Hello everyone, and welcome to the Retiring Canada Podcast. In today’s episode, we're going to discuss the five important steps to planning a secure retirement.
Specifically, we will cover:
- The 5-step critical path to a secure retirement.
- How a standalone decision can derail your retirement.
- The importance of ongoing monitoring and adjustments when life throws you a curveball.
- Lastly, a few action items for you to consider.
You’ve worked hard your entire career. Maybe you're a medical professional who has amassed wealth inside a professional corporation, an experienced tradesman who diligently contributed to a pension plan now exceeding $500,000, or a business owner who focused all efforts on building a business to sell and fund your retirement.
No matter how you accumulated wealth, there is a common goal: a secure retirement without the worry of running out of money.
However, the path to retirement inevitably has its ups and downs. In the first few years of retirement, you might experience a health event that triggers substantial long-term care costs, an economic downturn that stifles your retirement nest egg, or a drop in interest rates affecting secure sources of income.
Helping Canadians navigate these hurdles led me to become a retirement planner, specializing in financial advising for retirement.
I've sat with hundreds of families over my career, and this experience, combined with the many families we've helped retire, led to the creation of the Fundamental Retirement Plan (FRP).
The FRP is a structured process that results in a final retirement plan customized to your specific needs and concerns.
It covers five key areas critical to retirement success, which we will discuss in today’s podcast.
Our team of advisors at Fundamental Wealth and Harbourfront developed this process in conjunction with our in-house investment team.
This means you have checked off the critical boxes we've identified over the years as essential for retirement success. The plan includes a timeline for execution and a way to monitor progress, allowing us to make real-time adjustments to keep you on track.
One big concept in retirement planning is that every decision you make is interconnected. When you take CPP benefits, how much you spend, and which accounts you withdraw from all impact your account balances and how long your money will last.
These are the big questions in retirement:
- Do I have enough?
- How long will my money last?
- If something happens to me, will my family be okay?
- How do I pay less tax?
Often, people come to us one, two, or three years into retirement, thinking they're on the right path because things are going well. But without visibility into how today's decisions impact future account balances, it's easy to become complacent or falsely secure.
Your path may seem smooth now, but it can diverge into running out of money (the red) or thriving and growing (the green). The FRP's purpose is to identify who you are, what's important to you, and how to achieve your retirement success.
The FRP includes investment allocation, generating income, reducing taxes, addressing healthcare, and estate planning.
The FRP is not a one-time plan but a continuous process to monitor and adjust as needed. This relationship allows visibility into the impact of decisions and adjustments based on circumstances.
External events like a stock market crash or internal decisions like spending more on a vacation home can impact your retirement trajectory. Our relationship ensures peace of mind and parameters for making decisions to stay on track.
Now, let's discuss the five steps of the FRP:
Step 1: Allocation
After understanding your goals and defining retirement success, we recommend spreading your money across different asset classes, such as stocks and low-risk securities. Think of this as balancing ingredients in a recipe. The wrong allocation could mean running out of money, returning to work, or lacking funds for healthcare or your spouse.
Step 2: Income Planning
We aim for multiple streams of income in retirement, ideally living off interest without touching the principal. Understanding where income comes from—retirement accounts, non-retirement accounts, employer pensions, CPP, OAS—is crucial as it determines tax obligations. Our dynamic plan adjusts income based on your plan's trajectory, known as your Retirement Income Guardrails.
Step 3: Tax Planning
Tax planning is critical but follows after knowing your investment allocation and income sources. This ensures we provide the best advice to maximize your income while minimizing taxes.
Step 4: Long-Term Care Planning
Long-term care costs can derail retirement, especially if one spouse needs care while the other remains independent. We include solutions in the FRP to manage these costs without escalating premiums and explore provincial programs and benefits.
Step 5: Estate Planning
Many clients get estate documents from their lawyer but never inform us. We've integrated estate planning into the financial process. Your financial planner should lead this process, ensuring assets are retitled correctly, beneficiaries are updated, and having conversations about the disposition of your estate. We aim to prevent issues like your money going to your children's future ex-spouse.
These five steps are customized for you, providing actionable items to improve your retirement peace of mind, future visibility, transparency, and clarity. The FRP offers a timeline for execution, a structure for monitoring your retirement, and ensures your plan stays on track for a successful retirement.
To learn more about the Fundamental Retirement process, visit fundamentalwealth.ca.
That will do it for today! Here’s your action item: If you are nearing retirement or recently retired and haven't checked all these boxes, make sure you do. Remember, all your choices are interconnected, and making independent decisions on each area can have disastrous consequences.
For links and resources discussed, check the show notes or visit retiringcanada.ca.
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All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.