The Entrepreneurial Senior

Retirement used to be about a time when we look forward to enjoying a more relaxed lifestyle after decades of slogging away in the workforce. It was envisioned by many retirees as a time to enjoy a life of independence, to spend more time with family and friends, travelling and engaging in activities that gave them enjoyment and satisfaction.

Alas, this is a time of great malaise and financial instability in most world economies. That vulnerability has had a negative impact on retirement savings of those looking forward to enjoying their golden years.  Many retirees, to their dismay, have to come to terms with the fact that their retirement dreams either have to be set aside or abandoned. These retirees are mostly baby boomers. They either have to remain in the work place longer than planned or be creative in generating additional income to replenish their retirement savings, often depleted by poor investment advice. They have become The Old and The Restless” ….. restless to strike out on their own and become entrepreneurs and address anxieties that they might outlive their pension.  This scenario appears to be the catalyst that is giving birth to the surge of entrepreneurial seniors’.

The entrepreneurial surge is a remarkable development occurring in the baby boomer generation. This rapidly expanding demographic is frequently described as being more healthy and wealthy, and much better educated than the previous generation of seniors. Sadly, not all baby boomers have accumulated considerable wealth and many are burdened by debt. A significant number carry heavy debt loads such as mortgages and other debts into their retirement years. Some also have to support unemployed offspring in the ongoing recession. This situation has led to the growth in ‘seniors entrepreneurship’.

Becoming an entrepreneur is an attractive option to supplement inadequate pension savings and also to satisfy a desire to becoming an independent business person. Some seniors tend to be drawn more towards  service-oriented projects such as care-giving, home-help services, or beautician services that don’t require a huge financial investment to get started. Other retirees establish a start-up business that requires more capital investment for selling a high-end product or service. It  is important to ensure the business venture is viable and is not in a ‘dying industry’ or the business will have a short life cycle. The digital age, with computers and information technology, has created numerous business opportunities for aspiring entrepreneurs. To their credit, a  significant number of boomers are well-versed in the technology and can take advantage of the opportunities it spawns.

Establishing a business is a major undertaking at any stage of life from both a financial and personal perspective. There are daunting’ challenges’ but also great ‘rewards’. In setting up a business most entrepreneurs have to make ‘sacrifices’, especially in the initial phase.  Budding entrepreneurs should take note that many start-ups fail within the first two years of a business. Some entrepreneurs have great enthusiasm but lack  business acumen. It is essential to be disciplined and make sacrifices by working harder than you ever have to achieve success.

Aspiring entrepreneurs must become well-versed in accounting, income tax laws, various government regulations for small business, and very important, satisfying and maintaining your customer base. Other challenges include developing a good business plan, solidifying access to additional capital, improving financial literacy to make sense of financial statements, dealing with suppliers, maintaining relationships with other entrepreneurs, hiring good staff and, also crucial, finding and keeping customers to ensure the long-term success of the business.

Apart from financial considerations, there are other reasons why seniors choose to become entrepreneurs …  they can finally make their own business decisions!  The idea of entrepreneurship takes shape in their mind and the desire to set up a business becomes an attractive option to ensure a stable source of income and create a needed product or service. Whatever the reasons behind the decision to become entrepreneurs, it seems that the fragile economy and ‘longevity’ of seniors have become a driving force fuelling this remarkable development. They are following their ‘passion’ but in order to be successful that passion must be tempered by focussing on the bottom line.

Clearly, establishing your own business can have multiple rewards. Setting up a business is not only about money which is the primary goal.  In fact, successful entrepreneurs get personal satisfaction by fulfilling the needs of other people through the services and products they offer. One of the best rewards aside from the success of the business is the ‘feeling of pride’ that the new entrepreneur enjoys with all that they have achieved. So to those who are “The Old and Restless” and considering entrepreneurship the message is …. it is never too late to re-invent yourself in order to make a contribution to your community and fulfill dreams of running your own business.

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Below are helpful links on setting up a business:

Starting Your Business
http://www.canadabusiness.ca/eng/page/2856

Starting a Business in Canada – Make sure you are ready for entrepreneurship
http://www.canadaone.com/tools/startingabusiness.html

Guide for Canadian Small Business – Guide for Starting a Business
http://www.cra-arc.gc.ca/E/pub/tg/rc4070/

Posted in Baby boomers, Business start ups, Entrepreneurial Seniors, Entrepreneurs, Retirement, Seniors demographic, Small business | Tagged , , , , , , , , , | 13 Comments

Deferred Pension Benefits – Who Really Benefits?

The changes to pension benefits proposed  by the Harper government have left many of us with a troubling  question – “Who really benefits from these changes?” According to the proposed legislation, the purpose of these changes is to put OAS on a sustainable track to meet the challenge of the ageing population. The changes will affect  CPP (Canada Pension Plan), OAS  (Old Age Security) and GIS (Guaranteed Income Supplement).

The legislation is intended to head off the financial challenges associated with our expanding senior’s population and also to help balance the budget. These changes focus mainly on the age eligibility rules that defer pension benefits – the eligibility age will be raised from 65 to 67 and benefits will increase. This paints a more positive image of the financial benefits future recipients will have by raising the age from 65 to 67 and increasing benefits. However, many commentators have argued the government is ‘kicking the can down the road’ by making the changes effective 2023.  Could it be that the Harper government does not want to alienate a certain cohort of voters by this deferral? The changes will impact those currently  under the age of 54 who will be retiring in about 10 years.

Although the deferral of CPP benefits is optional for seniors who qualify, the recipients who choose to take benefits at the qualifying age of 60 will have drastically reduced benefits.  However, if seniors  delay their benefits until age 67 they will have an advantage in terms of increased benefits payments. It appears, the government is waving a carrot to those who are considering taking CPP earlier than age 67. As mentioned above, deferring the implementation of the CPP changes for 2023 will definitely impact those who are currently middle-aged – i.e. under the age of 54.  This group will find that raising the age of eligibility by two years will affect their financial plans hence will be forced to re-organize their long-term finances to secure their own pensions.

Of greater concern are the changes to OAS and GIS benefits. The deferral of OAS and GIS will have the most dramatic impact on those who qualify for these benefits — i.e. recipients of OAS and GIS are in the lower income bracket. They will have to wait for an additional 2 years to qualify for OAS and GIS benefits. Under the proposed legislation the seniors in this category will face financial hardship if  OAS and GIS benefits are deferred.  Will this vulnerable group be pushed into more poverty? Strangely enough some seniors in a higher income bracket  who were eligible for the OAS but never bothered to claim these benefits will automatically receive these benefits without applying.  Why was this change introduced if it will cost the government more?  Refer to this link for more details: http://www.servicecanada.gc.ca/eng/services/pensions/oas/changes/index.shtml

While the OAS pensions changes are an attempt to reflect the changing demographics there isn’t much consideration to the fact that there will come a time when age-related health issues will burden health services. True enough many in the baby boomer cohort have embraced a more healthy lifestyle and are expected to live longer but as we age we also become more susceptible to more serious health issues associated with ageing. What about those retirees from high risk professions (e.g. manual labour, manufacturing, mining etc.)  where injuries or serious long-term health problems are commonplace?  Will they be around long enough to gain from the increased benefits that have been deferred? Will the health care system cover the health costs associated with illnesses caused by the type of professions they had? How long will the health care system be in place for low income seniors if the economy continues to stagnate? Will seniors on modest incomes eventually have to resort to costly private health coverage?

In this discussion about pension benefits the ‘gold-plated pension’ benefits for MPs should not be overlooked… that tab is picked up by taxpayers! There was a token attempt to convey the impression of fairness by the Harper government to spread the pain to MPs but it is not very convincing. When we look at how our pensions stack up against those of politicians we have to ask – “In what other profession can a worker expect to receive a minimum of $35,000 annual pension that MPs are entitled to receive after working for only 6 years?”  Further, these politicians usually make sure to establish lucrative business contacts that eventually lead to well-paying positions in corporations or other government agencies after leaving politics. Refer to this link: http://www.cbc.ca/news/politics/story/2012/03/28/budget-pensions.html

Since seniors will have to remain longer in the workplace an obvious outcome of this deferral is the unemployment spike affecting younger workers  – even today younger workers are vying with older experienced workers for jobs. Will there be sufficient jobs for the younger generation with the increased presence of seniors in the workplace? The most recent census data confirmed the demographic shift in our population distribution and gives sufficient notice to both government, private enterprise and social agencies that there could be challenging times ahead if better policies are not put in place to deal with the implications of the changing demographics.

The projected demographics are expected to become a reality and younger workers will have a challenging time finding work. They will not benefit from the deferral. Younger workers will have to finance their own pension benefits in a tightening economic environment since ’the can has been kicked down the road’. Hence the question remains – “Who really benefits from these changes?”

Posted in 2012 Census, Baby boomers, Canada Health Care, CPP, Demographics, Economy, GIS, Guaranteed Income Supplement, Health Care, OAS, Old Age Security, Pension Reform, Pensioners health care | Tagged , , , , , , , , , , | 4 Comments

Transition from full-time work to retirement

By Francine Van, Guest Contributor

Francine Vanderbolt

Francine Van

How does one transition from working full-time to retirement? This is a question I pondered in the months preceding my own retirement. We feel we are working out of necessity when we are working fulltime yet the period of transition into retirement has taught me there are both tangible (e.g. money) and intangible benefits to work.

There is now a need to work by choice and, yes, some of it is still related to actual financial needs. I find work is generally linked to a sense of being vital and also being a participating member of our society. Retirement is sometimes a nasty word with negative implications inferring you are no longer a contributing member of society – you are more likely to start to feel invisible and perhaps not having much self-worth.

The structure and schedule of work is a motivator to satisfy that need to stay busy, the sense of being valued and a reason to get up in the morning. Yes, volunteer work is helpful but does not totally fulfill this need for me, nor does helping an aged parent or being with your grandchildren. I speak only for myself and not for others although I realize this could work for some. As the children grow and become young adults there is less need for the grandparent. So, again you will find yourself in transition. I feel it is important at this point in life to find your passion … to listen to that little whisper in your mind that has been there all along and that you never listened to before and which slipped silently into your subconscious. As retirement approaches that whisper intrudes ever so quietly to remind you that there is still opportunity and purpose to this phase of your life.

I am becoming a real advocate for pursuing my passion and have found lots of reading material that substantiates it. I have also encountered lots of people who are taking on new second careers or starting a business of choice as an entrepreneur. I would love to hear more stories from anyone out there that has pursued this. I am still finding my way in this regard – still nervous about the rejection that comes with it and with stretching my soul, going just that little bit outside of my comfort zone. I want to enjoy this time of life. At this point I am changing jobs again …(smile)…and feel a total freedom that I am no longer concerned with employment insurance benefits so I can change jobs as frequently as I like with no consequence as my employment is now by choice! A little healthy stress just lets you know you are still alive.

I continue to pursue my photography interests in hopes of sharing and expanding this creative activity. I keep watching for miracles every day …. for opportunities that come along, great opportunities such as when I met a stranger on a bus tour who happens to know web design and can help develop my website. My last job after retirement taught me some retail expertise including how to talk to strangers, to be open to another’s energy, and to sharpen my intuitive skills. I think everything we experience through various phases of life shapes the path we walk during our golden years and helps us to embrace our destiny whether it is one we have chosen for ourselves or one that has been thrust upon us.

Retirement is a journey we take by ourselves and hopefully we will learn to make lemonade with the lemons life sometimes throws at us!

Posted in Baby boomers, Golden Years, Quality of life, Retirement, Retirement hobbies, Retirement income, Retirement planning, Seniors demographic | Tagged , , , , , | 5 Comments

Do Seniors get respect from the financial industry?

 

Nowadays it seems that Rodney Dangerfield’s trademark phrase  “I don’t get no respect” can be appropriately applied to the everyday lives of many seniors. While much attention and focus is placed on the emotional, physical and financial abuse by family members there are other areas where seniors experience a different type of abuse that tends to go undetected. That abuse should probably come under the caption ‘getting no respect’! Seniors are treated with disrespect at the checkout counter doing grocery shopping, getting a seat on public transit, greedy relatives, home renovation scams, substandard service by health care providers and yes, dealing with banks and the financial industry. It is the latter that is of particular concern to seniors, especially those surviving on modest retirement incomes.

For example, about a year ago a bank fraud was revealed where 31 seniors  across Canada were defrauded of almost $206,000 by an employee at a charter bank. (Refer to this link:
Bank employee accused of stealing from accounts

Another example is ‘reverse mortgages’. Seniors who have paid off their mortgage should be wary of the ‘reverse mortgage’ offered by banks. While this option might appear to be appealing it can have negative unforeseen consequences with respect to your net worth. Many seniors might not understand the implications associated with reverse mortgages. In particular the interest rate for a ‘regular mortgage versus a reverse mortgage’ and the regulations governing reverse mortgage. (For more information on reverse mortgages you can refer to this link: Reverse mortgages are set to rise, unfortunately

There is a more troubling aspect of financial abuse that at first glance appears to be a benign issue. It is related to mediocre  financial service and inadequate advice from financial advisors and financial planners in the financial industry. It appears that seniors, particularly those of modest incomes, have a lot less value in the eyes of financial advisors than those seniors with substantial financial worth or even younger clients. One must question whether these advisors provide accurate or expert advice to seniors. Surely when dispensing financial advice to seniors there should be far less emphasis on investing in high-risk speculative products at their late stage of life.

More emphasis should be on recommending dependable products where capital is protected. Younger clients have more time on their hands to recoup losses incurred from investing in high-risk products but seniors do not. It should not be overlooked that high-risk products tend to have management fees and other hidden charges.  These products also provide financial advisors and brokers with generous commissions.  In addition to inept financial skills of financial advisors, vulnerable investors have seen their nest eggs whittled by fraud and mismanagement.

Financial advisors seem to be of the opinion or assume that many seniors are not very financially literate hence they don’t take the time to give proper advice on how to handle their retirement portfolios.  Many of these advisors used unfamiliar financial jargon to communicate to clients.  That behaviour toward any client is discourteous, condescending and offensive. The encounters many seniors have with staff in the financial industry also indicate that advisors are not as knowledgeable as we expect them be. The lesson here is definitely ‘buyer beware’. Providing inferior or misleading financial advice is of great concern to all clients given the current volatile economic climate and concerns about inflation. More focus should be put on delivering better quality advice to protect the retirement income of seniors and, for that matter, all investors.

The use of Rodney Dangerfield’s comedic reference to “no respect” is not intended to trivialize or downplay the seriousness of any form of elder abuse.  The idea of ‘no respect’ is intended to show how subtle forms of elder abuse inflicted by non-family members can affect the financial well-being of seniors.  Even more important, the deficient and unsatisfactory financial advice from advisors in both the chartered banks or private investment firms is a matter that requires closer scrutiny.

When managing their hard-earned investments seniors need to become ever more financially literate  in their dealings with advisors who may or may not be skilled/experienced or well-trained.  Given the chaotic economic situation all over the globe we have to question whether it is in our best interest to even listen to the advice of these ‘financial advisors’. While greater transparency is needed in the financial industry with regard to fees and commissions, the issue of unprofessional behaviour and substandard advice given to seniors needs to addressed. Otherwise seniors who are encouraged to invest in high-risk products might find themselves chastened as they see their portfolios shrink.

Hope you are intrigued by this post and are inspired to pay closer attention to your investments and also be more wary of the advice dispensed by financial advisors. Shall look forward to your comments about your experiences as a senior dealing with the banking industry and financial advisors.

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NOTE – Check this federal government link to access information on elder abuse and various services for seniors:

Elder Abuse Awareness
http://www.seniors.gc.ca/eng/pie/eaa/index.shtml

Posted in Activism, Charter banks, Elder abuse, Financial Advisors, Financial fraud, Financial scams, Retirement income, Retirement planning, Reverse mortgages | Tagged , , , , , , | 8 Comments

The Stinky Side of 50!

Special contribution by Francine Van

The details we were never told, and now I know why……….

Francine Van

We join the golden movement with hope and optimism of new futures to come.  We believe there will be less worries, more freedom, obligations of choice rather than necessity, fun, and finally a sense of peace.  Well, OK, don’t hold your breath…..the truth is:— You never really retire, it is an illusion to get you to change jobs without pay for family…you become a babysitter, chauffeur, personal shopper, hairdresser, cleaning lady, etc. etc. …need I go on? Almost forgot ….. amidst all this I am trying to get my photography project off the ground!

— You cannot possibly take all the vitamins recommended for your age, (they will make you smell or give you gas).  Just take the hormones to stay out of jail

— Budget on the anti-aging creams and makeup …when they say too good to be true, they mean it …except get the strong hold hairspray for that spot called the ‘Aruba’ on the top back of your head, it shows now …did you notice!

— When you find yourself repeating a lot, remember when you are not talking to your parents or grandchildren

— When your mom says her lunch was a chocolate bar, it’s ok …she made it to over fifty

— Don’t drink all eight glasses of water recommended or you won’t get any sleep

— Exercise your butt, it flattens …hmmmm!

— The coffee shops become the place of choice rather than the bars, too much wine and no one picks you up when you fall off the bar stool.

And lastly, although I could go on, cancel all those over fifty joke emails, magazine subscriptions, and any reminders that are self-defeating. Denial is a wonderful thing and soon like your parents, you will forget.

As Mark Twain so accurately put it:  “Against the assault of laughter nothing can stand.”  Shall look forward to your comments so that we can all remember laughing is great medicine to get us through life.

Posted in Baby boomers, Elders, Golden Years, Retirement planning, Seniors demographic | Tagged , , , , , | 5 Comments

Pension Benefits and Increasing Seniors Demographic

An increasing number of Canadians  are becoming concerned about their CPP benefits in light of the global economic turmoil. Among the greatest concerns are the prospect of a double dip recession, increased fiscal constraints, and a shrinking labour force of younger workers.  If there is a double dip recession governments might impose more fiscal constraints so there is the likelihood that much needed services and benefits for seniors will be reduced or eliminated.  The increase in the seniors demographic combined within a shrinking economy and a predicted decline in the labour force of younger workers will present a challenge to government revenues. This gloomy forecast does not bode well for the sustainability of the pension system. With recent statistics indicating there will be a slowing in the growth of the labour force there are serious concerns that the present pension system will not meet the needs of future retirees. Alarm bells about Canada’s fiscal health have been raised by Kevin Page, the current parliamentary budget officer, who “calculates that the provincial and federal governments’ fiscal structures aren’t sustainable over the long term due to an aging population and current economic trends.” The report presents a troubling financial picture for Canada in the long term if fiscal constraints are not put in place.

That the workforce will have to support a substantial number of older Canadians dependent on CPP benefits is cause for concern since that indicates our current pension system is clearly not sustainable in a fragile economy. A reduced workforce cannot  generate enough economic activity to cope with the pension needs of retirees. In a shrinking economy some seniors will  have to work past retirement age and compete for jobs with younger workers. Hence we have a scenario where many Canadians, whether retired or working, will undoubtedly experience a substantial drop in living standards. As deficits increase government spending will have to be curtailed and everyone, including seniors, will have to pay more taxes. A pension option put forward during the last federal election by Federal Minister Jim Flaherty’s is a ‘pooled pension plan’. This option, however, has not gained much traction.  (Check this link for full details of the ‘pooled pensions plan: http://www.fin.gc.ca/activty/pubs/pension/prpp-irpac-eng.asp) Minister Flaherty’s model or theory  is not clearly understood or accepted by Canadians. This ‘pooled pension’ option will be controlled by private enterprise and also the banks.  There is concern that there will not be adequate banking and financial regulations in place to administer this type of pension plan. Concerns are driven by the recent economic turbulence that the absence of adequate regulations wrought on economies around the globe. That devastation is attributed mostly to a lack of proper regulations and oversight in the financial industry. It brings to mind the unfortunate situation of what happened to the pension benefits of many Nortel employees in Canada. There should not be a repeat of a Nortel type fiasco. It is also a necessary part of the equation that those in the labour force must earn a living wage to participate in this option. Will future workers have to rely on erratic and unstable income from their private pension plans and/or RRSPs with this ‘pooled pension plan’ option? At the moment we are witness to storm clouds gathering on the horizon for many European countries and will have to accept that we in Canada are not immune to another economic downturn. Although many governments around the world are struggling to contain their deficits and stabilize their economies there is a strong possibility that most developed countries are about to sink back into a much deeper recession. There will be a  huge wealth gap as our middle class disappears. And if businesses are to survive in the long term proper planning should be in place for an organized transfer of skills and knowledge to younger workers as there will be a massive gap in skills and knowledge as seniors exit the labour force. A fragile economy will undoubtedly impact various services seniors depend on, the most important of which is health care.  And as the volume of our aging population increases we are likely to see the cost of health care services  along with other necessities rise dramatically in an economy that has a shrinking labour force.  Our governments have to recognize that serious economic and social problems will result if this combined challenge of a seniors tsunami and a fragile economy are not addressed in a calm, creative and balanced manner. A long term plan to address this serious challenge is imperative. ——————————————– Federal Government links: a).  Is Canada Ready for an Aging Population?  http://www.parl.gc.ca/40/2/parlbus/commbus/senate/com-e/agei-e/subsite-e/Aging_Report_Home-e.htm   b).  Canada’s Aging Population: Seizing the Opportunity” http://www.parl.gc.ca/40/2/parlbus/commbus/senate/com-e/agei-e/rep-e/AgingFinalReport-e.pdf

Posted in Canada Pension Plan, CPP, Economy, Elders, Finance Minister Jim Flaherty, Health Care, Pension Reform, Pensions, Pooled pensions, Recession, Retirement, Seniors demographic, Seniors tsunami | Tagged , , , , , , , , , , | 12 Comments