Aligning Your Retirement Wealth Span with Your Ideal Life’s Plan

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Let’s face it: Retirement isn’t what it used to be. In the “Good Old Days,” people worked nearly their entire adult life, before (hopefully) enjoying a few years of leisure toward the end. Today, retirement is often measured in decades rather than years. It can be almost as long as your career.

That’s mostly great news. Except, there is still no “retirement school” you can attend, to prepare for this incredibly significant time in your life. Have you and your spouse planned for what happens next once you retire?

Your Wealth Span

First, there’s using robust financial planning to determine your “wealth span.” Once you retire, how much income can you count on, and how much can you comfortably afford to spend?

Obviously, it’s pretty important to estimate both your income and expenses as accurately as possible. Unfortunately, many Canadians are prone to overestimate both. For example, according to a 2018 survey conducted by Schroders Investment Management, the average Canadian expected they would have about 71% of their working income in retirement, when in fact the actual average was closer to 61%.

People also tend to overestimate the returns they can expect from a well-balanced investment portfolio. With GICs delivering in the range of 2%–3% annually, and stock markets as volatile as ever, dependable 8–10% annual returns may be a thing of the past. It’s best to temper your expectations accordingly.

Your Life’s Plan

To make the most of your retirement, you’ll want to prepare, not only for the quantity you have to spend, but for the quality of your days.

In other words, what are you actually going to do once you’re no longer working?

It’s easy to assume you’ll just figure that out once the time comes. But the fact that many of us are living longer as well as retiring younger, suggests upfront planning is warranted.

What will your ideal retirement look like? We like to see our clients starting to have that conversation around 5 years out – especially if they’re a couple, with potentially conflicting expectations.

Typical goals in the early years of retirement may include traveling, spending more time with friends and family (especially the grandkids!), pursuing new or existing hobbies, volunteering, and more. The possibilities are many. But we’ve seen data suggesting that retirement can also increase your odds of experiencing clinical depression by 40%. Failing to plan in advance is likely to only aggravates these odds.

Even if the money is there for you, that’s certainly not an ideal outcome! Your financial planner should help you prepare for both your realistic wealth span as well as your ideal life’s plan in retirement. For more related insights, tune into our “Think Smart” podcast, “Wealthspan: Making Your Retirement Money Last,” and let us know if we can assist.

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