Retirement Planning Repair Kit

What do you do if you’re about to arrive at retirement and you have recently suffered a financial setback or you’re just not quite ready? How can you get your retirement plan back in tip-top shape? Here are ten tactics that can help you.

1. Conduct a Financial Inventory

Get a clear understanding of your net worth and current spending habits so you know where you stand. Visit the Build Your Plan section of this website for worksheets to summarize your current situation

Prepare a Balance Sheet

What are your assets (property, investments, and so on)? What are your liabilities (debts, mortgage balances, credit card balances, and so on)? Your assets less your liabilities tell you your net worth today.

Estimate Your Expenses

Often referred to as “tracking your money”, this simple exercise determines what you spend monthly on food, mortgage payments, household utilities, vehicles, etc. If you know what you spend (that is, your cost of living), you know what income you’ll need in retirement. The exercise also is a good predictor of the future because it will measure your spending habits; few Canadians change their spending behaviour just because they have retired.

2. Check Out Income Sources

Now is a good time to determine the income sources you'll have in retirement. Compare the income you expect against your financial inventory (see #1, above) to see if you’ll have enough. Employee pensions and personal savings will have to make up any difference.

  • The Canada/Québec Pension Plans provide a pension for those who have been in the workforce. You may start your pension as early as age 60 or delay it as late as age 70. Taking it early or late will reduce or increase the payment.

A good feature of our public pension plans is that it does not disadvantage parents whose career was interrupted by raising children. Eligible low-contribution or no-contribution years, while raising a child, may be excluded under child rearing drop-out provisions.

  • Old Age Security (OAS) is payable to all Canadians regardless of whether they were in the workforce. It currently starts at age 65. OAS payments are based on the residency period in Canada; some eligibility rules apply.

In 2019, 39% of retirees were worried about their debts.

3. Get Rid of Debt

Simply put, you cannot retire if you are up to your ears in debt. Ideally, you should be debt-free or (at least) have debt under control with sufficient emergency cash on hand that will cover the debt should a crisis arise. If debt is controlling your life and you want help, check out the information and tips available in Down with Debt.

4. Reduce Your Costs

Upon conducting your financial inventory, you should look for opportunities to trim any fat from your expenditures.

5. Keep Working

Consider supplementing your retirement income with full- or part-time work or by starting a small business; there is great opportunity for today’s retirees. Older employees are in demand by many employers because of their work experience, dependability and common sense. Some employers even entice retirees to join them with flexible arrangements such as structured part-time work.

6. Increase Your Savings Rate

When you still have a full income, there may be an opportunity to save vigorously from now to the end of your current career and boost your overall retirement savings.

7. Downsize or Move Away

Consider downsizing a large family home to something more manageable and suited to your needs in retirement. Downsizing can free up considerable cash to supplement your retirement savings.

Living in a large urban centre typically costs more than in small communities. Many smaller communities have extensive recreational choices, shopping, medical services and other support structures you may want, which come with a lower price tag. For more information visit: Accommodation.

8. Build a Better Investment Strategy

To make sure your retirement is not put at risk every time there is a stock market downturn, take the time to assess your retirement investment strategy.

Diversification Is Key

Do not abandon equities. You could live more than 25 years in retirement. If you want your money to last at least as long as you do, you’ll need a diversified investment portfolio. The right mix of equities and fixed-income investments will help you preserve and grow the money you’ve accumulated.

Consider a Balanced Approach

A balanced strategy may result in giving up periods of high returns but it also flattens out the bumps. Pre-built funds, such as target (retirement) date funds and balanced funds, are a convenient way to achieve diversification, risk management, long-term growth and asset stability in your portfolio.

As to which ones, that’s a personal choice. For retail balanced mutual funds, check out The Globe and Mail Mutual Funds page or morningstar.ca and search for funds whose investment objectives and risk profile fits your investment comfort zone and goals. Take advantage of opportunities to save and invest through employer plans offering pre-screening of funds and reduced fees.

Consider Canadian Dividends

Dividend-producing stocks and dividend funds can generate steady, tax-advantaged income with the potential for future growth. They can be held tax-sheltered within your TFSA, or outside registered accounts to take advantage of the dividend tax credit and capital-gains favourable tax treatment.

9. Get Educated About Finances

Being an uninformed consumer increases the risk of financial failure. With common sense and a modest amount of knowledge, you can take control of your own finances, build your own investment strategy and map your own future. There are many advisors willing to tell you what to do with your money. With a solid understanding of financial matters, you'll be able to separate the good advice from the bad and will not have to depend solely on the advice of others for your financial future.

10. Stay on Top of Your Plan

Monitor your progress annually or whenever circumstances change. By staying on top of your plan, you can take corrective actions as needed and keep yourself on track to realizing your retirement goals.