Tag Archives: Financial Independence

5 planning options to help you reach your Retirement goals

Posted By Robb Engen | September 5, 2017

There are lots of unknowns when it comes to retirement planning. Most of us focus on how much we need to save for retirement without giving much thought as to how much we’re going to spend in retirement.

A $1 million dollar nest egg can provide you with $30,000 to $40,000 to spend each year with reasonable assurance that you won’t run out of money. But if your ideal retirement lifestyle costs $60,000 per year, your million-dollar portfolio won’t be enough to last a lifetime.

Once you determine your magic spending number, the rest of the variables start falling into place. The earlier you can identify the amount of income you need to live the retirement you want, the easier it is to make your retirement plan and adjust course, if necessary.

Let’s say you’ve analyzed your retirement income needs and find, based on your current financial situation, that you won’t be able to fully fund your desired lifestyle. What to do?

Here are five retirement planning options to help you adjust course and reach your retirement goals:

1.) Reduce your lifestyle

A $60,000/year retirement might be out of reach based on your current situation, but maybe reducing your goal to $45,000/year can still provide a great lifestyle in retirement.

This lifestyle adjustment could mean travelling less often, making sure you retire debt free, downsizing your home, replacing your vehicle less often, reducing your hobbies, or a combination of all the above.

Don’t forget to include government benefits such as CPP, OAS, and/or GIS when projecting your retirement income. It’s worth sitting down with a retirement planner to figure out the best way to draw down your assets and when it makes sense to apply for CPP and OAS.

2.) Work longer

It can be difficult to picture yourself working longer once you’ve got retirement on the brain, but a few extra years on the job can drastically alter your retirement projection.

The longer you work, the more you can save (or add to your pensionable service if you’re so lucky to have a workplace pension). But also the more years you’re working and earning a paycheque the fewer years you have to withdraw from your nest egg.

Are you healthy and willing to grind it out at work for a few more years? If so, you might be able to reach that $60,000/year retirement goal after all.

3.) Earn more return from your investments

This is a tricky one because you might take it to mean investing in riskier assets (i.e. an all-equity portfolio), when in fact you can earn higher returns by reducing the overall cost of your portfolio. That’s the first place to start.

Imagine your $300,000 retirement portfolio is invested in a typical set of mutual funds that together comes with a management expense ratio (MER) of 2 per cent. The cost is $6,000/year but you don’t see the charge directly; instead, it comes off your returns.

Switching to index funds and going the do-it-yourself route might reduce your costs to 0.5 per cent, or $1,500 per year. That’s an extra $4,500/year staying in your retirement account instead of going into the hands of your advisor.

There might also be a case for increasing the risk in your portfolio. Say, for example, you tend to hold a lot of cash in your portfolio: you’re not fully invested. Or you hold a bunch of GICs and other fixed income products.

Dialling up your investment risk to include a portion of equities could help you achieve an extra 2-3 per cent per year. The power of compounding can make a huge difference to your retirement portfolio and holding even a small portion of equities in retirement can help your nest egg last longer.

4.) Save more

This one is so obvious it should be first on the list. If you’re not able to fully fund your desired retirement lifestyle based on your current projections then you need to save more.

Hopefully your final working years can give you the opportunity to boost your retirement savings. Big expenses, such as paying down the mortgage and feeding hungry teenagers, are behind you.

But an empty nest and paid-off home might tempt you to increase your lifestyle now rather than doubling-down on your retirement savings to boost your lifestyle later. That’s fine; see options 1-3.

That said, there’s no better time to enhance your nest egg by maxing out your RRSP contributions, including unused contribution room, and doing the same with your TFSA, in the years leading up to your retirement date.

Be mindful here, though, of strategies to reduce your taxes in retirement. It makes little sense to go wild making RRSP contributions in your final working years without considering how withdrawals will impact taxes or OAS clawbacks in retirement.

5.)Supplement your retirement income

Much like working longer can increase your nest egg, supplementing your retirement income with a part-time job derived from a passion or hobby can prolong the life of your portfolio.

How to plan for a Victory Lap Retirement: Advice from the authors

Posted By Financial Independence Hub | September 2, 2017

By Richard Eisenberg, Work Editor, Next Avenue.org

Special to the Financial Independence Hub

Mike Drak and Jonathan Chevreau, authors of the new book, Victory Lap Retirement, are on a crusade to change the way society thinks about retirement. Their book is actually, as Drak says, “a retirement book about not retiring.”

A Victory Lap Retirement — Drak, 62, coined the term — means spending years combining work and leisure between the time you quit a full-time job and stop work entirely. In the book, the authors say a Victory Lap Retirement lets people change from a “surviving mentality” to a “thriving mentality.” The Toronto-based duo would know: They’re both taking Victory Laps right now.

Previously, Drak spent nearly 40 years working in commercial banking. He quit in 2014 to protect his health and personal well-being. Now, when he works, he is a retirement coach, public speaker and writer (next up: a retirement transition guide). Chevreau, 64, is a veteran financial columnist, blogger and author of the book Findependence Day; I interviewed him for Next Avenue in 2013 about “findependence” — his term for having enough money so you can work because you want to, not because you have to. He still writes about personal finances, but on his schedule.

I recently spoke with Drak and Chevreau about how and why to have a Victory Lap Retirement. Highlights: Continue Reading…

What to expect when applying for CPP

Posted By Jonathan Chevreau | July 28, 2017

What should you expect when applying for CPP (Canada Pension Plan) benefits? As my latest Retired Money column for MoneySense explains, age 64 is not just the age the Beatles ask the question “Will you still need me, will you still feed me?”

It’s also the age when Service Canada can be expected to reach out to you with a letter to your home address, giving you details of how the Government of Canada will feed you with CPP benefits once you turn 65 (or as early as 60 should you choose reduced early benefits).

But fear not, Ottawa will also still need you, in the form of taxable revenue: like Old Age Security, CPP benefits are fully taxable.

The full piece can be accessed by clicking on the highlighted headline: CPP application: Here’s what to expect during the process.

The piece’s focus is on the actual application process but does touch on the age-old topic of the optimal age to start receiving benefits: which can be anywhere between age 60 and 70. The Hub has tackled this several times in its almost three years of existence. Use the search engine to the right and enter CPP, or click here.

Try the Canadian Retirement Income Calculator

The piece also links to a useful web tool provided by Service Canada: the Canadian Retirement Income Calculator, which you can access by clicking on the highlighted text.

Can you retire on a million dollars?

Posted By Robb Engen | July 26, 2017

In your 20s and 30s, retirement is so far away that you can barely see it on the horizon. The best way to get there is to save what you can afford – say 10 per cent of your income – and then readjust your financial compass as you get closer and have more information.

You might start the journey with the idea that you need a million dollars or more once you reach your destination. To get to one million by age 65, a 30-year-old would need to save $8,500 per year for 35 years, assuming a 6 per cent annual return.

Saving for Retirement

It’s not easy to save $700+ per month in your thirties. Competing priorities like a mortgage, car payments, and raising children often means that retirement savings are put on hold. Put off saving until you reach 40 and you’re now faced with the daunting task of saving more than $1,400 per month for the next 25 years to reach that million dollar mark.

Some might feel it’s prudent to pay off the mortgage and max out children’s RESPs before ramping up their own retirement savings. By age 50, most of those obligations should be taken care of which should now free up significant cash flow to save for retirement. It’ll need to be significant to reach a million. With only 15 years to go now, compound interest is not on your side, and so you’ll need to save nearly $3,400 per month – or $40,000 per year – to get to your retirement goal.

A tempting alternative at this point is to adjust your expected rate of return. After all, with an 8 per cent return you’d only need to save $2,800 per month, and at 10 per cent you’d need to put away less than $2,400 per month.

But the more realistic approach would be to adjust your expected retirement age and then figure out if a million dollars is really the amount you need to enjoy a comfortable retirement. You’d be surprised to learn you can live off much less.

Millennial Money: How Daydreaming can help you Budget

Posted By Helen Chevreau | July 18, 2017

“If you can dream it, you can achieve it” is a saying more often seen on an inspirational Instagram account than in a financial blog. While I am loath to agree with the sentiment of a mere bumper sticker, dreaming really can be an excellent tool for those struggling to get their financial futures in order.

I began to think about the value of dreams in achieving financial freedom a few months ago. From there I decided to do some research on the subject. What is it about having defined dreams that can help solidify steps needed to achieve goals? When, if ever, is dreaming going to hurt instead of help?

I came across this blog post from ‘The Lady in the Black’ site, which includes a variety of guest bloggers all chiming in with that they consider the true value of using our daydreams to achieve our financial goals.

It’s safe to say we all love a good daydream once in a while. It can be an excellent way to escape the day-to-day uncertainty in our lives. More importantly, however, daydreaming can be an opportunity to really discover what is most important to your future financial wellbeing, and can even help you plan a concrete goal for that future.

Share this:

Share this:

Share this:

Share this:

Share this:

Sign up for our Daily Digest E-Mail!