If You’re Close to Retirement, This Year Calls for a Review

January 25, 2023

During times of economic uncertainty and market volatility, investors with a long time horizon can take some solace in the fact that they have time to ride out current conditions. But what if you are looking to retire now, or in just a few years?

Test your assumptions

The good news is that any retirement plan has a number of variables that you can adjust to keep your strategy relevant under all kind of financial environments. Why not take some time this year to revisit those assumptions and make sure they still apply? But remember, focus on the retirement you want first, followed by the financial strategies that will get you there.

When do you want to retire? What is your target age for retiring? How firm is that? Is it related to tradition or company policy, such as age 65? If working just a little bit more, perhaps one year extra, could improve your financial situation in retirement, would you be willing to make the sacrifice? If you’ve decided that now is the time, then move on to other aspects of your plan to make it so.

Will you work in retirement? It may seem like a contradiction, but many Canadians want to work after they have formally retired. According to a survey in January of this year, 50% of Canadian pre-retirees say they plan to work in retirement. Why? Sixty-four per cent said it was to stay physically active and 43% said it was to generate income.1 If your post-retirement work generates income, be sure to factor that into an updated plan. Be realistic: some retirement jobs are hobby businesses and won’t make much of a difference to your retirement income projections.

Has your attitude towards risk changed? When investment markets experience a significant correction, as happened in March this year, we all get a “real world” test of our risk tolerance. How did it feel to experience this so close to your actual retirement? Do you recall the “expected rate of return” assumption in your retirement plans? If so, consider whether this still applies. Do you need to adjust it downward? Conversely, did you take the correction in stride? You may want to consider if a higher target return rate is appropriate, and what it could mean for other aspects of your plan, such as the target date or an upgrading of your retirement lifestyle goals.

How much income do you need? The traditional rule of thumb is to plan for 70% of your pre-retirement income after you retire. But this figure is too general to be of much use in your unique plan. Many retirees live on much less, but some require much more – especially if they have big plans in retirement such as extensive travel. Did living through the lockdown challenge some of your assumptions about your own lifestyle and the income you’ll want to support it? If your income was decreased during lockdown, how did you feel about that? For some, a required adjustment to spending was easily adopted; for others less so.



Putting it all together

An effective retirement strategy is a bit like a puzzle that comes together to enable you to live the life you want. A change in one variable may affect the others. For instance, an increase in your targeted rate of investment return may allow a higher income which, in turn, may fund a more enjoyable lifestyle.

1 Ipsos, RBC Retirement Myths and Realities Poll, published January 16, 2020. http://www.rbc.com/newsroom/news/2020/20200116-rrsp-poll.html

Insurance products and services are offered by life insurance licensed advisors through Chevron Wealth Preservation Inc., a wholly owned subsidiary of Echelon Wealth Partners Inc. This material is provided for general information and is not to be construed as an offer or solicitation for the sale or purchase of life insurance products or securities mentioned herein. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please seek individual financial advice based on your personal circumstances. Please note that only Echelon Wealth Partners is a member of CIPF and regulated by IIROC; Chevron Wealth Preservation is not.

Forward-looking statements are based on current expectations, estimates, forecasts and projections based on beliefs and assumptions made by author. These statements involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements.

The opinions expressed in this report are the opinions of the author and readers shoauld not assume they reflect the opinions or recommendations of Echelon Wealth Partners Inc. or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. These estimates and expectations involve risks and uncertainties and are not guarantees of future performance or results and no assurance can be given that these estimates and expectations will prove to have been correct, and actual outcomes and results may differ materially from what is expressed, implied or projected in such forward-looking statements. Echelon Wealth Partners Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.