The Solvency Struggle

By Roberta Allen

The challenges of staying solvent in later years can be fierce. The Solvency Struggle chronicles the yearlong personal struggle of one grandmother to wrestle with this reality. Other "year of books" are academic exercises, undertaken by authors who have other options readily available. Here is an exposé of what life is like for those older Canadians who don’t:

• who have found that spending can only be slashed so much
• who face obstacles in increasing income
• who find sustaining quality of life when expenses threaten to swamp income pushes them into debt sometimes for the first time.
• who cannot make RRSP withdrawals without negative consequences that exceed original tax refunds.

“Almost one million...futile savers have been misled...are victims of fraud however unintentional. About a third of Canadians with RRSPs have scrimped and saved for nothing because most if not all of the benefits they receive will be taxed away...They will not realize the benefits they anticipate because they will miss out on pension and other social-income tested benefits, and it appears no one is about to tell them.” (Dr. Richard Shillington, Canadian economics policy analyst).

For decades, analysts have been writing about the penalties faced by retired citizens who followed recommendations to save in Registered Retirement Plans. Yet, the media, advocacy groups for the more affluent, purveyors of investment products and politicians pay scant attention. Here is seldom-disclosed information about keeping out of the ranks of “futile savers,” information that is crucial to be aware of pre-retirement.

The specific financial concerns of the largely forgotten and seldom heard segment of the population – lower and middle-income retirees and soon to be retirees – are spotlighted in The Solvency Struggle. Financially-challenged seniors and baby boomers, younger generations who want access to full benefits at the age of eligibility, financial planners who want to convey better information customized to their clients, those who believe in justice, activists and anyone who enjoys first-hand accounts of grappling with daily living, here’s your book.

Timely practical tips about maximizing age and income-based benefits resulting in significant savings, fighting debt and recipes are all included. There is even the kernel of a fair play, deficit- reducing plan for the Canadian government to implement.

Roberta Allen scrimps and occasionally splurges in Oak Bay, Canada. She loves fresh ideas, creating order out of chaos, beauty in its myriad forms and critiquing as well as her husband, grown daughter and two sons, three granddaughters, and two grandsons.

• Language: English
• Publisher: Roberta Allen
• Release date: Mar 29, 2012
• ISBN: 9780988006812

Book preview

The Solvency Struggle

One grandmother’s yearlong fight with the ‘Debt Dragon’

while facing financial reality

Roberta Allen

• Read this before investing in Registered Retirement Savings Plans!

• Receive more income-based benefits upon the age of eligibility!

• Reduce the chance of straying into debt later in life!

The Solvency Struggle

One grandmother’s yearlong fight with the ‘Debt Dragon’

while facing financial reality

Roberta Allen

Copyright © 2012 by Roberta Allen

Smashwords Edition

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Table of Contents

Introduction

January

February

March

April

May

June

July

August

September

October

November

Conclusion

Introduction

Staving off the debt dragon on a terrain pocked with pitfalls is not an easy feat. This is the chronicle of my struggle as an older woman to stay solvent. I am parrying with:

• Income that is equivalent to a median Canadian individual income but shared by my husband and me.

• Inadequate assets that cannot be accessed without harsh penalties.

• A smattering of wisdom acquired over 60-plus years.

This is my story, but I am not alone. Over one million older Canadians currently are engaged in some aspect of this struggle. For those of us who were misguided and inattentive, someone should come up with a plan to level the field. Why not me?

Over 30 percent of younger generations are slated to join us. Someone should divulge to them how to avoid stumbling haplessly into our realm, the shabby shebang of futile savers. Someone should share with them knowledge that could keep thousands in their pockets. Why not me?

Someone should tell the story of us, neither-nor middle income tweniors and seniors. Why not me?

Us tweniors are past middle age but not yet 65. We don’t eat cat food but also don’t play golf, flit between condo and cottage, imbibe pricey wine, take a winter vacation, or fight aging aggressively with expensive products. Our reality is that everything is a choice with Canada’s two-tiered medical system. A broken tooth is a catastrophe — never mind glasses, hearing aids and optional prescriptions.

Sagas often start with a halcyon period. For me that was last year, a fabulous year. The skies cleared. The May sun beamed as we slowly revolved high above the Emerald City at the Space Needle in Seattle. Our 16-year-old granddaughter was so impressed with her entrée, the vegetable gateau, that she snapped photos on her cell phone to send to her 20 best friends. Because the fare was so delectable, I didn’t blanch at a bill five times beyond what I find reasonable. The rains thoughtfully held off until just before we dashed into our motel.

That evening, the Empire Builder swayed along the tracks heading to Chicago for my father-in-law’s 90th birthday. In the late afternoon we chatted with other passengers, a salon in motion complete with wine, cheese and majestic scenery. Including transportation off the rock otherwise known as Vancouver Island, a night in Seattle paid for with air miles, three meals, and two roomettes, the total for my husband, granddaughter and me was cheaper than air. There were no security ordeals beforehand. We could carry on up to five pieces of sizable luggage. Travel was slower but infinitely more civilized.

In July an overnight at the retro Hotel Vancouver, arranged and paid for by my mother-in-law, conjured up memories of my dad and the life he had prepared me to expect. Their free dessert bar celebrated my sugar and butter heritage.

En route to Whistler the next day on the Rocky Mountaineer, the scenery was breathtaking. There we visited our older granddaughter who was working in the Village, newly independent and grown up. The subsequent sunset on the ferry ride back to Victoria was spectacular.

In August our new little digital camera rewarded us with photos of my toddler grandsons in a flash. The days of having to wait months to finish the roll, sometimes only to be met with disappointment were banished.

In September, the Peking acrobats, vintage candy exhibit and sale, Clydesdale horses, pig races, and sand sculptures highlighted the Vancouver Pacific National Exhibition, our first trip back in 30 years. The oomph of the Rod Stewart impersonator lured me into a beer garden for the first time ever. We stayed for three hours — me on one drink.

Generous relatives extended invitations and picked up some of the tab. How could we tell them affording the attendant costs was dicey for us? The problem was I couldn’t afford the remainder without dipping into my Registered Retirement Savings Plan henceforth to be known as RRSPs. A miscalculation kept us from realizing the full consequences of our actions.

Consequence #1 is what we took from RRSPs counted as income. The domino effect reduced the government Guaranteed Income Supplement that augments our modest Canadian Pension Plan and my husband’s Old Age Security by 17 percent. Our monthly net income fell by almost 6 percent, which doesn’t seem like much but was the amount that composed our purely discretionary funds. Our estimate had been 1 percent. Over 40 percent of what we took out got clawed back with two consecutive cutbacks to our Guaranteed Income Supplement over the past two years.

I am not eligible for the $500 OAS until I turn 65, which is not till November. This feels a bit grim, and while I don’t expect any one else to feel sorry for me, I did indulge myself. I felt like a distressed gentlefolk trying to deal with my upbringing, the expectations engendered and financial reality.

How, I wondered could I get through the next months? At the same time I did not regret our choice/mistake. Our experiences were too memorable to have missed.

Fortuitously, I came up with the idea of reframing the wait as a challenge. My goal would be to examine what is truly necessary and continue debt free by pruning my spending. Saving something in the process would be a miracle. The fall back would be succumbing to debt and having to come to terms with that reality.

Full Disclosure: Leftover from the RRSP withdrawals we made in the past two years, we have $1,000. Each of us has an accessible $2,000. Mine came from a pay equity settlement more than 15 years ago. If not for having been a gender victim, I would probably have zip. My husband’s resulted from a trio of car accidents, which left him in chronic pain. Financial planners don’t advise either method of accumulating assets. There is no real estate or anything else except RRSPs, which deserve their own rant.

Statistics give us 20 more years of life. Prospects for additions are bleak. This means making our nest egg last is a priority.

Funds are set aside monthly for car repairs, Christmas, and home and vehicle insurance and will increase and decrease accordingly, never exceeding $1,000. These accounts are probably under-funded. The grand total equals $7,000.

The rules:

1. I will not load up before January 1st.

2. I will not attempt to restrict my husband and will not use him or anyone else as a way of circumventing my goal. We have a history of seesawing up and down about finances, which only exacerbates matters.. However, I will continue with invitations from folks, invitations that are not aimed at end runs around my struggle.

3. Initially, all of the following will be off the table — housing, healthy food, costs associated with our 11-year-old Toyota Echo, medical/dental, prescriptions, utilities, basic toiletries, birthday gifts, family get-togethers, and 1 percent of our gross for donations and commitments already made for 2011. These I will relate as they become relevant. Each month if any of these exclusions can be tweaked, I will.

4. My purchases will be made within a walkable range of one mile unless I am nearby a discount store on other business. No special trips will be made.

The bonuses:

1. Our housing charge is tied to our income and includes major repairs and replacements, laundry, heat, hot water, and parking. Currently, we pay 26 percent of our