January 16, 2020
Retirement is the reward for all those years of working, planning, and saving. But retirement can be sailing through your golden years without financial concerns or it can be spent worrying if you’ll outlive your savings. The good news is that there are steps you can take to turn the dream of your ideal retirement into reality.
This first step is to have a plan. A financial plan will help you decide when you are financially able to retire as well as give you an idea with respect to what you can spend during those years. When drafting a plan, it is important to use realistic return assumptions for your investments. Be conservative; outperforming your plan means you will have more money to spend than you anticipated. Underperforming means you risk running out of money.
In retirement you need to ensure your portfolio is constructed for your unique situation and your tolerance for risk. Keep in mind, once you are out of the workforce you likely will not have the luxury of stopping withdrawals and waiting out market downturns. It’s important to have a cash flow plan that can survive the ups and downs of the markets. Proper diversification is a must.
It is important to understand your different income sources and the impact of when you decide to take income from each. For example, you can choose to start receiving Canada Pension Plan (CPP) benefits at age 60, though the amount you receive will be reduced as a result of starting before 65. For some, that will be the right choice. For others, it may make sense to wait until age 65 or even delay to age 70 for a higher pension. If you are healthy and have other sources of income, mathematically you are better deferring CPP in order to receive a higher income later.
Managing your taxes is also critical; every dollar of tax you save is another dollar in your pocket to spend as you wish. Managing taxable income can also help you avoid (or minimize) clawback of income from government programs such as Old Age Security (OAS).
It is important to stick to your plan and update it on a regular basis. Your financial plan should be a living document, not gathering dust on a shelf. Life happens and you may need to adjust the sails on the way.
Plan for the non-financial aspect of retirement living by considering what will make you happy. For some, that will be travel or golf and for others it may be spending time with grandkids. The point is, put thought into what you will do with the extra time you will have. Remember, this can also determine the amount of spending during retirement. Staying busy, learning new skills and meeting new friends will help keep your mind and body sharp. Your social network will most likely change as you enter retirement and leave your coworkers behind. Make an effort to find friends that share your interests and have the time to enjoy life as you plan to. Having friends to share your experiences with will make the ride that much richer.
Finally, think about your health. It is certainly easier to enjoy life if you are healthy and that does not happen by accident. Exercise and healthy eating will pay dividends long into your golden years.
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.
Author:
Scott Lewis, MBA, CIM is a Portfolio Manager and Investment Advisor with Louisbourg Investments. Comments or questions may be submitted to Scott at Scott.Lewis@Louisbourg.net , or he may be reached at
(506) 853-5410. Follow him on Twitter at @AdvisorScott.