Life is starting to return to normal 16 months after COVID-19 turned our world upside-down. As we move towards a new normal, here are three key questions to consider about your retirement, whether you’re approaching retirement or you’re already retired.
1. When will I retire?
In the past, the easy answer was “When I turn 65.” But as a result of the pandemic, many people are reassessing their priorities in life, and thinking about moving forward their retirement dates. As you do, consider family and emotional factors. If you have a spouse, how will your retirement affect them? How will you replace the sense of purpose that your work may have provided? And, of course, how will you fund your retirement lifestyle for an extended period of time?
On the other hand, you may be considering a later retirement date. The pandemic has caused economic hardship for many people and, if you’re one of them, you may be thinking about working longer, or keeping your business going longer. Consider updating your financial plan to determine whether you need to adjust your target retirement date, and what financial strategies can help you get back on track.
2. How much is enough to avoid outliving my retirement savings?
The longer-term trend is that people are living longer, meaning retirements are lasting longer. With continued improvements in health care and medical breakthroughs, it’s reasonable to expect this long-term trend to continue or to even improve.
The key question is how much is enough to avoid outliving your retirement savings? Some of us tend to set nice, round targets, like $1 million or $5 million. The truth is, there is no easy answer. Most Canadians get by on less than $1 million, relying on government benefits to augment their savings.
Another consideration is where you might choose to live during your retirement – this can play a major part in determining how much you might need to live, as health care costs continue to rise.
3. How can I make the most of my retirement savings?
Your retirement savings may need to last longer, and work harder too. In previous generations, many retirees could put their savings into low-risk, interest-bearing investments like GICs and government bonds. However, interest rates continue to be very low. To help ensure your savings last 30-40 years after retirement, and it’s appropriate for your risk tolerance and capacity, you may need to consider other investment options offering long-term growth potential.
It’s also important to be tax-smart by developing appropriate strategies around and leveraging the benefits of tax-sheltering offered through Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs); and, the unique and growing advantages of Tax-Free Savings Accounts (TFSAs).
Talk to us to learn about how we can help you build a plan to achieve the retirement lifestyle you are seeking.
This information is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ® / TM Trademark(s) of Royal Bank of Canada. Used under license.