In thinking about retirement, there is often a focus on specific goals or perhaps idealistic dreams of the future. This open-ended thinking is critical, as achieving the retirement one envisions begins with knowing what that vision entails. That said, there is a major difference between one’s plans for retirements and having an actual retirement plan. Here, we look at the difference and explain why it’s necessary to have both.
Making plans for retirement
Not everyone imagines retirement the same way – some want to travel the world or move abroad, while others will stay in their current home or make the family cottage their primary residence. Retirees often continue to work part-time or volunteer in their communities, and many will downsize to a smaller and more manageable home. There are countless scenarios that depend on one’s lifestyle, health and financial situation, among other things. As these goals are identified, plans for retirement begin to take shape – and as most Canadians know, that requires substantial savings. That’s where part two comes in: having a retirement plan.
Making a retirement plan
A retirement plan is different from having ‘plans for retirement’ in that it is a formal documented strategy to tackle the practical elements of an individual’s retirement dream: what it will cost, how to plan for those expenses and furthermore, how one’s personal situation factors into their goals. It looks at one’s needs as well as their goals and accounts for both. It involves, which accounts (RRSP, TFSA etc.) to withdraw from to maximize after-tax income. It considers all public and private pensions available to an individual, evaluates their assets and of course, reflects their unique vision for retirement.
Retirement planning is incredibly personal. An individual with dependents (a spouse or dependent child/grandchild, for example) will have to plan differently than someone who is single or married with no dependents. Whether or not one’s spouse has retirement savings and/or a pension of their own is another factor. And finally, personal situations change over time. Many Canadians divorce (and sometimes remarry) or find themselves unexpectedly widowed. They add to their family or change career paths later in life. One could sell their business or property at a high value and find themselves with more money than expected (or experience quite the opposite, in some cases). A retirement plan looks at all possible scenarios and creates a strategy that best serves the individual, regardless of what the future holds.
Our team can help
Having a plan for retirement is the precursor to having a proper retirement roadmap, but the latter is critical to achieving the first. We look forward to reviewing yours at our next meeting.