Better retirement choices
Poorly made choices can dramatically impact your retirement plans
“Life,” philosopher Albert Camus contended, “is the sum of all your choices.”
Good or bad. Easy or hard. Right or wrong. Every choice you make will impact your life to some degree. Choices with little impact are often made without much prior thought. The problem is that many people also take this casual approach to decision-making when making bigger, more impactful choices.
As a Retirement Income Specialist, I see poorly made choices all the time. Unfortunately, these choices tend to be life-altering and irreversible. Like a doctor forced to deliver a gloomy prognosis, I am heartbroken to see the look on people's faces when I tell them how a choice they made will put them at a disadvantage for the rest of their lives.
The Retirement Risk Zone Years (TRRZY)
The 10 years leading up to retirement and the 10 years immediately following retirement are filled with critical choices that can create turning points in your life. We call this period ‘The Retirement Risk Zone Years’ (TRRZY).
During this period, the number and frequency of tough and important choices you’ll face do not decrease. In fact, they increase. What’s more, the implication of choosing poorly intensifies, as both time and flexibility have turned from friend to foe.
Over this nearly two-decade period, you must adapt your thinking to a new reality. Strategies that served you well during your savings years, can turn on their heads and start to work to your disadvantage as your flow of funds reverses from saving to spending. Those who fail to recognize and adapt to this new thinking have a high propensity for making poor choices, many of which they will regret in future years.
Your big choices during The Retirement Risk Zone Years
Last 10 years of accumulation (Saving):
- How much longer should I choose to work?
- How much more should I choose to save?
- Where should I choose to direct the final top-ups of my savings?
- How much more should I choose to put in my RRSP?
- Should I choose to follow a “work optional” approach?
- What role will my home equity play? Do I choose to downsize and, if so, when?
First 10 years of drawdown (Spending):
- When should I choose to start to collect my Canada Pension Plan and Old Age Security?
- How soon should I convert my RRSP to a RRIF?
- Can I afford to support the lifestyle I’ve chosen, or do I risk outliving my money?
- Have I chosen a well-informed drawdown strategy to protect the lone survivor financially, after the first of us passes?
- How much financial assistance can I afford to offer my children today, without putting my own financial future at risk?
- Do I choose to leave an estate to future generations? If so, how much?
There are significant choices that, if made properly, will:
1. Maximize your recurring retirement incomes like CPP and OAS
By choosing your optimal start dates wisely, you are rewarded with hundreds of thousands of incremental dollars.
2. Minimize your taxes
By selecting to actively and strategically shift where you choose to source each year’s required cash flow, we can pre-determine which marginal tax bracket you’ll land in. Whether you can take full advantage of income splitting and if you’ll get clawed back in Old Age Security, with the ultimate goal of minimizing the amount of taxes you’ll pay over the balance of your life.
3. Protect your nest egg
By choosing to integrate the timing of future cash flows with your money management strategies, you’ll be able to put pension-like mechanisms in place that will mitigate your exposure to inevitable market downturns.
When you want to choose the route that will get you to your desired location as quickly as possible, you turn to an elegantly simple solution. Your GPS. Your GPS computes millions of complex calculations to compare the time required to complete each possible route – with the understanding that each possible route is made up of many legs, with different speed limits, intersections and varying levels of traffic congestion. Ultimately, technology removes the complexity so you can confidently follow the elegantly simple guidance you have been provided.
The elegant simplicity of a GPS does not stop there. The GPS continues to track your progress along the recommended route, looking for changes in conditions, including potential hazards that could impede or delay your travel, that may cause it to recommend that you alter your chosen route.
When you want to choose how to fund your desired retirement, there is also a suite of elegantly simple tools you can turn to. Our proprietary Retirement Navigator™ tools complete millions of complex calculations to identify which choices will provide you with the greatest amount of after-tax cash flow over the balance of your life.
Think of a Retirement Navigator™ income plan as a cookbook, containing ‘recipes’ for each successive year, giving you easy-to-follow directions on which cash flow ‘ingredients’ (e.g., RSP, CPP, etc.) to use and how much of each to mix together. Further, like a GPS, this elegantly simple solution continually monitors your progress against the planned drawdown strategy, always on the lookout for changing conditions that may warrant modifying the recipes.
The bottom line? Successful passage from the first half of life to the second half of life depends on how well you manage your choices during TRRZY and how well you transition from your saving years to your spending years.
Our Retirement Navigator™ Retirement Income Planning Process can help you make better choices with confidence and ease. Better choices that will allow you to do more and worry less.