identity. All too often, retirement means that identity vanishes along with the regular income.

A more realistic approach for today, if you have the luxury of choosing your retirement date, is to make a list of all the things you would like to leave behind. Then, see what you can manage to keep – preferably including some sort of paycheque.

I know many business owners who’ve successfully “semi-retired” in various creative ways. Some hire extra staff to run things while they take extended vacations. Others downsize to just a few key customers that value their expertise. Some choose to leave the daily grind in favour of consulting or part-time teaching jobs. Even low-income earners can semi-retire. I recently met a taxi driver who earns $1,500 a month just by leasing out his taxi license. All these options help to keep an income flow going.

When it comes to calculating your retirement income, there are four things you need to consider:

1) How long are you planning to work? The longer you work, the less you need to save.

2) When will you start drawing out your pension? The longer you leave it to mature, the larger it will be.

3) How much do you plan to withdraw? Delaying your withdrawals by working a few extra years means you don’t need to save as much.

4) How are your assets currently allocated? Some assets, such as a big house, cost a lot to own, and you may want to consider downsizing. Your best bet is “growth assets” that will help you to combat inflation over the next few decades. Business assets can also be preserved as an income source during retirement.

As you can see, today’s retirement equation is far from simple. To help our clients come to grips with it, in the coming year we’ll host a series of free seminars designed to put your finances into a useful framework. The next two sessions, both at noontime and including lunch, are:

• “Integrating CPP and OAS into your retirement planning,” July 23.
• “Cash controls for busy boomers,” August 5.

Registration is free, but space is limited, so please reserve your place by contacting Iain Davidson at 613-788-8012 or at Iain.Davidson@RichardsonGMP.com.

Alan MacDonald is an Investment Advisor with Richardson Partners Financial Limited. Alan helps investors with over $500,000 of assets make smart decisions about money. For more information please visit www.alanmacdonald.ca or e-mail Alan at Alan.Macdonald@RichardsonGMP.com

Richardson Partners Financial Limited is a member of CIPF.