We feel your pain. So let us reassure you. Despite what you may think, there is a lot of good news about retirement. We’ve talked to a wide-ranging selection of financial experts and we’ve come away with one conclusion — you’re doing far better than you think you are. Join us as we reveal 10 things that most people don’t know about retirement, but should.

1. You’re not behind at all

The ads make it sound as if 55 is a reasonable retirement age. In fact, for most of us it’s not. The median retirement age in Canada is 62 for men and 61 for women, according to Statistics Canada. Who does retire early? By and large, federal government employees, who ditch work at a median age of 58. You can credit their early departures to generous pensions that are indexed for inflation. But even public-sector employees aren’t hanging up their work clothes at 55.

If you look at the math behind retirement, you can see why most of us stick around the office a bit longer than we might like. For every year early that you retire, you pay three penalties: you lose a year of potential savings, you lose a year of growth for your retirement savings, and you gain one more year of retirement expenses.

Consider a woman who hits 55 in good financial shape, with a paid-off condo and $100,000 in savings. She can count on her savings to produce $4,000 or $5,000 a year in returns, but she’s too young to start collecting Old Age Security or Canada Pension Plan. Unless she resorts to desperate measures, such as selling her condo or burning through her savings, retirement is impractical.

But look at what a difference five years can make. If she buckles down and contributes $10,000 a year to her retirement fund during that period, and achieves a 7% annual average return, her savings double to $200,000. That bankroll can generate $8,000 to $10,000 a year in income as long as she lives. At 60, she can also start collecting Canada Pension Plan. If she combines those sources of income with part-time work, a phased-in retirement becomes quite practical.

2. You’ll live longer than you expect

When we’e doing our retirement planning, many of us figure that we’ll live to 80, the average lifespan in Canada. But that average is misleading. It reflects what a newborn baby can expect in the way of lifespan and is dragged down by all the unfortunate people who die relatively young.

If you’ve managed to reach 65 without suffering a terminal illness, you’ll probably live considerably beyond 80. According to StatsCan, a 65-year-old man can expect to live to 83; a 65-year-old woman can look forward to blowing out the candles on her 86th birthday.

And remember — those are averages. Half of retirees live longer, some much longer. Moshe Milevsky, an associate professor of finance at Toronto’s Schulich School of Business at York University, says there is a 41% chance that at least one member of a 65-year-old couple will live to 90. So even if you don’t quit work until 65, there’s a good chance that your retirement could still wind up spanning a quarter or more of your life.

3. You’ll see more of your partner — a lot more
Sure, you love your spouse, but let’s do a little math here. Chances are, for most of your married life at least one of you has worked outside the home. Subtract sleep, travel time and other away time and you’ve seen your beloved for— at most — six hours a day.

In retirement, that figure can easily double. And continued exposure can cause even happy couples to bicker. Fred and Janet Barnes (not their real names) retired to Dickey Lake, Ont., to renovate a cottage after living in and around Toronto for most of their lives.”His perfectionism drove me a little crazy,” says Janet. “My slapdash methods were hard for Fred to take.” The Barneses eventually figured out ways to divide the work so they wouldn’t get on each other’s nerves.

Other retired couples strike different bargains — maybe the kitchen becomes her territory, while the garage becomes his — but whatever the specifics of the deal may be, the important point is to realize that retirement is not just a financial journey. It’s also an emotional odyssey and you should plan ahead to make the most of it.

Beginning in your 50s, you should start thinking about the activities that will fill your day in retirement. “You’re going to need to stay connected,” says Dr. Randy Swedburg, chair of the applied human sciences department at Concordia University in Montreal. Your many options include going back to school, giving your time to charity, or starting your own business.

4. A part-time job is worth $400,000 in the bank

If your retirement savings are a bit smaller than you had hoped, take heart — a part-time job in retirement can go a long way toward making up for an undersized portfolio.

Let’s say that you can make $20,000 a year from your part-time job. That is about what you could reasonably expect a $400,000 investment portfolio to generate in retirement, says Terry Greene, a fee-only planner with MSC Financial Services Ltd. in North Vancouver. So your part-time job is the financial equal of a $400,000 portfolio. Especially if your part-time job consists of doing work youenjoy, you may find that you never want to fully retire.

5. Your employer really does love you

The first wave of baby boomers has already hit 60. Millions more will soon hit retirement age. And there are not that many people coming up behind them. “The demographic trends are suggesting that over the next 10 to 15 years, we’re not going to replace the workforce that currently exists,” says Ted Emond, a senior consultant with Hewitt Associates, a human resources consulting firm in Toronto.

The likely result of Canada’s aging society is a potential labor shortage that will make skilled help more and more valuable with each passing year. HSBC Bank Canada, is already attempting to keep older employees in the workforce by letting them work part-time while collecting pensions. Wal-Mart Canada allows its retirees to come back as consultants or to mentor current employees. Count on more employers to do the same as demographics makes skilled employees tougher to find.

6. Government is more generous than you think

The financial planning industry likes to cast doubt on the future of Canada Pension Plan. In fact, CPP is on solid financial ground after the reforms of a decade ago, according to the federal government’s chief actuary. CPP (or Quebec Pension Plan in the case of Quebecers), combined with Old Age Security, will provide you with an average of $11,500 a year if you’ve worked in Canada your entire life and retire at 65. The maximum you could qualify for is about $16,600 a year.

Don’t forget, too, that you’re eligible for a Guaranteed Income Supplement if you’re a low-income retiree. “For low-income [earners], government programs are going to provide you with the standard of living you’ve always been used to,” says Malcolm Hamilton, a consulting actuary with Mercer, a benefits consulting firm in Toronto.

7. You may be missing free money

A Sun Life Financial survey found nearly 40% of us have access to savings programs in which our employer kicks in money to supplement what we contribute. But one in five
of us who are eligible for such plans doesn’t participate. As a result, we lose guaranteed returns of 25% or more.

You should inquire with your human resources department to make sure you’re not missing out. Many publicly traded companies offer employee stock ownership plans with an employer match. If you buy $80 of your company’s stock each month through such a plan, your employer kicks in an additional $20 a month — an instant investment return of 25%. Other companies offer retirement plans in which the company matches your contribution dollar for dollar — a guaranteed return of 100%. In either case, the money is free and you should grab it.

8. You don’t need a million bucks

Financial planners like to say you’ll need 70% of your current income in retirement. To hit that goal, a middle-class couple will need to amass a million dollars or more in savings. But is the 70% figure truly a good estimate of what you need in retirement?

Probably not. Brian FitzGerald, co-author of The Pension Puzzle and chief executive officer of Capital G Consulting in Toronto, says
you have many more costs while you’re working than while you’re retired, so your need for cash in retirement is considerably less than the 70% figure suggests. “There’s a bunch of expenses you don’t have to incur in retirement,” he says. For instance, most retirees no longer have to worry about paying off a house, funding their kids’ education, making RRSP contributions or commuting to work. And they pay substantially less in income tax because they’re earning less.

So how much of your current income do you really need to maintain your standard of living in retirement? “I’m pretty confident that 50% will do the job for most people,” says Hamilton, the actuary. Of course, if you want to live lavishly and travel constantly, you will need more, but if you’re happy to go on living much as you always have, replacing half of your working income should do the job.

9. RRSPs aren’t always the answer
Canada has five seasons: winter, spring, summer, fall, and RRSP time. But while we’e annually bombarded with ads telling us to stuff money into our RRSPs, don’ think of those four-letter contraptions as your only option in retirement planning.

RRSPs are not your best strategy if you have high-interest debt, such as a credit card balance. Given the 18% or more you’re probably paying on your credit card debt, you should first devote every available dollar to paying down that costly debt. RRSPs may also not be your best option if you’re a low-income earner, since the tax savings that result from making an RRSP contribution aren’t worth much if you don’t pay much tax to start with.

If the federal government goes ahead with its proposal to introduce tax-free savings accounts next year, RRSPs will have an additional competitor for your attention. Ottawa’s proposal, as it now stands, would allow each of us to put up to $5,000 a year into a tax-free savings account, or TFSA. You won’t get any tax deduction
for doing so, but your money will grow tax-free. And you will be able to withdraw the TFSA money without paying any taxes. While the math gets complicated,”I would think people with below-average incomes are better with TFSAs,” says Hamilton, the actuary.

10. There’s a world of possibilities
One option that can instantly multiply your retirement spending power is to leave Canada behind. Mexico, Costa Rica, Malaysia and Panama all enjoy far better weather than we do, and much lower costs of living. “Overall, there is no question you can live here on one-half to one-third what you could in any Canadian city and have a good lifestyle,” says Tom Dawson, 54, who with his wife, Donna, moved to Panama City nearly two years ago from St. Albert, Alta. The 1,800-sq.-ft. condominium they bought overlooks the Pacific Ocean and the Panama Canal, and cost them less than $200,000. Medical care is excellent, locally grown produce is cheap and foreigners who retire to Panama with a pension can qualify for several tempting tax breaks, including an exemption from property taxes.

The federal government offers primers on retiring abroad (click
on www.voyage.gc.ca and search “Retirement Abroad”). Another
useful source of information is The Canadian Snowbird Guide by
Douglas Gray. But no book or website can fully convey the day-to-day reality of a foreign country. Try out a destination before making any permanent decisions. Rent a home for a year and see what daily life is like. If it matches or exceeds your expectations, you may be able to afford the retirement of your dreams on far less money than you expected.

Guess what? In this not-so-perfect world, several companies are now offering what looks at first glance like a reasonable facsimile of this perfect product. Manulife was first out of the gate with what it calls GIF Select with IncomePlus. Since then two other insurers have also marched out their own guaranteed-income-for-life products. Industrial Alliance has Ecoflextra and Sun Life has SunWise Elite Plus. More are expected to follow.

Guaranteed income products appear to have all the angles covered. They protect you from the worst that could happen, yet they still offer you a chance to enjoy the best. “They’re popular because they combine fear and hope in one package,” says Jim Otar, a financial researcher in Thornhill, Ont., and founder of retirementoptimizer.com. Driven by fear and hope, Canadian investors have already poured more than $4 billion into the Manulife product. Investor Economics, a financial services consultant, predicts that guaranteed-income-for-life products will attract more than $50 billion from investors within three years.

So should you jump in? After carefully analyzing these products and talking to some of the sharpest folks in the financial research field, we’ve come to a surprising conclusion. We don’t think you should rush into these products — at least not right now.

We recommend waiting because these products are almost certainly going to get better over the next few years. While the current versions claim to protect you from all the risks that might threaten a comfortable retirement, they still leave something to be desired. You end up paying a lot of money to protect yourself from some risks only to leave yourself open to another risk you never considered.

How do they work?
 Make no mistake about it, these products are complicated. Many a buyer has made it only to page five of a 92-page information folder before giving up. So let us explain the essentials in just a few paragraphs.

The products begin with a regular mutual fund, such as the Trimark Global Balanced Fund or the CI Harbour Fund. When you buy your guaranteed investment, you typically pick from a long list of funds that spans everything from money market funds to all-in-one portfolio funds.

But here’s where things get tricky. You don’t actually buy that fund when you buy a guaranteed product. Instead, you buy a contract that goes up and down in value based upon whichever underlying fund you’ve chosen. That contract is commonly called a segregated fund or seg fund. You take this roundabout route because insurance contracts such as seg funds are able to offer you benefits that pure mutual funds can’t. For instance, they can protect your money from creditors, bypass probate in estate settlements, and give you guarantees — such as a guaranteed income for life. The income guarantee — formally known as the guaranteed minimum withdrawal benefit, or GMWB — is what attracts many people to these products. The guarantee assures you that no matter what the markets do, you will get at least 5% of the money you put into these products back each year from the time you turn 65 until you die. In other words, the guarantee covers off your worst case scenario. It assures you that you’ll receive regular payments for life, no matter how long you live.

The seductive aspect of all this is that you also have a chance to grow the monthly income you will receive. Every three years, if the markets have performed well, you get the chance to “reset” the amount of monthly income you will receive to a higher level. But this only happens if the markets have done so well that your underlying fund is worth more than it was three years ago, even after three years’ worth of withdrawals.

One final feature deserves mention. If you buy one of these products before you’re ready to retire, you usually get a 5% bonus every year for up to 15 years during the period before you start drawing an income. During this period you can get resets too.

The three big risks
 Since the only reason to buy these products is to guarantee yourself an income in retirement, you should consider how well they protect you from the three risks that threaten a comfortable retirement.

The first threat to your nest egg is longevity risk — the risk that you live longer than you think, so you run out of money. Luckily, most of these products offer excellent longevity protection, because, in most cases the income you get is guaranteed for life.

Make sure you read the fine print, however. Originally, these products guaranteed only 20 years of income, and even now some products offer fewer years. Otar, the financial researcher, says you shouldn’t buy a non-lifetime version of a guaranteed product, as it could leave you penniless when the guarantee expires.

Your second major risk is market risk — the risk that the market will collapse in a smoldering ruin and take your savings with it. Studies have shown that a market downturn just before or after you start drawing an income can have a devastating effect on how long your money lasts.

These products offer excellent protection against that danger. If the market collapses you may lose all your money, but the insurance company behind the guaranteed product promises to continue paying your guaranteed minimum income for life. In effect, if your core fund’s value gets demolished, these investments turn into a kind of annuity that pays you the exact same amount month after month for as long as you live. The only problem is, the payouts do not rise with inflation.

That brings us to inflation risk. This is the least understood of the three major risks, even though it is just as dangerous as the other two. Inflation risk is simply the danger that your purchasing power will shrink away to a fraction of its original size as life gets more expensive with each passing year. The steady erosion of your purchasing power may seem like a minor worry in the short run, but it can be deadly in the long run. If you had been getting a fixedmonthly income over the last 25 years, your income would have lost more than half its buying power over that period.

These new products offer very little protection from inflation. Sure, you’re guaranteed to get back every dollar you put into the product — but those dollars may buy a lot less a couple of decades from now. “The risk of not keeping your purchasing power is actually quite high,” says Otar. “They shouldn’t be making any claims about offering inflation protection.”

Otar ran extensive computer simulations to find out what kind of inflation protection these products would have offered over the past century by looking at how often they would have reset their payouts at higher levels. His conclusion? “When you look at market history, 30% of the time there is no reset whatsoever,” he says. “If you buy this product when you are 65, by age 90, you would have kept up with inflation less than 15% of the time.”

In other words, while there’s virtually no chance you’ll run out of money completely, there’s a significant chance you could run short. If you put $1 million into a guaranteed product at 65, you might be guaranteed an annual income of $50,000. You could probably live comfortably on that right now, but if this century is like the last one, there’s almost a one-in-three chance that you won’t get a single reset. If you don’t, and the inflation rate over the next 25 years is similar to the rate over the past 25 years, by the time you’re 90, you’ll be getting only $24,000 a year in today’s dollars. “Yes, you’ll get paid for life,” says Asher Tward, vice-president of estate planning at TriDelta Financial Partners in Toronto. “But by the time you’re 90, the purchasing power of your payments could be cut in half. You have to ask yourself, is that enough?”

Who should buy them
 Otar and several other financial experts say that guaranteed-income-for-life products do have some unique benefits and are appropriate for some people.

Otar says that you might want to consider buying one if you have no other guaranteed source of retirement income, such as a pension, and you have too small a portfolio to hedge the various risks yourself. Buying a guaranteed product makes most sense if you can’t tolerate risk, are prepared to live on as little as 5% of your original portfolio, and don’t mind that the buying value of your payout is likely to be slowly reduced by inflation.

Even then, you should plan carefully to make the most of a guaranteed product. These products carry higher fees than mutual funds, so the best strategy is to start by investing in an underlying mutual fund that’s high in stocks, since stocks have the potential for big gains that can offset the fees. Otar would normally suggest that a retired person put only 40% to 50% of his or her retirement savings in stocks; however, if you’re using a guaranteed product, he recommends that you invest 70% to 80% of your portfolio in stocks, at least to start. The high proportion of stocks will boost your chances of getting a reset during the early years, and may help compensate for inflation. After your fund has dropped to 80% or less of its initial value, there’s almost no chance that you’ll get any further resets no matter what you’re invested in, so you can switch to a more conservative portfolio at that point.

You should keep in mind that since you’ll be taking out 5% per year in withdrawals plus paying 3% or 4% a year in fees, you will be depleting your portfolio by up to 9% per year. That could quickly burn through your funds. Because of the high burn rate, Otar says that if you live a normal lifespan, there’s only a 10% or 15% chance that you’ll have money left when you die.

The burn rate is something to keep in mind if you want to leave your options open for later years. In theory, getting out of one of these contracts is not much different from leaving a mutual fund. Your biggest obstacle would likely be a deferred sales charge, but those charges usually go to zero after about seven years. Problem is, you will also be leaving behind your hard-won income guarantee, and, given how fast you could be burning through your money, you might not have enough funds left to start over with a different plan. In short, says Otar, if you’re not willing to stick to your guaranteed contract for life, you shouldn’t be buying into it at all.

A final consideration when buying a guaranteed product is whether you should buy it in advance of retiring, so you can enjoy that guaranteed 5% annual bonus — plus the possibility of resets — during the period before you begin withdrawals. During this period, you are more likely to get resets because you are not taking out money, and the 5% bonus should pump up your guaranteed minimum withdrawal amount. However, the 5% bonus does not actually increase the value of your underlying fund; it just increases the amount you can withdraw after you retire.

Otar says it can make sense to buy into one of these products five years early to take advantage of the bonuses, but if you’re more than five years away from retirement, you’ll probably do better by passing up the guaranteed product for now and sticking to a standard balanced investment portfolio. Why? Because the fees are so high with the guaranteed product that they slow down your portfolio’s growth to the point where the resets and bonuses can’t compensate for the money lost to fees.

If you’re tempted by these products, your best bet is simply to wait. Chances are that the deals are going to improve over the next few years. Buying now could be like paying $5,000 for a flat panel TV that ends up selling for $2,000 a year later. “I don’t think they’re so great right now that you should be rushing out to buy one,” says Tward from TriDelta. “They’re only going to get better.”

Otar agrees, saying that in the U.S., insurers are already offering much better versions. Down south, it’s common to have annual resets instead of a reset every three years. That sounds like a small difference, but making the resets an annual event makes it much more likely that your income will keep up with inflation. J. Roy Firth, Manulife Financial executive vice-president, confirms that his company will likely add new features in the future, possibly including annual resets. “There will be lots more features as people get accustomed to these products,” he says, “but as with any feature, people will have to pay for it.”

After looking at all the pros and cons, Tward says that guaranteed products do serve a purpose, but it’s a limited one. “I’m not saying that there isn’t a fit in certain situations when the investor is extremely risk-averse,” he says. “But for the average Canadian investor who undertakes some equity risk, such as a regular mutual fund investor or stock investor, this is not a good alternative.”

So what are the alternatives?
No single product can offer you the exact same benefits as a guaranteed retirement investment, but there are other strategies that might be a better fit for you.

Tward says there’s nothing wrong with the traditional strategy, which is to gradually move into safer income-producing investments as you get close to retiring. The right mix of cash, bonds and high-dividend-paying stocks won’t eliminate longevity risk or market risk, but it can significantly reduce both. If you’re mainly living on interest and dividends, rather than cashing in investments every year, you can sail through a nasty market crash with few scars. Plus you’ll have more protection against inflation than with guaranteed income products.

If you want an even safer alternative, splitting your retirement savings between an annuity and a low-cost balanced portfolio, such as the MoneySense Global Couch Potato strategy, can increase your protection against longevity risk. The annuity provides you with a guaranteed income for life, while your investment portfolio gives you the potential to prosper if the market does well. You can also dip into your portfolio for big-ticket items like a new car, without worrying about fees or penalties.

The reality is that no retirement strategy can eliminate all risk. If you decide to buy one of the current generation of guaranteed income products, inflation can erode your purchasing power. On the other hand, if you pursue growth to protect yourself from inflation, the markets could crash. The financial engineers who put together the guaranteed-income-for-life products did a good job, but in this imperfect world there’s still no such thing
as the perfect risk-free investment.

Douglas Walker of Black Creek, B.C., is one of the best known creators of what he calls kinetic sculptures for the backyard. Walker, a photographer, stumbled across the idea four years ago while designing his own garden. He wanted something to give his tiny pond a focus. “I picked up a copper pipe from a local garage sale and decided to hook up a pump to it,” says Walker. “Then I got it to sprinkle water. When it was finished, a neighbor saw it and wanted to buy it as a gift for her father.”

Walker’s fountains incorporate bits of glass and old water faucets, as well as discarded musical instruments such as tubas, saxophones and trombones. They’re built to move — or, as Walker says, “perform.” In full motion, water bubbles and gushes from horns of copper and brass, creating sprays of mist that dance in the sun. “People love the motion,” says Walker. “My sculptures are whimsical and the water ties all the pieces together. People walk away with a smile on their face when they see them.”

John Smith of Yucca Valley, Calif., is another premier garden artist. An engineer by training, he stumbled into design 10 years ago when he couldn’t find any sprinklers that he liked. He asked his brother Cyr, a painter, to help him create a sprinkler that would cast a wide spray of water, like fine rain. It took them two years to come up with their first working design. Since then, they’ve sold more than 10,000 of their works.

John and Cyr work together to come up with the designs for the sprinkler heads. John then plans where to place holes to create an interesting pattern of spray. “It’s garden art first and a sprinkler second because it won’t be sprinkling much of the time,” says John. “But it’s a dynamic art, so you have to create a design that’s balanced while spinning, because you want them to create a beautiful cascade of water. Believe me, they take quite a bit of tweaking to get right.”

Rain makers: Where to shop for garden art

• To see the Smith brothers’ mobile water sculptures, visit www.smithandyork.com.

• To view Douglas Walker’s garden sculptures, click on www.waterworksgardenart.com. His pieces are usually under two metres tall
and cost from $250 to $10,000.

• Kathleen Mand Beck is a Wisconsin artist who has developed an interesting Floral Collection of copper sprinklers with prices starting at $129. Check out
her work at www.dovetailgallery.com.

• Missa Hills of Providence, R.I., will produce sprinklers to your specifications through her website www.copperart.org. She will build sprinklers to any height and design them to water the specific shape and size of your backyard.

• Steve Rayman, a sculptor in WestDes Moines, Iowa, builds his water fountains in large geometric shapes. He constructs each work by hand, using heavy copper tubing that he claims will withstand “several lifetimes” in the garden.

• Want to build your own sprinkler? Check out dreamsprayer.home.att.net/. It offers copper sprinkler kits starting at $140.

2. THE LITTLE BOOK THAT BUILDS WEALTH
 by Pat Dorsey (Wiley, $21.99): Picking great stocks is like building a castle, says Dorsey. In both cases, you want to make sure you have a strong moat around you. When it comes to stocks, a moat is a built-in advantage that allows a company to defend its territory and churn out high profits, not just this year, but for decades.
OUR TAKE: A smart book about a neglected aspect of investing. If you want to know why Coca-Cola is a great buy for the long haul, but oil stocks aren’t, give it a read.

3. THE HAPPINESS PROJECT
(www.happiness-project.com, free): Gretchen Rubin was a lawyer before she decided to give happiness a try. Her personal project is to give every happiness tip and formula a test drive and report back to us on how well they work. Her site spans everything from 20 tips on reducing stress to 13 tips for dealing with a really bad day.
OUR TAKE: Oh, don’t be such a grouch. Give it a try! While some of Rubin’s tips are the type of thing you might expect from a cheesy motivational poster, more than a few strike us as genuine insights. If nothing else, we found it wonderfully reassuring to learn that someone else is just as stressed out as we are.

4. GETTING STARTED IN VALUE INVESTING
by Charles S. Mizrahi (Wiley, $23.99): There are tons of learn-to-invest books but this one stands out for its common sense as well as its deft balance of numbers and anecdotes. Mizrahi believes in buying good companies at a fair price and he shows you the simple techniques that can allow you to do the same.
OUR TAKE: One of the better introductions we’ve seen to value investing. Novice investors will learn a lot from this book; so will experienced investors who have enough bruises to appreciate the wisdom of what Mizrahi has to say.

5. MILLION DOLLAR JOURNEY
(www.milliondollarjourney.com, free): The young engineer who writes this blog hails from Newfoundland. His goal is to amass a million bucks by the time he hits 35. And, judging from the wide ranging material on his site, he’s willing to do just about anything to make that happen.
OUR TAKE: What makes this site work is the personality of the anonymous author. He describes himself as an “obsessive-compulsive personal finance guy,” but he’s actually immensely likable. While we could quibble with some of his views, there’s no doubting his spirit.

DO RENOS   Remember that
three-month wait you
had to
endure to get your leaky faucet fixed? Remember the staggering
bill you had to pay? That all becomes a distant memory if recession
hits. When times turn tough, skilled trades people are eager
to do household chores — on your schedule. Better yet,
homeowners
will once again have some bargaining power and that should
result in lower prices. “A roofing contractor, for instance,
can
knock a thousand dollars off a $6,000 job because he can absorb
the loss into labor costs,” says Mel Fruitman, vice-president
of
the Consumers’ Association of Canada in Ottawa.
“That’s why
home renovations and repairs is one area where you’ll see
actual
price decreases for consumers instead of just price freezes.”

BUY SMALL CAPS   Conventional
wisdom says you
should
seek the safety of large capitalization stocks during recessions.
That’s what Michael Zhuang, president of MZ Capital
Management,
an investment adviser in Washington, D.C., thought, too, until
he studied nine recessions going back to 1950. He discovered small
caps actually did much better than their big brothers during bad
times. “Three years after the start of all nine recessions,
the average
return was 28.20% for the [large cap] S&P 500 vs. 76.21% for
the
Fama/French Small Cap Value benchmark portfolio,” says
Zhuang.
“While the future may not be like the past, we think small is
beautiful.” One way to load up on small cap value stocks is
the
Rydex S&P SmallCap 600 Pure Value exchange-traded fund
(AMEX: RZV). Its management expense ratio is only 0.35%.

SNAP UP A HOME   “A
recession is
always a good buying
opportunity
for house hunters,” says Don Drummond, chief
economist with TD Bank. It’s also a good time for getting
lower
rates, says Douglas Gray, author of Canadian Home Buying Made
Easy. “You’ll get a better rate if you renew your
mortgage, and a
recession is also good for lines of credit tied to prime.”

TAKE A TRIP   A slowing economy
hits hard at
the travel
industry.
Caribbean cruises are already selling at rock-bottom prices.
Consider a five-night cruise aboard Royal Caribbean
International’s
Enchantment of the Seas. It leaves from Fort Lauderdale, Fla.,
on June 9, has stops in Key West, Cozumel and Belize, and costs
only $629 (port charges included).

Those who prefer going overseas can also find great bargains.
At press time, return flights from Toronto to London on Air
Transat were as low as $149 plus $320 tax and fuel charges.
“It’s
actually cheaper to go to London these days from Toronto than
it is to go to Vancouver,” says Peter Martens, Flight
Centre’s
marketing manager for Eastern Canada. And check out the deals
Air Canada is offering to Bangkok and Tokyo. At press time, both
destinations are going for under $1,200 from Calgary, Vancouver
and Toronto.

If you’re looking to move, should you follow our strategy, or play it safe, take the conventional route, and first sell your existing house?

Much of the answer depends upon where you live. In our small town, only about a dozen homes in our price range go on the market at any time, and 90% of them don’t fit our criteria. We knew that if we sold first and gave ourselves a buying deadline, we might well have to settle for a ho-hum house. This made no sense, since we were under no economic pressure to move.

Buying first can also be a smart move in a seller’s market where bidding wars make it impossible to predict whether you’ll be able to buy the place you want, even at full asking price. Gabriel and Nancy Chang took their agent’s controversial advice and bought their new house in midtown Toronto before listing their condo. “The buying process could have dragged on forever,” says Gabriel. The Changs had two offers rejected during their search, including one that was a staggering $75,000 over asking price. “A couple of our friends took six or seven months to buy. One made 20 offers before having one accepted.”

Going the traditional route and selling your existing house first makes most sense if you’re operating without much of a financial safety net. In that case, if you can’t sell your current home before your new deal closes, you’re in a heap of trouble. You will either have to carry two mortgages or arrange expensive bridge financing.”If you absolutely need to get $300,000 or you won’t be able to afford your new house, then you definitely want to sell first,” says Graham Reid of Coldwell Banker Terrequity Realty in Toronto.

Selling first also makes sense in a slow market or if there’s something unusual about your home. “If you live in a cookiecutter house, then you know what you’re going to get when you sell,” Reid says. But if the house is in exceptionally good or poor condition, it may not be comparable to others in the area. If it has an odd layout that will appeal to a small number of buyers, it may be equally hard to evaluate. Since you won’t know how much you’ll get for your old place, it will be impossible to budget for your new home.

At first, we didn’t want to consider the
second option. We were fuzzy about the
difference between retirement homes
(which are meant for relatively healthy
seniors) and nursing homes or long-term
care facilities (which are intended for those
who need extensive nursing attention).
Retirement homes sounded too institutional
for what my parents needed.

As we researched the matter, however,
we were pleasantly surprised at what retirement
homes had to offer. The facilities
were far nicer than we had expected. Most
important, the homes allowed seniors like
my parents, who continued to cherish
their privacy, to live in their own apartments.
The homes provided housekeeping,
meals in a common dining room, 24-hour
emergency assistance, and other support,
but otherwise left residents with the
independence they had always enjoyed.
We were pleased to find that retirement
homes really did feel like homes and not
like institutions.

While leaving the family home behind
is never easy, my parents eventually
decided that the retirement home option
would work for them. They moved into
one in Victoria three years ago.
While my Dad has since passed on, my
relatively hale 80-year-old mom continues
to live comfortably in her new home. She’s
made friends, finds the food quite tasty,
and appreciates not having to do her own
housekeeping. She likes the home’s many
activities, such as “sit-and-be-fit” classes,
and enjoys taking walks around the welltended
grounds.

Her comfort has made her kids comfortable.
I live in Ontario and one sister
lives in California, but another sister lives
nearby in Victoria and drops by frequently
to visit my mom and have meals with her
in the home’s dining room. Management
and staff are friendly and attentive. Live-in
managers keep tabs on how each resident
is doing and will check in on an ailing
senior who unexpectedly misses a meal Common rooms are well-furnished
with
comfortable and attractive furniture. Art
decorates the well-lighted hallways. While
aging is no picnic and she misses my dad,
my mom is content with the lifestyle she
has found at her retirement home.

If you’re interested in a retirement
home for yourself or a relative, let me
offer you a few tips from my own family’s
experience as well as from the broader
experience of experts.

Assess what you really
need  Retirement
homes provide different levels of support.
Mobile seniors like my mom require
only basic support such as common meals,
housekeeping and 24-hour emergency
response by live-in staff. Derek Mercey,
an industry consultant and vice-president
of Care Planning Partners and The Care
Guide Inc., which publishes guides to
retirement homes, estimates about 25%
of retirement home units are devoted to
providing this level of basic support.

Seniors who need a bit more support
should look for homes that provide help
with administering medications as well
as with essential physical activities such
as bathing and dressing. This set-up is
sometimes called “assisted living,” but
terminology varies widely from province
to province, so make sure you understand
the term used in your locale. Such facilities
make up about 75% of retirement home
units, according to Mercey’s figures.

If you want to make sure that you or
your parent can stay put as frailties grow,
you should consider homes that offer
“aging in place.” These homes allow you
to start off with modest levels of support
when you’re relatively healthy, but ratchet
up the support level as you need it. Just
remember that there are limits. If you need
intensive nursing support, you probably
require more help than a retirement home
can provide and will need to consider a
nursing home or long-term care facility.

Price matters
 Retirement homes can
be expensive. Count on paying $2,000
to $3,000 a month for a studio or small
one-bedroom unit for a single person.
That figure typically covers rent, meals,
housekeeping and basic support needs.
If you share your apartment with your
spouse, you will probably pay an extra
$500 to $700 a month. If all of that adds
up to simply too much money, small units
away from major cities can go for as little
as $1,500 a month, Mercey says. On the
other hand, if money is no object, you
can find luxurious one-bedroom units in
downtown Toronto or Vancouver for as
much as $8,000 a month.

But deals can be found  While
a
retirement home may seem too expensive
for your budget, take heart. Don’t forget
that government pension plans, such as
CPP and OAS, will pay you up to $16,600
a year in retirement. Assuming you have
a paid-off home that you can sell, as well
as a small nest egg, you should be able to
raise another $300,000 or so — and since
you probably won’t need a nursing home
until your late 70s or later, you can be fairly
aggressive in drawing down that money.
Between the government pension plans
and your savings, you should be able to
generate a bit over $30,000 a year in income.
That should cover the cost of a small
apartment for an individual in a modest
retirement home.

If your income doesn’t stretch that far,
and you live in British Columbia or Alberta,
you can look into publicly supported
retirement homes. These homes will often
gear your rent to your income. Another option
is non-profit homes, which typically
cater to specific groups or communities.
But be warned: you may have to do some
research to find these homes since they
often do little beyond world-of-mouth to
promote themselves.

Get your tax breaks
 If you have a
marked restriction in some specific basic activities
like walking and dressing, be sure to
check out your eligibility for the Disability
Tax Credit, and the Medical Expense Tax
Credit for that portion of your retirement
home costs attributable to attendant care.
“I’ve found that these credits get missed
fairly frequently,” says Trisha MacLennan,
a financial planner in Burnaby, B.C. She
gives occasional talks on financial planning
at seniors homes and has found herself
peppered with questions about these
complex credits from seniors who hadn’t
realized they might be eligible.

Earlier is
better  Most people don’t
move into a retirement home until they’re
in their late 70s or early 80s. Don’t leave
the decision until the last minute, however.
Otherwise an unexpected illness
or injury might force you into a quick
choice when you’re not ready. “It is a very
difficult thing to talk about,” says Esther
Goldstein, an expert on retirement homes
and author of The Comprehensive Guide to
Retirement Living. But, especially if you’re
dealing with aged parents, Goldstein
recommends you have the conversation
as early as possible.

Trust your eyes
You should take a
tour of any home that you’re considering.
Most allow you to have a meal on site and
talk to other residents. Many retirement
homes also let you arrange a trial stay
that can range from a few days to a few
weeks. Goldstein suggests you try to stay
at least a full week to see how the home
functions during weekends and other
off-peak times.

Consider home care
 Retirement
homes aren’t always the best option.
Many seniors find that additional support
from family members or from paid
providers in the family home works better
for them. But be realistic about how much
help family members can provide. Who
will cover for you when you go on vacation?
If family members simply can’t do
the job, you may want to consider having
outside providers come to your home.
Some provinces will help arrange subsidized
in-home support, but governmental
assistance is often very limited.

Location, location
 Based on my own
family’s experience, I think it’s vital to
try to find a home that is reasonably near
at least one of your kids. Despite all the
support a retirement home can provide,
there’s no substitute for family members
in the vicinity.

Do your reading 
Several directories list
retirement homes. For homes in Alberta,
B.C. and Ontario, check out www.the
careguide.com and The Care Guide Source
for Seniors, put out by Care Planning
Partners Inc. In Ontario, take a look at
www.senioropolis.com and Goldstein’s
Comprehensive Guide to Retirement Living
(she plans to expand her research to other
provinces later this year). For homes in
British Columbia, turn to www.seniorshousing.bc.ca, sponsored by the nonprofit
Seniors Services Society. In Alberta,
check out www.ascha.com, sponsored by
the Alberta Senior Citizens’ Housing Association,
an organization of retirement
home providers.