Just as everyone takes a different path to retirement, what you do when you retire is also unique to your own circumstances, needs and wishes. It’s helpful to think about how you envision the future, since your chosen retirement lifestyle will significantly impact your finances. Obviously, travelling the world in luxury requires more money than a simpler lifestyle.
What counts the most is matching your financial assets with your retirement lifestyle to ensure you can accomplish your objectives. Keep in mind that retirement is often measured in decades, not in years. As people live longer, it becomes more critical to plan well for retirement.
Identifying your retirement expectations
Before you start building your retirement plan, here are five overarching questions to consider that may help you gain a better sense of how your life could look in retirement:
What lifestyle do you prefer?
In some respects, being retired is an opportunity to choose your own adventure. With more time and flexibility than you’ve probably had in years, retirement allows you to do what you enjoy and find meaningful.
Many retirees pursue a mix of travel, hobbies, time with family and friends, volunteering, exercising and staying healthy, gaining new knowledge or skills, and simply enjoying unscheduled leisure time (reading, listening to music, watching favourite shows, etc.).
The activities you choose and how much effort you devote to them depends on your personal interests, mental and physical capabilities, and financial circumstances. Think about the approximate costs of these activities as you construct your retirement plan and budget.
Where do you expect to live?
This question not only covers where you’ll live geographically, but also takes into consideration whether you plan on downsizing to a smaller home (e.g., condo or apartment), stay with family members or reside in a seniors-oriented community or retirement home.
Retirees often prefer to remain at home, but consider if that’s financially practical and whether you can manage the responsibilities of independent living. You might try a phased approach where you stay at home for as long as it makes sense, and later consider alternatives to receive the support and services you need.
Will you still work?
It’s becoming common for people of “traditional” retirement age to continue working. If you like what you do and can remain proficient at it, why not? Work is valuable because it keeps you busy, engages your mind, sharpens your social skills and lets you be productive. In addition to a sense of accomplishment and intellectual satisfaction, working also generates income that can help you enjoy a better retirement.
Maybe you can work part-time hours or start a business that matches your skills and interests. It might be a full-fledged business or a “side hustle” where you work according to your availability.
Will you be financially prepared for health issues?
Getting older often means experiencing health challenges. You can take practical steps – such as regular exercise, eating properly, getting enough sleep and having emotional support – to help minimize health issues. You should also budget in your retirement plan for expenses like medications, therapeutic services, mobility-related home renovations, professional health care support, living in a nursing home, etc. You may also wish to explore insurance policies that can provide the coverage you need as you age.
What are your legacy plans?
Giving back is important for many retirees, as it’s their way to make a meaningful difference in the world. Maybe you want to donate to your favourite charities and/or volunteer your time to those causes. You can also establish a charitable trust, scholarship or bursary, or even a foundation that creates your legacy as you see fit (and as your finances allow). An Investment Advisor has the knowledge to build a tax-efficient giving plan that can maximize the impact of your financial support.
Not sure how much money you’ll need when you retire? Use our RRSP calculator or speak to a Senior Wealth Advisor today.
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This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.