Remember the days of drive-in movies and flipping through vinyl records? Those simple pleasures taught us something invaluable: enjoying life to the fullest while staying mindful of the details.
Now, in your 70s, the script is similar — but the stakes are higher.
Retirement should be your golden age, where you’re relishing the freedom you worked so hard for. It shouldn’t be spent stressing about money. But with every new stage of life comes a new set of financial considerations.
Financial speedbumps are common. The average debt for Canadian seniors (aged 65 and older) is approximately $24,000, after all. But there are many financial mistakes that are easily avoided — if you know what to look for.
Today, we’re pointing out the bumps in the road you’ll want to avoid, with advice on things like will and estate planning, healthcare costs, and the sneaky, silent thief of inflation.
You’ll also hear from Vancity and Aviso Wealth advisor Sonny Nieslen. He kindly sat down with us to discuss money mistakes to avoid in your 70s, giving you a professional insight into the subject.
Financial speedbumps are common. The average debt for Canadian seniors (aged 65 and older) is approximately $24,000, after all. But there are many financial mistakes that are easily avoided — if you know what to look for.
Underestimating your purchasing power.
In 1974, the cost of a Big Mac was .85 cents. Today, the cost of a Big Mac is $7.79. If you’re 70 now, a Big Mac has become over nine times more expensive in the 50 years since you were 20. The lesson here is simple: Inflation makes costs rise over time.
Ignoring the impact of inflation can whittle away at your retirement nest egg, as subtle price increases will erode your purchasing power over time.
Many people in their 70s live on a fixed income and adjust their lifestyle to match that fixed income. Often, the income comes from pensions like CPP or OAS and the return from investments.
Sonny Nielsen, a wealth advisor, says that without proper planning, “rising costs can outpace your income, leaving you financially vulnerable.” He tells us that since 2020, inflation has eroded purchasing power by 20%, meaning your fixed income won’t keep pace with inflation. This can lead to situations where you have to start sacrificing things in your life.
Sonny recommends, “To safeguard your savings, plan for inflation by adjusting your budget and investment strategies to ensure your money lasts throughout retirement. A proactive approach will help you preserve your financial security in the face of rising costs.”
Being risk-averse or opting for shorter-term investments.
You should always plan to fund a long life. No one wants to enter their nineties with a depleted bank account, unable to afford a comfortable lifestyle. Your investments can play a role in ensuring you’re afforded that lifestyle, but not if they’re too conservative or short-term.
Sonny notes this doesn’t mean you should take on risky investments but rather have an understanding of how your investing choices affect your overall financial plan.
“Many seniors become very risk-averse and live off the interest of their investments. And when you do that, when you start taking taxes and inflation off that, you can get in a worse situation,” says Sonny.
It’s always important to speak to your financial advisor about the best strategy for you and your lifestyle when it comes to investing.
Not protecting yourself against financial fraud and abuse.
While you may not be at risk of falling victim to financial fraud right now, financial scams are becoming more and more sophisticated every day. Often, scammers will target seniors, so always check with your bank or someone you trust if someone asks you for your passwords, personal information, payment, or a refund.
Here are three other ways to protect yourself:
- Don’t sign contracts or make purchases on the spot. If you’re pressured with a “limited-time” offer, walking away is safer.
- Be cautious if a stranger asks for money or a cheque, especially if someone requests a refund for money sent “accidentally.”
- Always ask for proof of identity and check references before hiring someone or agreeing to at-home work.
While you may not be at risk of falling victim to financial fraud right now, financial scams are becoming more and more sophisticated every day. Often, scammers will target seniors, so always check with your bank or someone you trust if someone asks you for your passwords, personal information, payment, or a refund. – Vancity and Aviso Wealth advisor Sonny Nieslen
The Government of Canada points out that financial abuse often happens at the hands of someone who knows you well, making it difficult to address. If you suspect financial abuse, don’t hesitate to reach out. Abusers often try to make you think it is your fault or your idea but remember that your money and property are your own, and financial abuse includes being pressured into giving someone something.
Reach out to community resources, trusted family members, or friends. Ask your bank, credit union, seniors’ centre, doctor, or local police for guidance.
To his financial peers, Sonny says, “Any time a fraudster is taking advantage of somebody who’s a senior, they typically need to involve somebody else, like the credit union, their advisor, or somebody that does the transaction — and that person needs to ask questions.”
Not knowing when to start your public pension.
Roughly 89% of Canadian seniors receive Old Age Security (OAS) payments, and 97% receive the Canada Pension Plan (CPP) or Quebec Pension Plan (QPP).
And approximately 43% of seniors rely on government pensions (OAS and CPP/QPP) as their primary source of income.
There’s a certain strategy for knowing when to start your public pension.
Starting your Canada Pension Plan (CPP) as early as age sixty will result in a permanent reduction in your monthly payments. Delaying it until age 70, however, could more than double your payout.
In a similar vein, delaying your Old Age Security (OAS) pension until you’re 70 can increase your monthly benefits, but waiting beyond 70 typically offers no further advantage — and could even lower your payments. But for those who qualify for the Guaranteed Income Supplement (GIS), delaying OAS past age sixty-five could mean missing out on this additional support.
Of course, personal factors like your health, lifestyle, and financial situation will help to guide your decision, too. Be sure to discuss your pension with your financial advisor prior to starting.
Letting your will and estate plan remain idle.
Less than one-third of Canadians say they have an estate plan, and less than half of Canadians have a will in place. If you do not have an estate plan or will in place, now is the time to create one.
If you have one in place, ask yourself, when was the last time you updated it? Your relationships, family dynamics, and needs can and will change throughout your lifetime. Keeping up-to-date with your will and estate plan will ensure your current wishes are executed properly.
If you have beneficiaries or loved ones who your will or estate plan will impact, it’s important to discuss everything with them before you pass. Conversations about death and finances aren’t often an easy chat, but they’re important ones to have while you’re still here.
Less than one-third of Canadians say they have an estate plan, and less than half of Canadians have a will in place. If you do not have an estate plan or will in place, now is the time to create one.
“The last thing that you want to do is put, for example, your executor or your beneficiaries in a situation where they didn’t realize something,” Sonny says. “You get some of these very awkward situations.”
Not planning your finances long term.
Creating a long-term financial plan gives you control over your lifestyle at every stage you grow into. Sonny creates plans to last Vancity members throughout their retirement.
“The plan might deviate a little over time,” he says, “but members are involved in every discussion. The goal is to keep changes minimal and stick to a plan they agreed to long ago. By following this plan, people can maintain their financial independence, even in challenging times, and a certain dignity comes with that. Preserving dignity throughout one’s life is something you simply can’t put a price on.”
It’s also important to appoint someone you trust with the power of attorney. This will allow them to help you with your finances if you become mentally or physically unable to do so yourself. This does not give anyone the power to make decisions about your finances if you are mentally sound and able to do so yourself.
Underestimating healthcare and long-term care costs.
Healthcare costs typically rise as we age, and comfortable long-term care can come with a hefty price tag. While Canada’s free healthcare system covers quite a bit, there is a price to aging comfortably.
Hopefully, you’ll live a long and healthy life without needing added healthcare costs or a long-term care plan. Preparing for later-in-life care and not needing it is much better than needing it and not having the funds earmarked for it.
“When you start getting to a point where you’re aging, if you want to age at home or you need to get some support, it gets outrageously expensive,” says Sonny.
Putting aside a portion of your savings for unexpected medical costs and talking to your insurance provider about long-term care insurance are two ways you can be proactive about your later-in-life health costs.
Overspending, when it comes to family, is common with retirees.
No one plans to overspend in their retirement, but if you’re not paying attention, it can happen. You may want to give family members cash or a loan, spend money on gifts, or take your family on vacations to celebrate your freedom. It’s easy to lose track of spending, but this can lead to financial strain later in life.
To avoid this, set a budget that aligns with your retirement income, including specific lines, like gifts, family support or travel. This will help you maintain your financial health while still being there for your family and enjoying your retirement.
On the flip side of overspending is decumulating your assets. When you’ve spent your entire life accumulating assets to save for retirement, it can be hard to wrap your head around doing the opposite.
“It’s important to talk to a professional. That person will be able to help you find a balance right between being able to plan for inflation costs, not giving away too much of your money, not decumulating too fast, but also spending it, enjoying it in your retirement,” Sonny says.
Finding a balance is easier with help with Vancity.
When it comes to finances in your 70s, you don’t need to figure it out alone. Finding a healthy financial balance is easier with help from the professionals.
Vancity and Aviso Wealth advisors like Sonny Nielsen have been helping our members in their 70s keep their finances healthy for decades. Connect with Vancity to explore solutions for your unique needs.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. The information contained in this article is from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is not intended to be investment, tax or other advice and should not be relied on without seeking the guidance of a professional to ensure your circumstances are properly considered. Please see our Terms of Use.
