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Are You Ready to Retire?
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The realities you face when you stop working can be very different from your retirement dream. There are plenty of pitfalls you could encounter. If you haven’t properly prepared for leaving the working world and living without a paycheck, you’ll have to face the ugly truths about retirement.
With today’s realities of minuscule interest rates, decreasing availability of employer-provided defined benefit (DB) pension plans and the potential of longer life expectancy, extending retirement resources over one’s lifetime is more than a theoretical problem.
It’s great news that we may live a long time, the challenge is preparing clients for a retirement that could go from age 60 to 100. The big fear is running out of money. In my experience, retirees need to address ten key issues:
Issue #1: How much income will your net worth produce?
You might have diligently been setting aside money for the future and have significant resources. But even $1 million might not last long in retirement if you live in a province where the cost of living is high. Is 1 million enough to retire on? It depends on what amount of income you want to achieve your retirement goal. If you invested 1M into a Cash Account you could withdraw a net after tax income of $34,624, indexed to inflation for 35 years.
Assumptions: 6% rate or return, 4% inflation, no other income sources, retire at 60, withdrawals last for 35 years.
Unfortunately, when people set retirement savings goals, they often do so without actually knowing how much they’ll need each month to cover expenses in retirement. In my experience very few people are clear on how much income they would need each month in retirement and which resources they should utilize and in what order. The resources available to produce an income are varied and far from uniform, for example some people have company pension plans, stock options, RSP’s, TFSA’s, Cash Accounts, rental properties etc. Additionally, the split between each category impacts the amount of tax paid to create an income stream. For example RSP’s and pensions are fully taxable when withdrawn whereas a TFSA isn’t subject to tax on withdrawal. With Cash Accounts the investment income is taxed as it is earned or realized, but withdrawals are not.
Solution: Create an Income Plan
For starters, don’t assume that you’ll spend a lot less in retirement. Most retirees spend between 80 and 90 percent of what they were spending during the year before they retired. So your savings need to be able to generate enough monthly income to sustain your current spending habits.
If you’re already retired and didn’t calculate how much income you would need to cover monthly expenses, you might have to make adjustments in your spending. I recommend distinguishing your needs from your wants and calculating how much you need to get by each month versus what you’re also spending on wants. Eliminating many of your wants might help you make your retirement savings last longer.
You might be asking yourself, “Where do I find the right Financial Consultant near me who charges a flat fee and will treat me fairly?” “Where can I find an advisor who can create an Integrated Aligned Overarching Strategy?” or “Where can I find an advisor who will only invest my money in proven passive investments? We suggest that you interview several. You’ll quickly learn that there are very few who are fiduciaries, believe in passive investing and have a process to create an Integrated Aligned Overarching Strategy. When you do find the right advisor, you’ll be able to relax in the knowledge that you are in the right hands and that your financial future is secure. Feel free to reach out to me with your questions. I’m committed to investor education.
Dean Kendall is a Financial Organizer in Calgary, handling all of the financial affairs for a select group of clients who value unbiased quality advice for one simple flat fee.
His book - Stop Paying Hidden Investment Fees! Click here for more information https://www.ideallifeexperience.com/Stop-Paying-Hidden-Investment-Fees
Newest book - Becoming The Champion of Your Dreams: How to Set and Achieve Your Most Important Goals Click here for more information. https://www.ideallifeexperience.com/Becoming-the-Champion-of-Your-Dreams
In addition, Dean is a 3X Canadian National # 1 Amateur, a 5X Canadian National #1 Professional BMX rider, downhill mountain biker and an avid snowboarder. He is an expert at winning. Let him show you how to win the money game. You can reach Dean at dean@ideal-life-experience.ca or Phone 403-543 -7226
©Copyright 2008 – 2022 by Dean Kendall. All rights reserved. 403-543-7226 dean@ideal-life-experience.ca