I was speaking with clients the other day who are contemplating a move from their home in Oakville. Although they are many years away from the traditional retirement age of 65, the thinking is that life is too short not to really live it. They want to use the equity from the home to travel and do the things they’d be putting off until they retired.
It’s a decision I find many of my clients considering: selling the family home with the goal of downsizing and using the equity for something else. But then the inevitable questions arise? Should I buy a condo? Move to Niagara-on-the-Lake or similar community? Or rent in the big city and buy a rural or lakeside recreation property to get the best of both worlds?
I am often surprised when some clients approaching retirement do not consider themselves “ready” to move into a condo. Despite the upscale amenities and low- or no-maintenance advantages, many people who are heading into their retirement years are balking at a move away from the lifestyle they have comfortably lived for so many years. And yet, I understand that the answer isn’t as simple as it seems. In fact, nothing about retirement is. Inevitably, it depends on how you want live as you embark on the next exciting chapter in life.
Do you know how you want to live? Have you thought about it? So many people don’t. They don’t start to think about living in retirement until it’s upon them. But retirement shouldn’t be a date. Instead, it should be a transition that could start long before the work-a-day life comes to an end.
Work makes up a huge part of our lives. More often than not, it forms a significant chunk of our social network and gives us a reason to get up in the morning. It’s not enough to make the decision to retire. You have to know what you’re going to do next. A Harvard study that’s been tracking the health of Harvard sophomores and others for 80 years suggests that “close relationships, more than money or fame, are what keep people happy throughout their lives.” The study went on to suggest that having a strong social support network helps to delay mental and physical decline and are better predictors of long and happy lives than genes, social status or IQ. Based on my conversations with clients and friends who are either widowed or divorced and still working, weekends seem to be the hardest part of the week—disconnected from their social network and staring down too much time on their hands. Retirement could be like an endless weekend.
I don’t plan on retiring for quite some time, but with all of my children living away from home, I’ve turned my attention to exploring interests that I didn’t previously have time for. One of those interests is theatre. I’ve always been a supporter of the performing arts. But more recently, I started taking improv classes with Second City, and I’m having the time of my life. For me, it’s not about becoming an actor or comedian. It’s about stepping outside of my comfort zone, stretching my personal boundaries, and, as it turns out, learning some new life skills around the benefits of listening and teamwork.
My daughter, who hasn’t even embarked on a career and is decades away from retirement, recently discovered the joy and benefits of volunteering. When I was visiting her a couple of weeks ago, her hockey team spent a Saturday morning teaching special needs children how to skate. My daughter said watching one of the children raise her hands when she scored a goal as if it was the Stanley Cup was one of her most rewarding experiences.
As my daughter’s experience suggests, it’s never too early to think about how you want to live a rich and balanced life—now, and in retirement. You can’t run a marathon without training for it first. Retirement is much the same. Pursue a passion, volunteer, join a book club, take classes on topic that have always interested you, learn to golf, or train for a marathon. If you expand your world in new directions before you retire, you may find your work more enjoyable to the point of wanting to work beyond the arbitrary retirement date you may have set for yourself.
Keep your eye on the goal and stay the course
Just as we should be evolving our notion of retirement from a sprint to a marathon, we need to be evolving our fortitude for long-term investing as markets begin to shift.
At the beginning of this year, the Bank of Canada raised the interest rate to 1.25% based on strong economic data. The third such hike in six months, it would appear that we have reached the end of ultra low interest rates. Of course, compared to historic levels, we remain in a low interest rate environment. But the pendulum has begun to swing. How far it’s going to go is something we’ll have to wait to see. However, with a strong economy, historically low unemployment, strengthening oil prices and a rising Canadian dollar against its US counterpart, all signals point to a steady increase in interest rates.
This shift, as we’ve seen in the past few days, is bound to unsettle equity markets as investors consider a move back to bonds. Additionally, 10 years beyond the financial crisis and the Great Recession that followed, we have yet to experience a significant correction. Given that markets tend to correct every five years or so, we are long overdue.
January provided a number of surprises in terms of interest rates and a rising dollar. But as we enter the second month of the year, housing numbers suggest prices may have plateaued, and the recent market volatility may mean we’re in for a bit of a ride in the months ahead.
However, nothing we’ve seen so far should be cause for too much concern. Just as you would if you were training for a marathon, keep your focus on your goal and stay the course.
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