27 January, 2020

Retirement Planning

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Are you dreaming of becoming a world traveller in retirement or adopting a quiet life close to your family? Whatever your aim, to make your dreams a reality, your financial plan needs to take your goals into account.


Tailoring your plan is vital because the nature of your goals and dreams will influence how much you need to save – but there are other factors to consider. For instance, many Canadians will have to rely on multiple income streams – in addition to their registered retirement savings plan (RRSP) savings – to fund their retirement.


To support yourself during retirement, you’ll need to transition your savings into regular streams of income. It’s important to be aware of all the potential income streams available to you since they can have a significant impact on how much you need to save for retirement. These income streams can be from government sources, like the Canadian Pension Plan, or non-government sources, like a company pension plan, income from a rental property and other sources. How much income those streams can provide will be determined by a set of factors that are unique to you. Your retirement plan should consider how each of these income streams can work together to help you to realize your dreams and goals.


Customizing your financial plan begins with integrating your priorities for the future and the retirement lifestyle you want most. In addition to optimizing other key sources of income, your plan should also involve regularly investing in an RRSP to generate long-term, tax-free compounding growth.


Here are some fundamental steps to help you identify your unique retirement destination, estimate a rough amount you’ll need to save to get there, and the financial tools and investment strategies required to make it all possible.


Chart your goals and vision for retirement


First, ask yourself, ‘What are my retirement goals, and what type of retirement lifestyle do I want to achieve?’ Answering this may involve exploring what’s most important to you – right now – and how that translates into retirement. If you are part of a couple, be sure to work together to establish mutually exclusive goals.


Start by identifying some activities you currently cherish most, which will help you uncover your goals. For example, if you value exploration and adventure, you may want to travel more or own a vacation home in retirement. Or, if you value family, you may want to continue saving for a child’s education, take a year off with them, plan to leave an inheritance, live close to family or continue to support adult children at home.


Estimate how much you need to save


The retirement income you’ll need will reflect the nature of your retirement goals. For instance, will you be satisfied with a relatively humble, less expensive lifestyle, or do you see yourself travelling regularly, dining at fine restaurants or renovating your home?


Thus, setting retirement goals is essential in determining the approximate total amount of retirement savings you’ll need. Keep in mind that you will generally require between 50% and 70% of pre-retirement income to maintain your standard of living.1 This total amount may also depend on your target retirement age.


However, in an unpredictable job market, you may have to gather enough savings sooner than expected. Consider mapping out different work departure scenarios. A recent study found that nearly half of retirees surveyed retired earlier than planned due to circumstances beyond their control. About half of these retirees (48%) said they were struggling financially.2


Maximize the income streams available to you


Understanding what sources of income and investment tools are available and how to optimize them, before and after retirement, will form key parts of your plan. There are several different retirement income sources to consider, such as:  

Registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs)

Canada (or Quebec) Pension Plan, Old Age Security, Guaranteed Income Supplement

Company pension plan

Personal savings and investments, including tax-free savings accounts (TFSAs)

Income from a rental-property

Home equity

Continuing employment income (if you chose to work into retirement)

Retirement planning is not a one-size-fits-all exercise. It requires carefully assessing your priorities and a thorough investment plan to ensure you achieve your retirement goals. Whatever your retirement focus, I can work with you to audit your income sources, determine how much you need to save and build a financial plan that integrates the right income sources and investment strategies. Contact me today to learn more and to ensure you meet the RRSP contribution deadline of March 2, 2020.


1Ontario Ministry of Finance, Ontario pensions and retirement savings, Updated March 22, 2019

2Angus Reid Institute, Retirement in Canada: Lots to Enjoy About ‘Golden Years’ but Financial Worries Loom Large – Especially for Those Still Working, July 2015