Derek, what do I need to do to prepare for retirement?
Whether you’re 10 days away from retirement or 10 years, it is best to consider a number of factors before you walk out the door of your job for the final time. A little planning and foresight can ensure many happy years ahead you may want to consider a few factors before riding off into the sunset.
You will want to understand where your income is going to come from. If you have a pension through work, understand your retirement options and have a conversation with your wealth advisor about what may be best. Keep in mind government programs will be helpful so consider checking to see what your future Canadian Pension Plan (CPP) payments will be. Your advisor can help you determine when you should begin taking your CPP payments and will factor in taxes and your other sources of income.
Beyond that, it’s time you get a retirement income forecast created by your wealth advisor to give you an understanding of how all of these can come together along with your investments to create an income. Be conservative with your return estimates, factor in inflation and taxes, and plan that you’ll live a long time – all of these factors will change but they are important.
You may want to start watching your expenses. While I don’t mean tracking every penny that walks out the door, I do mean by being aware of what your typical monthly expenses are. It’s also important to separate your spending into two categories; money spent on necessities, and money spent on extras. The reason is that you’ll want an understanding of what you can cut out of your life if you really need to. This doesn’t mean you need to live like a pauper, it’s simply good information to have at hand.
You should consider consolidating your investments. At the same time your wealth advisor should be able to work with you on other matters including financial planning, insurance planning, estate planning, and other topics relating to your money. Ideally, if you have established trust with an advisor and benefit from their added services, you may want to bring more of your investments under their management. The benefit to this is that the advisor can manage your assets in-line with your retirement objectives and ensure your plan is consistent. This can be more difficult if your money is spread around.
You may want to look at paying off any debt prior to retiring. Since your income will be fixed, it’s best to limit your expenses. This may be something that takes years of forethought – said another way, you may want to look at your debt years before you think you’ll retire and create a plan to have it chipped away prior to retirement. Another consideration is what you’ll do about vehicles. It’s a reality that you’ll likely need a new vehicle during your retired years at some point. It may be best to ask yourself whether your future retirement income can handle the payments or if you’ll save extra funds for that purpose itself.
You’ll want to consider what you’re going to do with all your free time. It’s natural that you’ll take some time to decompress, do the things you’ve been meaning to do and perhaps travel a bit. But once that ends your mind may crave some activity. Think about retiring “to” something rather than “from” work. This may mean being involved in a charity, board or volunteer position.
A qualified wealth advisor who offers all of these services and more can be a great companion when working towards your golden years. Above all, start planning today so that you can retire in confidence.
Derek Fuchs, Senior Wealth Advisor
Scotia Wealth Management