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A map can be invaluable when you’re preparing for a journey, especially
one you’ve never taken before. It can help you avoid wrong turns that
can cost precious time and cause needless headaches.
This common-sense approach to travel also applies to planning your
retirement – which itself is quite the journey. Although the word
“retirement” may mean something different to everyone, the better the
road map, or strategy, the more likely you can live the retirement
lifestyle you’ve dreamed of.
As a starting point, you might want to write down answers to two basic
questions that will underpin your strategy: What do I want in
retirement? And how will I pay for it?
In answering the first question, you need to take a careful look at not
just the day-to-day expenses you expect to incur, but other retirement
goals you may have, such as funding your grandchildren’s education,
helping support other family members or paying for a long vacation or a
second home.
Then you need to see if your finances will get you where you want to go.
It helps to detail all your sources of income, including government
retirement benefits, pensions and annuities. You also need to consider
whatever part-time employment income you may expect to earn. And of
course, you’ll have to tally up your assets. This encompasses all of
your savings and investments, including stocks, bonds, mutual funds and
GICs, within both your registered and non-registered accounts.
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Then you need to itemize your retirement expenses. These can be broken
down into two categories: necessities and discretionary expenses.
Necessities include your mortgage, utilities, groceries and taxes, while
travel and entertainment are considered discretionary.
This analysis can help determine if your sources of income can cover
your retirement needs or whether there are shortfalls that must be
addressed. For example, you may determine that you can pay for your
necessities with outside sources of income, such as pensions, which
might give you more flexibility with discretionary items. On the other
hand, you might determine that working part time or delaying retirement
is needed to boost your income so you can pay for those discretionary
expenses while in retirement.
Remember, if you don’t know where you’re going, you could end up going
nowhere or, even worse, heading in the wrong direction. A written
strategy can start your retirement on the right path and help keep you
there.
Speak with your financial advisor for help in crafting your retirement
strategy and to see if everything is on track, or whether you should
consider taking some actions now before it’s too late.
This is Jim Scott, your Edward Jones advisor. Edward Jones, Member
Canadian Investor Protection Fund.
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