To ensure your financial security in retirement, you must first think about your lifestyle in retirement and then the income you will need to support it.
Preparing for retirement can be thought of as a marathon rather than a sprint. Like professional athletes, most of us can improve our performance with practice and help.
“I’ve never met a single person who has thought through all aspects of retirement,” says Cindy Crean, Managing Director, Private Wealth, Sun Life Global Investments (SLGI). Crean finds that people typically fall short in two critical aspects of retirement: vision (determining what they want to do in retirement) and finances (determining if they’re saving enough to achieve their vision. ).
She recommends that couples seriously discuss what they want and how they see life in retirement. For example, she remembers a couple who were nearing retirement. The two spouses realized that they had opposing ideas about the dream of retirement. “Madame wanted to stay in town, buy a condo, and have an urban lifestyle, while Monsieur wanted to settle on a farm and live off the land. So they never talked about it.”
Financial imperatives can also guide this conversation about the vision of retirement. For example, once retired, people want to maintain their lifestyle but realize that they have to sell their house in town to finance it.
These retirement discussions have become particularly important because Canadians currently thinking about retirement have less room for error than their parents. Due to historically low-interest rates, many people nearing retirement don’t have a defined benefit plan and can’t rely on their fixed-income investments as their parents did.
“The game has changed, and you need to take control of your financial future to ensure you have a guaranteed income that will last throughout your retirement,” says Crean. “Some believe they can rely on state benefits, but they don’t know what it’s all about.
Is it possible to live on Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), and Old Age Security (OAS) – and how much does it cost? First, you need to consider how much you will need in retirement, plan your savings, and know where the income will come from for your essential and discretionary expenses.”
Ted Rechtshaffen, President and CEO of TriDelta Investment Counsel, find CPP dependency problematic, even though planned enhancements to the plan will begin to take effect in 2018. Although the maximum CPP benefit will increase by nearly 50%, Mr. Rechtshaffen would prefer that Canadians put more emphasis on saving for retirement.
