Are you exploring the ruins of ancient Athens or volunteering with a local service club? Or did you un-retire for a part-time job to cover unexpected medical costs for a spouse?
The advice from financial planners is that retirement is nothing to lose sleep over, unless you’re procrastinating about planning for it. A couple of hours a year is all most people need.
Yet even the experts provide different advice for preparing for the last day of work.
The first priority for Joyce Wong, a financial adviser with BlueShore Financial, is getting clients to shape their thinking around life expectancy – an average 80 years for men and 84 years for women in Canada.
“It’s important to have a financial adviser work with you to align your lifestyle goals, create a realistic vision of what your life is going to look [like] and translate those goals into a financial plan,” Wong says. If you have a partner, you also need to ensure you’ve shared your expectations.
Priority two is committing to an annual review, “even if it’s going to be a quick check and conversation that you are on track.”
The third consideration is “emergency funds for a rainy day” to cover unexpected costs while you’re still working.
“No. 4 is lifestyle planning,” Wong says. “People tend to plan for what I call the glamourous years, the first five or 10 years after retirement. After that, activities such as travel can become a chore, or maybe there are issues with illness, with not wanting to be feeling inconvenienced.”
Finally, Wong says, you need to understand where your retirement income will come from. “How much will you actually receive, should you want to retire at 60 or 65, from CPP [Canada Pension Plan], and if you expect to receive OAS [old age security], how much will that be?”
David Lee, another adviser with BlueShore, also focuses on immediate action items.
“The first one is paying down debt,” Lee says. “By accelerating debt payment now, it puts you in a position where you have fewer expenses when you retire.
“The second is planning how you are going to enjoy retirement, because it’s about more than just money. This is how you are going to spend your time.”
No. 3 is to be at least mildly aggressive with your money. “If you can take on a little bit of risk and have a longer time horizon, then you should do very well in the future.”
No. 4 is planning as if you will live to age 90, putting longest-term investments into tax-free savings accounts – there’s an extended time horizon for overcoming any market drops.
“The last consideration is having a good investment plan while you’re still working. It’s best to start early.”
Determining your post-work lifestyle is a key for chartered accountant Martin Zlotnik of Vancouver’s ZLC Financial. “Are you going to travel or work part time? You have to know where you’re going before you can plan how to get there.”
Ask yourself what kind of financial needs you’ll have at retirement and, aside from your spouse, whether there will be people you’re still responsible for – such as children who need financial help or have special needs, for example.
Zlotnik recommends you take some time to assess your current savings – registered retirement savings plans, an individual pension plan, retirement income fund and so on. “What do you have today, and how much more do you need to accumulate?
“You have to periodically examine your own risk tolerance, and for most people that risk tolerance should lessen as you get closer to retirement. When you’re 10 to 15 years from retirement you should have a strategy of more safety and less risk. Diversify your investments.”
“The last thing, and it’s kind of a self-serving comment, is to work with an adviser you trust and that you’re comfortable with. Although you want to work with someone that has a designation, compatibility is probably as important or more important than all the initials someone has behind their name.”For more on retirement preparedness, see an infographic at www.biv.com/navigating and read our new Retirement Ready magazine at https://www.biv.com/magazine/retirement-ready-2016/
