Don’t get caught retired and broke

Don’t underestimate the costs in the years leading up to retirement when you’re not quite eligible for benefits.



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In my research I have found one age group that is at much greater financial risk than others. It’s the age 55 to 64 group—both male and female. The risks for this group are almost always health related. Most Canadians greatly underestimate health risks. Individuals in this age group who have had to stop working due to health issues are not eligible for many retirement benefits until they reach age 65. In this corridor leading to retirement there are increasing expenses such as prescription medications and health aids, but often there is little or no insurance available. Until the individual reaches age 65 they find it necessary to tap into their savings or take on more debt. Even upon reaching age 65, some continue with financial challenges.

Three key factors for financial security later in life:

  1. Be financially literate. This does not mean becoming an expert in everything. Make it a personal policy to not sign anything if you do not understand the full implications of it. Keep asking questions and doing research until you are satisfied. If any professional leaves you feeling stupid—leave them.
  2. Do not live in a community that is beyond your level of affluence. Pretending to fit in is pointless. True friends will care about you despite your financial situation and never make you feel embarrassed about your difficulties.
  3. If you are a couple you need to work together to determine how best to save money, and, how best to protect one another financially when the first partner dies. Do not defer this conversation.

A book I picked up recently—The Solvency Struggleprovides some interesting insights on what it feels like to live in financial difficulty on a day-to-day basis. The then 64-year-old, university educated author documents her penny-pinching challenges throughout a one year period. It’s painful to read the trade-offs made by Allen. In my opinion it’s also an unsustainable approach. Very little financial detail is provided such as a net worth statements for her or her husband or the returns made on RRSP investments so it’s difficult to assess what went wrong. What is clear is that Allen and her husband are poor. They are living in housing geared to income, struggling with daily bills and depriving themselves of prescription medications and other health care such as dental work. Her health issues prevent a return to almost any type of paid employment and therefore no additional sources of income are available. An excerpt from her book (p. 114) provides some insight as to the struggle of living with a low income:  

…I am weary of even attempting the “strictest scrutiny” of the impact of every financial decision, global, environmentally…Even when I do try, the potential for innocently getting it wrong is huge.  I never wanted to be an expert on everything…I have no longing to live as if every decision matters…

Too many people rationalize their lack of ability to save for retirement as something they will adjust to later in life. Allen demonstrates how painful it is to live without financial resources—a place none of us wants to be.

Lee Anne Davies has worked as a consultant for insurance, wealth management, banking and financial education companies. She has a PhD in Aging, Health and Well-being and a Masters of Arts (MA) in Gerontology and Health Studies from the University of Waterloo and an MBA from Athabasca University’s Information Technology Management program. She’s also successfully completed the Canadian Securities Course and the Professional Financial Planning Course. To read more from Davies, visit her blog Agenomics.

7 comments on “Don’t get caught retired and broke

  1. I think we're going to hear a lot more of these stories as more and more boomers (voluntarily or involuntarily) retire. There will be some really sad stories. But at the same time part of me screams, "What did you do with your money your whole life?! I hope the years of partying every day like a rockstar was worth it."

    Oh, there'll be lotsa stories for sure but there's nothing at all us readers can do about it. (I'm certainly not donating any cash.) So, I wonder what the ultimate outcome will be? Retiree gives sob story to what end? Is it so that the rest of us hopefully learn from their mistake while they continue on eating Alpo for dinner lamenting the days they dropped $200 for a few pieces sushi? Is it supposed to be a lesson? Is it a played sympathy card? Are the people who *have* planned supposed to gloat?

    Sorry, I'm not being arrogant or anything, I'd just really like to know what the point is. (And is going to be.) Is the moral of the story: people need to save more than they think? Good article, by the way!!


    • Edward – thanks for commenting. Unfortunately some people get caught later in life due to a divorce or even a problem such as gambling or other addictions. Life really tosses some curve balls and I get concerned when people feel they can modify their living style without feeling much pain. I think it’s far harder than most realize. I agree that we’ll be hearing more of these stories.


  2. It’s not about retirement. It’s about expirement. Set your date.


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