Despite eating the tips of virtually all of my sprouting tulips, I still love the Easter Bunny! Spring, after all is about the joy and the energy of transitions from one season to another. From a wealth management point of view, that includes, immediately, how much you'll owe on your taxes before May 2, the personal tax filing deadline. Tax time is also a good time to review other financial documents like your health care directives, powers of attorney and of course, your will.
But over the longer term, smart savers strive to understand the size of the pot they will need in new life environments, like child rearing and retirement, for example.
Stats Canada published an interesting article about family consumption patterns in retirement, last month, which sheds some light on this important question. The data came from the Survey of Family Expenditures and the Survey of Household Spending. The study defined "consumption” as "spending on goods and services includ(ing) all items that meet the consumption needs of household members, but exclud(ing) gifts and charitable contributions, pension plan contributions, insurance premiums, taxes and savings".
It found that from 1982 to 2008 average household income declined about 16%. That's the bad news, and something savers today need to take into account as they look forward another 25 or so years. But the good news is this: Canadians in their early 70s reported that their spending on consumption for household members, while different, was really not curtailed by the decline in their income. Spending on health care, for example, doubled to 6% of available dollars for consumption, and amounts spent on residences and properties rose 43%. But, amounts spent on food, clothing and personal care, fell by 28%.
One of the reasons for this is, of course, the decline in family size for older households. (Yes, it appears to be true: cheese for four, is a lot more expensive than cheese for one or two!) Older households also spent less on alcohol and tobacco, administrative and financial fees, membership dues and service charges. Transportation expenses remained stable.
That's interesting information for financial advisors and service businesses catering to busy, pre-retiring baby boomers. It's important to get ready for those demographic changes in your business now.
It's Your Money. Your Life. To every thing there is a season. Success happens when preparedness meets opportunity. In the meantime, do give yourself permission to enjoy it all: the birth of spring, the baby rabbits and even the thwarted tulips!
Evelyn Jacks is President of the Knowledge Bureau, a national educational institute providing excellence in financial education for tax and financial advisors and their clients. She is a bestselling author of over 46 books on the subject of tax, personal finance, and wealth management, including Essential Tax Facts.