I believe most people would agree with the above statement so why is it that 46% of Canadians do not have a financial plan? It just doesn’t make sense to me. Everyone is concerned about their futures yet why are so many willing to blindly go along and hope things turn out for the best. All I can say is good luck with that!
Hope Is Not A Very Good Strategy
A far more reliable approach to dealing with the uncertainty of your future is to be intentional. Create your own future, that is what our book Victory Lap Retirement is all about. We recommend that you invest the time now to plan your own Victory Lap, hopefully well in advance of leaving their primary career. You design the lifestyle you want and then start putting the pieces in place to make it happen. Once you know the type of lifestyle you desire, then you can make sure that you have sufficient financial resources to cover the costs of that lifestyle.
This approach is simple with the added benefit it let’s you sleep at night knowing that you have a plan. In life there will always be unexpected things that happen, but with a plan you can review and adjust if something does take a turn for the worse.
In the recent 2017 EBRI (Employer Benefit Research institute) Retirement Confidence Survey, 75% of people said they plan on working until at least age 65 with 38% expecting to work to age 70 and beyond. Some of these people will work longer for lifestyle reasons and others for financial reasons, if you read between the lines this means they have no other choice.
The EBRI also tracks when people expect to retire and when they actually retire and it’s alarming to see that most people retire sooner than expected. The study found that 76% of people retire before age 65 with the median retirement age of 62. Almost 40% retire before age 60 (vs. 9% expected) and only 4% worked to age 70 and beyond (vs. 38% expected). The reality, as confirmed by the EBRI survey, is that most people retire much earlier than they planned. This is why financial planners call the five to ten years before a planned retirement the “retirement risk zone”, because a person’s retirement plans and finances are vulnerable to unexpected changes which can include job loss, health issues, and eldercare.
What Is Your “Plan B” If You Are Forced To Retire Sooner Than Expected?
Instead of freaking out like many people you will be thankful that you did the work and can calmly move up the launch date of your planned Victory Lap. In fact there is a good chance that you will be smiling knowing that you will be okay. You can finally escape from that high stressed job you had to tolerate for so many years. Freedom is an awesome thing let me tell you!
You can use savings generated from your work in Victory Lap in the form of your personal savings (RRSP, TFSA, 401K and unregistered investment accounts) to cover you until your company, government and/or other pension income kicks in. CPP can start as early as age 60 and OAS once you hit age 65.
Part of your plan might include downsizing or moving from your principal residence to a more affordable community or smaller home, allowing you to turn the equity in your home into cash to support your financial needs. One word of caution in Canada converting equity from your principal residence which is tax protected into a tax bearing investment will create additional taxes so make sure you discuss this plan with your financial advisor. This is sage advice for all your financial planning.
I enjoyed writing this blog article as it reminded me about what I went through when I was packaged off from my 36 year banking job. The only regret I have is that it didn’t happen sooner. Life sure is sweet these days!