We have established that not only is it okay to have a retirement plan in place, but that planning is in fact good and effective stewardship. So, what does someone approaching retirement need to do to be prepared? Although plans will surely shift and change over time, you need to consider what your life will look like in retirement, as that will have implications on the investment strategy in place. For example, have you thought about whether or not you will downsize and, if so, when that will take place? If there is an expected surplus upon downsizing, will this make up a part of your retirement assets or be earmarked for other purposes? Do you plan to continue working and thus bring in some level of income upon retiring, or will you be solely relying on your available pensions including retirement assets? How does your spouse’s decisions on when to stop working, as an example, impact your own decisions? This is a non-extensive sampling of some of the options to consider as you approach retirement. With this information on hand, an investment professional can then draw up a plan which determines how much you need to be saving, what the target rate of return needs to be in order to meet your spending needs in retirement, and take into account some different scenarios. They can illustrate for you how the plan changes if you stop working at age 65 versus age 67. They can explain what happens to your net worth if you decide to convert your RRSP into a RRIF at age 69 instead of age 71. In working with a qualified investment professional, they will be able to help uncover a lot of these answers over time.
As a final point, we need to be prepared for the fact that we cannot always prepare for everything! This can be a tough pill to swallow for those that have done extensive planning and want to be able to diligently follow a plan with a predictable outcome. But as we know, life is not always predictable. It could be that a plan assumes that your investments need to grow 6%, but they’re currently only growing at 5%. Or perhaps the plan assumes that you will be working until age 65, but circumstances have forced you to stop working before then. Typically, a sound investment strategy will have some buffer room worked in and additionally take into account differing scenarios. The bottom line is that it is important to not hold the plans too tightly, but rather use them as a guide. And equally important is to be working with a Portfolio Manager who can adjust your investment strategy when circumstances change, either positively or negatively.
“Plans fail for lack of counsel, but with many advisers they succeed.” – Proverbs 15:22
Janet Kim Sing, Portfolio Manager
Capstone Private Wealth