Getting Ready for Retirement

Imagine you are talking with your spouse about the topic of retirement and it is going to happen within the year. What do you need to do, to get ready for it? I went to Rein Selles who is a Professional Retirement Planner (PRP) and is President of Retirement/Life Challenge Ltd. for some answers.

What is the biggest potential problem facing those getting ready for retirement?

According to Rein, “It is ironic that many of us will want to begin planning retirement by trying to determine how much money we will need. That perspective, however, is like letting the tail wag the dog. How much money you will need depends on your interpretation of your own retirement. Unless you have a life plan, no income may be enough. Creating a lifestyle plan is the process of bringing together your own information in such a way that you can “see yourself retired”. Once that process is complete, income, tax and estate planning provide the method for bringing that plan about.”

Getting ready for retirement

Rein has eight tips to prepare for retirement:

  1. Get Organized – Bring together the financial and lifestyle data in one place so that you and your advisors have the information needed to advance your plans. Think about your goals for retirement, gather statements for all assets, review your last tax return & Notice of Assessment and get a copy of your wills and personal directives.
  2. Determine What Your Lifestyle Will Cost – Most of us will experience some reduction in income at retirement. This is usually accompanied by a reduction in expenses (mortgage is gone, child related expenses are done, costs associated with working are reduced). It can be very helpful to work out a list of current expenses and determine how these expenses will change (up or down) at retirement. No financial advisor is in the position to do this work for you. It is something that you need to do for yourself.
  3. Plan Your Reward and Your Retirement – I have found that many clients aren't really thinking about retirement. Rather, they are spending their energy on planning a reward for a lifetime of work (a long trip, a move to another location, etc.). The problem is, when the trip or the move is over, retirement will begin. It may be helpful to work out a list of things you really enjoy about work and life in the present. Once that list is complete, assume you are retired and determine whether you will have activities in place that will replace what may be lost at retirement.
  4. Is Leaving A Legacy Important? – Some clients feel very strongly about leaving a legacy before they retire by finishing a specific project or block of work. This can be a very effective form of closure and may also facilitate a “good leaving”. Many Canadians find that leaving their jobs at retirement is a disappointment. Once the party is over and everyone else goes back to work, a person can feel cast adrift.
  5. Is Your Home Appropriate to Retirement? – About one-third of Canadians will move to an alternate residence before or at retirement. Sometimes this decision includes moving to another community. Where possible, take time to rehearse your move. Spend time in the proposed community to determine what housing options are available and whether your new lifestyle can be achieved in this new location.
  6. Evaluate the Role of Work in Your Retirement – Nearly 70% of retired Canadians include volunteer and paid employment in their retirement plans. Will you want to use skills you have developed over a lifetime?
  7. The Best Plans Are Flexible – As you sit down to write your list of goals, remember that the best made plans include a degree of flexibility. Since the future is uncertain, our success will depend on how well we can adjust when circumstances around us change. If you are in a relationship with someone, there may be a need to adjust personal plans to accommodate needs of a partner. Avoid doing a “couple” plan. Start plans individually and then bring them together.
  8. Build A Team of Advisors to Help You – Draw on the expertise of both professionals and retirees who have experience making this transition. Both provincial and federal governments have published resources for retirees that can be very helpful in planning.

The bottom line

You will need to prepare two kinds of information:

  • Internal Information – Centered on individual values, attitudes and perceptions. This data can form the basis for the definition of retirement, lifestyle preferences and the need for income, based on current spending patterns. Most importantly, the data can only come from the individual.
  • External Information – Specific technical data on pensions, tax, investment and estate planning based on market, Canadian law and regulations. Most of us have this information interpreted to us through professional financial and tax planners.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

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