Who knew? Perhaps you saw some press releases or news articles. My contribution, besides writing this column, was two seminars I gave in November on “Tax Planning for Retirement”. If you missed it, I will tell you more about them in the January issue.
Jim Flaherty made Financial Literacy part of his 2009 budget. The issue had been pioneered in the U.K. and the OECD and Jim recognized that it was important for Canadians as well. He established a Task Force that consulted across Canada. The Task Force’s mandate was to “Strengthen the financial literacy of Canadians” as critical to the prosperity of Canadians and the nation. Financial Literacy is defined as having the knowledge, skills and confidence to make responsible financial decisions that will help meet personal goals and enhance quality of life. The Task Force reported its findings in September 2010, that Canadians were scoring an A (82%) in “making ends meet” but only an F (32%) in “staying informed” and mediocre C’s in “keeping track” (66), “choosing products” (70) and in “planning ahead” (61). The Task Force’s report last year set out thirty recommendations within five priorities. Initiatives are now happening across Canada to introduce financial teaching in schools and to help relieve poverty through better skills.
Space does not permit a full dissertation here, so instead let me use the column to share some thoughts on how financial literacy might be improved for LifeStyles 55+ readers. The challenge for Baby Boomers, as we enter our third trimester, is to make best use of our final years of high income from earnings, now the kids are grown and the mortgage is paid, to maximize our accumulation of the assets that will need to provide us an income after we stop reporting for work. When that point is reached, we will then need to worry about organizing our assets to provide the best possible income, first for our quality of life, from travel to grandchildren. Then to meet any critical illness of either partner, the likelihood that we may be single for a long period and that we will likely need long term care at some point, not to mention leaving a legacy to our heirs and favourite causes. There are a lot of decisions to be made. You best become financially literate. The alternative is poor decisions that could leave you destitute, even when you are most vulnerable.
The problem is that financial planning scares many of us. The temptation is to put our trust in a “professional”, be it our bank manager, insurance agent or a smooth mutual fund salesman; or worse, we act on the advice of our brother-in-law who may have less knowledge than we do. You do not need to become a financial expert in your senior years but you do owe it to yourself to be a knowledgeable consumer of financial services and products. You would do a lot of research for other major financial decisions, from buying a condo when down-sizing to what may be your last car or your top bucket list world tour. Do no less for your financial security.
The key to financial literacy is to take responsibility for your own decisions. Once you do that you will be motivated to add to your knowledge, to seek a second opinion when you are told something that sounds a little too good to be true. Certainly make use of the best professionals you can access but remember that you make the final decision. That includes tracking your portfolio’s progress, and ensuring you get satisfactory explanations for any variance from the planned course, and making changes as needed, including changing money managers if their performance loses your confidence. It is your money. You make the choices.
Attending seminars such as I offered in November is one way of keeping up and adding to your knowledge. Obviously I did not teach everything there is to know about tax planning after retirement in an hour and a half. My goal was to simply introduce some new ideas that may run contrary to conventional wisdom, to stimulate thinking. I tend to be a contrarian: if everyone else is buying, it must be time to sell!
So Stay Informed and work on Keeping Track and Planning Ahead. Read the financial columns in the paper and there is a wealth of information on the internet – start with the Investor Education Fund and the Financial Consumer Agency. Listen to financial advisors and other professionals – but weigh what they tell you with your new skills and confidence as a knowledgeable consumer. Make this your strategy to ensure that you make good choices in the financial products you use to meet your goals.
And until we meet again, I wish you and yours a very Merry Christmas holiday season.