Robert Paterson's Weblog

An investment strategy for the common man - Boomers real Freedom 65!

How's your pension or savings going? 

All you have heard to date is that you have to save enough to pay for your life as you age. This just is not possible for most people. Many boomers have teen age or school age kids AND elderly infirm parents. Saving enough and then making a killing in the market is an insane idea and it never happens for regular folks. It's impossible to fulfil this idea. Interest rates are at historic lows. The markets are controlled by traders. The underlying economy is a shambles. Traditional pensions are a thing of the past. 

So what to do?

It is to invest to REDUCE  your day to day costs and to INCREASE your ability to make a living. And to invest in the next generation so that they can help you. This is my pension plan in outline. So let's look at the details.

Personal Costs

Avoid being ill. Especially avoid developing a chronic illness. The average man in Canada is disabled by illness by the age of 65 and lives for another 10 years. He depends on his family and the state to suport him. This drives cash costs, a huge burden on your family and on the state. You may not have the cash, the family or the state to look after you anyway. This is also true for the average woman, the cycle start 5 years later.

In the US Fidelity predict that the average US retired family will spend nearly $250,000 on health costs in the last years of life. No one has that kind of savings!

Let's make this real.

My mum has been in a nursing home for 14 years ($40,000 a year) and has had an annual drug bill of $3,000 a year. That's nearly $500,000. My dad's pension fortunately has covered this. Without it I dread to think of what this would have meant to me. I would have become a prisoner to her. The last thing I want is to be a burden to my kids. The state will not be able to pick up the tab when so many boomers are in the their older years either.

So becoming Healthy is rule #1. That is why I have taken charge of my health and why this first step is so important for all of us boomers.

You can read all about how to do this in You Don't Need Medicine to Get Healthy

Reduce your structural living costs.

Energy - Home The #1 exposure that we have is to energy costs. So the size of our house and the way we heat it is key. Next to that is our need to get around. All of this is connected to the price of oil and energy. Already on PEI where I used to live, the average household heating bill is more than $3,000 a year.  In a typical winter with a 2.500 square foot house, we would fill the tanks in October, January , February and March.  At $800 a fill at current prices, that is about the average. We make this payment from our after tax income. 

There are a number of ways around this. First of all, move to a smaller house with a smaller footprint. Less to heat and to maintain. Less to pay in taxes too! For that bill can easily be $3000 a year. Less to insure. 

Then insulate like crazy and install the most efficient system you can. Supplement with wood if you can.

We have done this and we have cut our heating bill to $700 for the whole winter! We now have a hedge against future increases in energy costs too. We spent about $25,000 to get this improvement. Looks like a lot? But now look at the return and compare this to putting $25,000 in the market or on deposit.

That is an annual after tax return of nearly 11%. Government of Canada 5 - 10 year bonds yield 1.4%. And that is after tax. If oil prices go up, my yield goes up. If I want to sell my house, I can make this part of the price. It's a win win win for me and for you.

The key is to see this as an investment not as just a cost.

Energy - Transportation

How much does it cost to own a car? How long will you be able to drive a car?

Each car drives a lot of structural cost. It's not just the gas, but the maintenace, the insurance and the depreciation + parking etc. Estimate that a car will cost you at least $10,000 a year after tax!

So where you live is an important structural question. I live in a small village. All the shops are within a walk or a short bike ride. We only need one car and that a tiny one. If we need more, we rent. If I have to get to Montreal, I often take the express bus that has wifi, and takes an hour and costs the same as the gas for the trip in the car. 

If I need a new car in the future, I will buy a second hand one. That takes 40% of the depreciation off the table.

This has not been a big give up for us. If we really need a second car, we rent.

Finally, one of us may not be able to drive in our late age. By choosing to live in town and in walking distance of shops and life, we prepare for that too. 

You can find much more on how to resuce your costs in my first book - You Don't Need a Job

Time for Cash

As our costs drop, I don't need to struggle to earn more and so I have more time. Time is the most vital part of this new freedom.

I can trade cash for time. Convenience costs. Time is free. 

We do the gardening, not a service. With a small lot, most of the work can be done by hand too. That is good for our bodies and for the pocket book.

I can add wood heat to the mix too.

It gives us time to cook all our meals. This is both good for us and also cuts our food bills dramatically.

Tribe Versus Seniors Home and Child Care 

Will state paid seniors homes exist in 15 years? Will it be possible for working mothers to send their kids to day care?

A seniors home, apart from being a living death, cost today about $35,000 a year. They just wont be around in 15 years except for the rich. You and the state will no longer be able to afford them. On PEI with 12,000 women over 85 at that time, the costs will exceed the current TOTAL for ALL health care today.

With incomes being squeezed for all the young, how will they be able to work and have kids. Child care is also about $30,000 a year for many now. Few will be able to earn that.

So what to plan for?

I see no alternative but to bring back the Tribe. So this again, means choosing your last home with great care.  We are 1 hour from our son and his family and our son in law's mother also lives in the same village aswe do. The two grannies already help each other out a lot. Our son is here most weekends and we took care of his 1 years old for 9 nights that enabled him to get a much needed break. This summer we will have our daughter's kids for 2 weeks too. 

We are laying the foundation for the tribe to come back.

I don't see another way. The only way that the old and the very young can be accomodated in the next 15 years is to come back together. Not an easy thing to do. We are so unused to this way of living. So this is why doing it step by step helps.

If we can get this right we are looking at saving up to $100,000 after tax a year. Or at least reducing the risk of a break down in the family at both ends. I don;t se an alternative - do you?

Bottom Line

There is no way that most Boomers can save and invest enough money to live as we do now over the next 20 years. Nor can we expect the state to be there to help. By 2030, at current rates , the alzheimers costs in the US alone will exceed the budget for Medicaire. 

We will be pushed back on ourselves. But on our own, we are not strong enough. 

So the only alternative that I can see, is to restructure our lives. We have to create new habits of helping each other in the family so that, as we get older, the new normal is to do things with each other. The new normal is to share costs and even space. 

If you don't have kids, then I suggest looking to your closest friends and start to share your lives with them. 

This fall I will write a book about this - You Don't Need a Stockbroker to Retire when I will expand on thse ideas. What do you think so far? 

 

Related articles

Practical steps to get and to stay healthy - You can live like your ancestors

The jobs are still going away - what to do? I offer you a survival manual

Disability - the health story of our time

Are you a boomer? What is your retirement looking like?

Ancestral/Paleo Health - Going Mainstream

HealthWatch: Caveman Diet Trend Starting To Catch Fire.

A growing number of scientists, medical doctors and nutritionists have argued that a Stone Age lifestyle could benefit human health and even cure chronic diseases. Dr. Kim Mulvihill reports on how the diet helped her shed 30 pounds.

The CBS journalist is doing this story because she tried this and it works. "CBS 5 medical reporter Dr. Kim Mulvihill was so intrigued by the UCSF research that she became a guinea pig for the scientists.

She was told that she could not lose any weight and was given a Paleo plan to follow.

Within 10 days, her cholesterol dropped dramatically, as did her blood pressure. She then asked if she could lose weight, and modified the diet to eat less. Dr. Mulvihill then shed 30 pounds and two dress sizes. Her cholesterol, blood pressure and blood sugar levels all continued to plummet in a healthful way.Dr. Mulvihill said she never felt deprived and never felt healthier."

And this weekend CBC covered this on Sunday Morning and the Current on Monday

I think what is driving this is that IT WORKS! After 40 years of telling us to eat more grains and take more exercise, we have the epidemic. If people try this for a month, they feel results. If they do it for a year, they are transformed.

Me in 2009 and me this summer 2011. It took a year to lose 35 pounds by eating differently. My arthritis has gone. I am back to my wedding weight. I did spin for 2 months but mainly I have just been more active. I have a standing desk and I work outside a lot - the garden, wood stacking etc.

My dad died at 55. My mum has been an invalid since her mid 40's. I have a very poor ancestry and I was on my way to join them. But I decided that I did not want that as my future.

So what about you?

Chris Hedges Nails it #freedom99%

 

So here we are at the edge - Hedges states the reality - My bet is that the movement will not go away - the blue paper has been lit - we cannot know how it will ned but likely not with a whimper

Freedom 99% - A movement to decouple from the 1%ters who control our lives #freedom99%

My aha today is how to take the passion from the Occupy Movement and turn it into actions that will make a difference.

My aha is this - I can accuse and complain. Good thing to do as it points out what we have known but not spoken about. But the best action to take is to get free from their control. To break their power by making their business no longer viable. We can do that by reducing their incomes by no more than 15%, for such an attack on the bottom line takes them into bankrupcty.

This is all you need to do - reduce the profits consistently by abut 15%. Conversely we get free of their grip and we re-allocate money to the rest of us in the 99%.

Food is a good place to start. Robin and I have shifted about 90% of our buying to the local producers and to local distributors. If 20% of Islanders did that, we would start to hurt the Big Food system. Conversely we would be pouring money into the local food system. This would be about $60 million on PEI. Not a lot for a few big potato farmers but a fortune for the tiny veggie and small meat producer.

Take charge of your health. By eating real food - my regular readers know what I am talking about - we don't need the drugs. If you eat right - real food that is available only from real growers who will be small and local - you will be will not need the drugs and avoid the side effects and the costs. What might the effect be? The world market for Statin Drugs that lower cholesterol is $29 billion. All for a drug that we don't need and that is based on bogus science. How many people have heart disease on PEI? How many take statin drugs? What are the side effects? What are the costs? I have a friend who is paying $500 a month for these drugs. 

Again eating right supports our local food producers and cuts our costs.

Heating - Insulate your home and heat with local wood. Heating oil is one of our largest costs - about $2,500 a year. Nearly all this money goes off Island to Big Oil. We are utterly dependent on them. But a local wood/biomass system would keep the money here and is viable. What if 30% of us did this? We spend $200 million in total on heating oil. So again a $60 million dollar injection into the local economy.

I am just playing here but do you see how if we acted in concert, the Early Adopters could start to decouple us from the grip of the 1%. We could be more free and we could hurt them where it really hurts  - in their wallet.

We don't ALL have to do this - that will not happen. But if 20- 30% of us did, this would be enough to make the change. Then the rest will follow.

If we can take a lot of our food and energy back, we will have driven a wedge into the 1%.