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4 simple retirement questions most people can’t answer

We get it, planning for retirement is complicated. Traditionally, Canadians have had two options: paying around $3,000 to get a financial plan from a fee-for-service financial planner or if they had over $250,000 in investable assets an advisor may use a program to build them a one-time financial plan that would likely never be updated again. Why is good financial planning so hard to come by? Because it’s so incredibly complicated. CPP, OAS, insurance, debt, borrowing, mortgages, children, RESPs, TFSAS… the list of confusing financial considerations goes on. So, it’s no surprise that when it comes to people’s own retirement, there are often lots of grey areas that are unknown.

Here are 4 retirement questions that you definitely need to answer for yourself, and unfortunately, 4 retirement questions that most people can’t answer:

 

1. What age will I be able to retire?

This is a question that almost nobody knows (if you expect confidence and accuracy). Almost no one knows what to do on a monthly basis to maintain their lifestyle. Unfortunately, this leads to most people experiencing a significant lifestyle decline when they put their kids through school, when they retire, or because of something unexpected.

There are many retirement calculators online that promise to produce your ideal retirement age with a few simple clicks, but retirement really isn’t a one-size-fits all calculation. The only way to know your exact retirement age is to build a comprehensive financial plan, and to update it every single time something in your life changes, or every six months (that’s how often we remind our clients to update their financial plan).

 

2. How much money should I be putting away to be able to maintain my lifestyle in retirement?

You’ll see a theme start to develop here, there’s no one-size-fits-all solution when it comes to planning for retirement. Everyone’s situation is extremely different and rules of thumb, like saving 10% of your income, are quite dangerous as they may only apply to one person.

A recent poll from CIBC showed that a startling 32 per cent of Canadians between 45 and 64 have nothing saved for retirement, so one thing is for sure having something is better than saving nothing. That being said, a lot of things go into calculating how much you will need in retirement. When you build your financial plan with Planswell, we’ll look at things including, but not limited to: 

  • Age of kids
  • Current lifestyle
  • Private pensions, if any
  • Marital status
  • CPP and OAS clawback amounts
  • Mortgage status

 

3. How much money can I rely on from the government in retirement?

Two ways the government helps out Canadians in retirement is through the Canadian Pension Plan (CPP) and Old Age Security (OAS). One of the most common mistakes Canadians make is overestimating how much they will actually receive in CPP and OAS in retirement. Unfortunately, it’s likely you’ll have far less than you think.

Similar to the simple retirement calculators out there, there are many CPP and OAS tools online that will take your current age and then project it out by “x” amount of years without layering the income sources, or taking into consideration the clawbacks from CPP and OAS you may endure.

The best way to avoid overestimating how much CPP and OAS you will have is by building accurate financial plan that will actually do the calculations for you.

 

4. How will I cover any illnesses or accidents as I approach, or during, retirement?

It’s not news to anyone, that along with age comes increased risk of illness and injury. The costs associated with a critical illness or disability are often detrimental to someone’s financial goals, if they’re not properly protected.

Having the proper insurance implemented at each different stage in life is crucial to ensuring your financial plan stays the course.

While ensuring you’re covered during your higher risk years, starting out with insurance when you’re young and single is often one of the best ways to ensure you hit all of your financial goals throughout your life. In addition, when you’re young and healthy you’re often able to lock in a more affordable policy that can remain stagnant in cost all the way up to retirement.

To see how a potential illness or injury could affect your retirement savings, give our investment and insurance calculator a try.

 

What next?

Saving for retirement and financial planning are topics filled with myths and questions that many people can’t answer. The best way to ensure that you can answer any questions when it comes to ensuring you never experience a lifestyle decline when putting your kids through school, purchasing a house or in retirement is by building and updating your financial plan. So go ahead, spend the next few minutes ensuring that you’re able to answer any questions when it comes to your financial future – we’re positive you’ll be thankful you did.

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