ADJUSTING YOUR RETIREMENT PLAN
Contrary to popular belief, retirement plans should not be a “set it and forget it” investment. Your retirement plan accounts for your financial well-being in your later years, which makes it vital to evaluate your plan’s effectiveness regularly. Whether you’re well underway in your savings plan, or you’re ready to stop working and start enjoying your retirement, the most important thing to remember is to stay flexible & adjust when needed.
Even the best-laid plans experience setbacks, and retirement savings plans are no exception. Have you reviewed your investment portfolio lately? Are you still on track for your retirement goals? You may be surprised to find that your plan is outdated or did not factor in your changing life circumstances, goals or needs as you draw nearer to your retirement.
A FEW SIGNS THAT YOUR PLAN MAY NEED ADJUSTING:
1. Your savings are falling behind
It may be shocking to know that as many as 35% of Canadians between the ages of 45- 65 have little or no retirement savings, and as much as 50% have no idea how much they’ll actually need to save in order to retire comfortably. Additionally, Canadians are living longer, which means that your financial plan should be able to fund approximately 30 years of retirement so for this reason you want to be sure you are saving enough. If your plan has you set to retire at 65, are your current savings enough to support you financially? If not, you may consider retiring later than originally anticipated, acquiring a part-time job during retirement or investing more into your portfolio during your working years. Alternatively, if you are a business owner, you could have assets that you could convert into more savings when the time comes to sell your business. Have they been included in your plan?
2. Rising living expenses
Have you accounted for the ever-rising cost of living, and how your health and other extenuating circumstances could impact your retirement? Home repairs, car purchases, travel, or the cost of prescriptions, for example, can be crippling to your retirement income if you’re not prepared. It’s impossible to predict the future, but your savings plan should leave you with enough room to handle your expenses stress-free.
3. Rising living expenses
Tax-deferred savings vehicles such as RRSPs are a great way to help your contributions grow during your working years, but in order to truly benefit from investments, they must be bringing in returns. If your investments aren’t seeing the growth you need to make an impact in your retirement, you will want to adjust your strategy. This can come in the form of a new or updated investment profile, contributing more into your retirement savings, or working longer than originally intended.
4. Change in life events
Your retirement plan will need to be updated if you or your spouse have experienced a significant change in your health, experienced an early job loss, received an inheritance or are contemplating divorce. Any of the changes in life will require updates to your plans to ensure you will be able to still maintain or improve the retirement lifestyle that you’ve been planning for.