Retirement Planning – Where Do You Start?

If you were like me, I was not overwhelmed by the prospect of retirement. I retired and then I realized I had no plan and no idea of what I should do next. I was overwhelmed so we went away for 8 weeks to Australia to visit family and friends. While there I did not think about the fact I retired but I did start thinking about what I should do next. When I came back to Canada I realized that I had retired too soon and I missed work. I was lucky and was able to return to work and I worked part-time and full time for eight years before I decided in 2014 to retire full time. By that time I had another purpose and ideas about what I needed to do with my time. I still am doing it and enjoying the freedom I have to explore my writing, my workshops and my time with family and friends.

I realized that there are only two sides to retirement planning.

1) The financial side is established financial planning where you determine if you have enough money and where your income will come from each year for the rest of your life. I had done that before I retired so I was not worried nor am I worried about running out of money before I die.

2) I think the more important side of retirement is the personal/emotional side is where you answer the question: What do I want to do with the rest of my life? 

If you think of money as a tool that should enable you to live the life you love, create memories you treasure, and build legacies that express your deepest values then money becomes not important once you know you have enough. The problem is most of us do not have a clear picture of what we really want. Find someone, who can guide you through life’s transitions and help you figure out how to live a retirement that will leave you without regrets, doing this can really help you make the transition into retirement.

Most of us as we think about retirement become very focused on traditional financial planning. To that end, we use various programs to determine the likelihood of us outliving our money. The output of this planning will only be as good as the data you put into it. That’s called the “garbage in, garbage out” principle. Going through this process is important so you need to have  reasonably accurate numbers in the following areas:

Planned Spending:

• Core retirement living expenses – How much you plan to spend in after-tax dollars each month/year, and

• Large infrequent expenses – This includes items such as cars (if you pay cash), home remodelling/updating, etc.

• One-time expenses – a child’s wedding, vacation home purchase.

• Also factor in whether or not you have expenses that end during retirement (e.g., mortgage)?

• Financial assets – You will need a list of all your accounts (e.g., TFSA and RRSP, or for my American friends their 401k, IRAs, cash in the bank, real estate) and all your liabilities (mortgages, car loans, consumer loans, etc. 

You should also understand your risk tolerance, preferences, and past experiences with money. It is impossible to know exactly how much you will spend five or ten years from now. Don’t worry. Your initial plan is not going to be perfect. The goal is to forecast as close as reasonably possible and then update the plan based on actual spending and actual investment returns. Financial planning is not a one-time project but an ongoing process, kind of like landscaping (but less painful).

In a future post, I will talk about why we do what we do reveals what is in our hearts, and that is where true motivation and fulfillment lie and why that is important for retirement planning.