“To avoid disappointment in life, a plan is essential for your success”. These words hold true for most things in life, including retirement. Planning for retirement should be at the top of your list.
There are two main elements that one needs to plan for when we consider retirement, the financial and the emotional side of that transition. In other words, you need a financial plan to ensure you have sufficient money to do the things you want to do and you need a plan for the “activities/routine” in retirement. One without the other is only half a plan.
So let’s talk about the financial plan first. Everyone should have one, does not matter what lifestyle you want in retirement, right from a very basic one to one that may involve a lot of travel. You should not ask your neighbors, family or friends how much they are saving or what you should do, as a plan is as individual as you are and someone else’s really has no bearing on yours.
So how do you set that goal, well the plan starts with a very basic question, which is:
“If I were retired today, how much after tax income would I need each month to meet my expenses and my retirement lifestyle?”
That number may be as low as $2,000 to $6,000 per month or greater, once again depending on what your expenses will be and your lifestyle will be!
Once you have that figured out, (a basic expense calculator can help you with that or good old fashioned pen and paper, as long as you have accounted for all expenses that will continue to require cash flow when retired). The next step is to seek out an advisor who can put that goal into a retirement calculator tool, which will project, with inflation the future value of the $2-6,000 goal and what you need to save, to meet your goal!!. Cost of living goes up each year, so the calculator will include usually a 2-3% inflation rule.
SOME of the sources of income that you can rely on to meet cash flow needs are: company pension, Canada Pension, Old Age Security, RSP’s, TFSA’s, Investment Account and Sale of Business are just a few. Dare I say wealth transfer (yes it is important to note that in your plan, but not to base your plan on receiving any type of potential inheritance as part of the plan!)
Now lets talk briefly about the other half of the plan and that is, with all this new found time and freedom, what do the days now look like. Men seem to find the transition to retirement more difficult than women, but not always. Some of the things to consider are, family, travel, volunteering, part time work, hobbies, home. I once met with a couple who didn’t have that conversation about the “home”, which may include downsizing and or moving. Well he announced that they were going to move to Newfoundland in retirement, which was where he grew up….well that was the “furthest” from her mind (no pun intended) and she was taken back in the office as there had not been a conversation between the 2 of them on this subject. A lesson learned, communication is key at the beginning of the journey, not the end! The days can be long or filled with activities, but like the financial side of the plan, you need to talk about that early in life and come to an agreement with your spouse on issues that matter to you. Be open and be honest, bend a little for one another. Learn new things, now is the time, the options are as endless as a “google search”! Take with you and live with the attitude that anything is possible and you will enjoy your new found freedom and the endless possibilities of this fabulous stage of life!
So in conclusion, the sooner you start “the plan” the more likely you will succeed. Time is your best friend, which basically means the sooner you start saving toward this goal or any other the less money you will require. Educate yourself on investing, there are lots of reasons to make sure you work toward a return of 6-8% over the long term and that comes back to “how much savings is required to attain the goal”, the lower the return the more you will need to save.
Like every plan, it has to be reviewed and reworked if something significant happens in life that can impact the plan, so meet with your adviser annually, and make any adjustments to the plan if necessary. You will be pleasantly surprised how the pieces will fall in place and give you a sense of peace about your family’s future!
Written by, Pamela Sellers
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