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It-s-Your-Life

Living with Plan B

“It does not do to leave a live dragon out of your calculations, if you live near him.”
J.R.R. Tolkien, The Hobbit

Human beings are optimists by nature. Whether we are talking about our ability to drive, the state of our physical health or our outlook for the future, our default is generally to the positive. In part, that is why we have risen to the top of the food chain - at the same time it can leave us vulnerable and exposed when things don’t go our way. It’s why it’s so important to consider alternative outcomes when planning for retirement.

Too often we build our plans based on best case scenarios: how long will it take us to get to work in rush hour; how much will it cost to build our dream house; how long will we be healthy and active as we age? For some people the answers to those questions are often: looks like we’re going to be late, we’re over budget by how much, and what do you mean I need to replace the other hip now?

Contingency plans are the key to a successful retirement. With a well thought out retirement plan we should consider the potential for things to shift, and map out the steps to take if they don’t. For most of us, those back-up plans tend to be financial in nature but the broader emotional and personal impact need to be considered as well.

Ward and June worked hard to raise a family and build a successful business. They saved and parlayed those funds into an early retirement. For twenty years now they’ve made an annual pilgrimage South to enjoy the sunshine, the golf, and the friends who mean so much to them. In fact many of the friends they spend time with down there are friendships that began long before they retired and a few even date back to when their children were in school together. Three years ago, Ward had a series of health emergencies down South. He had to spend several weeks in a US hospital eventually being medevaced to a hospital in Canada, where he had to convalesce for six long months at home.

As Ward’s health returned, and a winter at home passed, he and June began to make plans to head South for the winter. The first roadblock was the cost of health insurance. With a pre-existing medical condition, costs skyrocketed and even finding a company that was willing to underwrite a policy was difficult. Ultimately restrictions within the policy required them to leave the US, return to Canada and then fly back to the US in order to have coverage for the length of time they wanted. To add to this, the fall in oil prices saw the US dollar appreciate substantially against the Canadian dollar making everything 20-25% more expensive than the last time they had been down.

These were the financial considerations, but there were also personal concerns that couldn’t be quantified. The possibility of another winter in Canada would mean being apart from the people and friendships that have become such an important part of their lives. The depth and colour that these connections brought to their life would be hard to replace; yes they had family at home, but the kids were busy with their own lives and those of their children. 

Fortunately, the story has a happy ending; Ward’s health continued to improve and as a result of careful planning in earlier years, they were in a position to weather the financial difficulties. They went South and enjoyed the heat of an Arizona winter. 

This isn’t the case for all people though; often these kind of curves can be devastating to retirement plans. Aging parents with dementia or major health problems, boomerang kids going through job lay-offs or marital issues can all put a strain on the best laid plans. The unexpected could mean holding off on downsizing the family home—with the empty nest full again. Scarce resources which were earmarked for retirement may suddenly be needed to cover unexpected healthcare costs or “getting-back-on-the-feet” expenses. That isn’t to say that we shouldn’t be willing or happy to help family in need; it just means that we always need to consider the other side of things and have a Plan B in place- especially in retirement.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

Jeff is an advisor and partner with The Navigation Team at Scotia Wealth Management.

He lives in Kelowna with his wife Tanya, their two university bound daughters and their canine kids.

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca

The Navigation Team

Scotia Wealth Management

This column is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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