February 10, 2021
Marcel LeBlanc, CFP, CIM
Retirement planning doesn't have to be scary and complicated. Use these 3 pillars of retirement planning to create your own plan.
There are different ways people ask how they will be able to retire comfortably. “Am I saving enough money to retire? How much will I need to have saved up in my RRSP?” All of these are variations of the same question: What will it take for me to continue paying for my lifestyle once I stop working? Let’s dig deeper into how we can start answering that question.
Step 1 - Figure out where you stand financially
The first thing you need to do is figure out where you are today. A person’s or a household’s net worth is used to measure someone’s financial standing. We determine our personal net worth by adding the assets we own (house, savings, etc) and subtracting the amount of debts we owe (mortgage, loans, etc). Your Net worth is important because it is what most people need to build in order to fund their retirement lifestyle. Your net worth is your starting point. It’s used to determine the gap between where you are now and where you will need to be to retire.
Step 2 - Manage your cash flow
Next step is to have a good look at what you’re doing with your money. Budgeting and allocating money is not only about control and discipline. How you use your money will likely have more impact on your retirement results than anything else. On the one hand, the less you spend on lifestyle costs, the more is left to save & pay down debt to build up your net worth. On another hand, the more income you spend on lifestyle costs, the larger your net worth will need to be to support these costs through retirement. Not only are you saving less but you are also aiming for a higher target. This 2x factor can either be working for you or against you. This is why tracking and managing your cash flow is key to your retirement success.
Step 3 - Estimating your results
Once you know where you stand, have a good idea of where your money is going and how much you can contribute to building up your net worth, it’s time to put this all together and calculate where these efforts will get you over time using retirement planning software. When done properly with accurate inputs and expectations, this step can tell you what kind of gap stands between your current net worth and your net worth needed to retire. It can also tell you whether you are on the right track to reach your goals or if adjustments will be required.
As you can see, Step 1 and 2 are fairly manageable even for individuals with less financial knowledge and experience. Step 3 is where things get more complicated and the help of experienced professionals can go a long way. Properly creating the inputs to reflect your situation, estimating your expected returns and inflation rates, saving and investing using the optimal accounts, and maximizing utility with a personalized funding and liquidation strategy while considering tax implications can be a daunting task and should not be taken lightly. If you are not able or willing to consider all of these in your planning processes, working with a qualified advisor will greatly improve your results and provide the best chance at success.
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Marcel LeBlanc, CFP®, CIM® is a Financial Planner with Louisbourg Investments. You can find more from him on Facebook and LinkedIn. Comments or questions may be submitted to Marcel at marcel.leblanc@louisbourg.net, or he may be reached at (506) 383-5204.
This writing is for general information purposes only and is not intended to provide legal, accounting, tax or personalized financial advice. If you are not sure how to proceed with a request for further information, seek help from a professional. Any opinions expressed are my own and may not necessarily reflect those of Louisbourg Investments.