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6 Steps to Help Canadians Avoid Outliving Their Retirement Savings

Apr 1, 2022 | Finances, Retirement

Saving for retirement can feel like fundraising for a mystery event. You know you’ll need to pay for a venue and provide refreshments, except you have no idea when the event will happen, how long it will run for, and how much food and drink to provide.

The most common feeling pre-retirees feel is the foreboding sense that they will not have enough money saved to last the remainder of their lives. We all have a target age in our minds for when we would like to retire, but sometimes circumstances decide for us. An unexpected layoff from our employer or a sudden illness can cause us to retire earlier than we planned. On the other side, economic downturns or unlucky investments can make us feel we have not saved enough for retirement and therefore cannot start living off our savings quite yet.

Worrying about finances is not a stressor one can shake off easily, but a solid plan and expert advice can help remedy the feelings of financial insecurity. The best way to start is by having a conversation with a private wealth management advisor. Becoming informed can help calm your fears and put you on a clear path to retirement security.

Step One: Paint a Picture of Your Retirement

It is easier to make savings goals when you picture your retirement aspirations. Taking the opportunity to write down what your ideal retirement life looks like can help you build a plan. You can answer a series of questions for yourself, such as, will you consider downsizing your home? Will you retire fully or continue to work part-time? Do you have any health concerns? Do you plan to travel? And so on.

Once you’ve imagined your dream retirement scenario, you can look at your current living expenses and track your monthly budget. Knowing your financial needs

and how your retirement will change or maintain your current lifestyle will help you determine a savings goal. Here at Regan Schiller & Associates, we have advanced digital tools to help you make projections for your necessary expenses (even some you may not have considered!)

Step Two: Set a Goal with Some Wiggle Room

No one has a crystal ball, which is why when you create a plan, you need to include potential derailments. It’s important to explore alternative scenarios, such as what your financial target would be if you decided to work a little longer or retire a few years early. Our private wealth advisors make projections based on anticipated needs, such as what you might require if your health requires extra spending. The best strategy to ensure you have enough money throughout your retirement, no matter the circumstances, is to set a goal with a bit of wiggle room. How big should your cushion be? We have excellent forecasting tools that can provide the answer.

Step Three: Evaluate Your Investment Portfolio

Reviewing your investment portfolio is a smart annual routine. You may find there are new opportunities aligned with your risk profile that you can use to your advantage. It’s also a great idea to thoroughly analyze your investments ten to eight years before your target retirement age. As your retirement future is in sight, you might want to consider adjusting your regular budget to free up more funds for investments. Another option might be to shift some investments into RRSPs or TFSA accounts.

Step Four: Assess Your Tax Savings Accounts

Suppose you’ve been taking advantage of the savings offered by the Tax-Free Savings Accounts (TFSAs) and the Registered Retirement Savings Plans (RRSPs). RRSPs defer your tax payment to the time you withdraw the money, saving you money as you invest; however, your withdrawals count towards income in your retirement. If you have a higher retirement income, it may result in the government clawing back other retirement benefits, such as the Old Age Security benefit and government pension payments. In that case, you might want to discuss your withdrawal strategy with your retirement financial advisor.

The best strategy for you will depend on where you have your money invested. Withdrawing from your accounts on a rotation might save you more money in the long run than concentrating on one account at a time. Our financial advisors can calculate different scenarios to help you find the strategy that stretches your money the furthest.

Step Five: Explore Putting Off CPP Payments

For some individuals, the age they retire is not entirely their choice. Health issues or injuries may prevent some Canadians from choosing when to retire. But if you’re reasonably healthy and capable of working, you might want to consider having a source of income until you reach at least 65. If you put off collecting CPP beyond the age of 65, the government will increase your payments by 8.4% per year until you reach the age of 70, when you are required to be collecting. That can make a meaningful difference in your monthly income if you are willing and able to delay.

On the other end of the timeline, your monthly payments will be lower when you withdraw CPP payments early before the age of 65. Lower government contributions can harm how far your other investments will reach.

Step Six: Talk to An Expert

There are many variables to keep track of when it comes to calculating what you’ll need to live comfortably during your retirement. Sitting down with an expert can make the difference between feeling stressed and overwhelmed and feeling peace of mind and clarity, knowing your future is protected. At Regan Schiller & Associates, we are professional private wealth management Consultants, here to answer all your questions and help provide you with confidence in your retirement plan.

Pre-Retiree Financial Planning in Edmonton

If you’re concerned about outliving your retirement savings, contact our team at Regan Schiller & Associates. We’ll help assess your investment portfolio, offer advice, and adjust your plan to secure your retirement dream.

This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Regan Schiller is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.