Making a financial plan and setting yourself up for success in retirement can seem complicated. We asked Paul Shelestowsky, Senior Wealth Advisor, to break it down for us. Here are three key rules Paul has for creating and revisiting your plan.
1. Plan early
The sooner you create your plan, the more time you have to make changes.
A well-thought out plan, developed with an advisor, can help you achieve peace of mind. With that foundation in place, you can run different scenarios and see how certain factors can affect your long-term goals. I always tell prospective Members who are thinking of working with me that even if you're five years from retirement, you should get a plan in place. Making changes even five years before retirement is better than making changes five years after. In fact, you should have a financial plan even before retirement is on the horizon - peace of mind is important at any stage. However, the closer a Member gets to retirement, the more we tend to revisit their plans.
2. Stay on top of your plan
A plan is important even if you think you're in great shape.
I work with many Members who are already retired with healthy portfolios. Some feel that a plan isn’t necessary because they're in good shape. I advise them differently. They may be fine financially, but other problems can arise. For example, a Member may have a RRIF that's taxable as income to their estate. How do we manage that situation so the estate is in a cleaner financial position? Members with healthy portfolios may not run out of money, but there are other important considerations to maximize retirement funds.
This is why we revisit plans regularly. When I see people on an annual basis, it’s more of a check-up than a deep dive. I always ask if there are big changes to a Member’s financial situation, like inheritance, job loss, divorce, death of a spouse, or giving money to children. Any of these events requires us to revisit goals and review the impact on long-term results. The sooner we act on new information, the better we can adjust the plan - so talk to your financial advisor right away, instead of waiting for them to check in with you.
3. You can change your plan
Your life changes - it only makes sense that your plan will change too.
Once you have a plan, you can run different scenarios based on your financial situation in retirement. This is a great tool for making important decisions and key changes to your plan. How you manage your money in retirement is probably the most important decision you will make, so it’s critical to put effort into that decision. For example, I’ve often dispelled myths about the true reach of CPP and OAS for people who haven’t saved much for retirement because they believe government support will be enough. Once we make a financial plan and run the scenarios, they're able to realistically determine if they can live on what they'll receive from the government and we can make any necessary changes.
Also, I highly recommend getting into the habit of revisiting your plan regularly so that adjusting it becomes second nature. This way, you won’t be thrown off when you have to account for big life changes. Plus, paying attention to your plan can have big perks. I’ve had instances where I’ve identified that a Member could retire six months earlier than expected, and needless to say he was over the moon with that news.