- Can I start investing today and retire comfortably at 65 or earlier?
- Can I afford to keep my lifestyle?
- Can I retire debt-free?
Good news is, if you’re 50 today you still have 15 years to go! You can still take control of your retirement steering wheel. In fact, you can now take advantage of what are likely your highest income years to retire rich. And, you’ve likely made your largest purchases (homes/degrees/cars) and your children are likely off to school or even out of university.
If this sounds like you, these are my top 5 planning moves:
1. Whatever your reality, start by understanding it.
- Do you have savings, retirement, or stock plans with your current or past employers?
- While working in Canada, you likely contributed to government benefits like CPP – how much can you expect to get from that?
- Have you made any investments in GICs, mutual funds, stocks, real estate, or precious metals? Are you paying off or have paid off a home?
- Would you be entitled to Old Age Security (OAS)? (Generally yes, at age 65, if you have lived in Canada for 10 or more years)
- If you’re an immigrant, what assets do you have abroad?
ScotiaBank’s famous tagline, “You’re Richer Than You Think” probably applies!
Understand your advantage from the start. Gather your accomplishments on a piece of paper – and make it visible! This will help motivate you to further plan your financial security.
2. What does retirement really look like?
To know whether you’re on the right track to achieve a wealthy retirement, it’s critical to define what is really important to YOU at that stage of life.
Sure, everyone wants a huge home, a boat, and lots of money to travel – but what will make you HAPPY? No matter how wealthy you are, there will be tradeoffs you’ll need to make. For example, you may have to forgo the boat to live in your desired community. Or, you may have to trade-in the house for a condo in order to enjoy travel and/or spend time with your grandchildren.
Talk about this with your spouse and loved ones. Better yet, put pen to paper. Create a list of your objectives and rate them in order of priority. This won’t be easy, but it will pay-off (maybe even literally!).
By walking my clients through this process, I often see a beautiful clarity emerge. And it’s followed quickly by confident decision-making power and focused action. You’re off to the races!
3. Understand what the gap is.
Now that you know what you have and what you want, figure out if you’re on the right track. This involves some serious number crunching.
If you are comfortable with a DIY approach, there are a ton of online calculators out there, one such as Razor Plan (http://razorplan.com/).
If you are more comfortable talking about your options with a specialist, it is probably a good idea to engage an independent Certified Financial Planner who can help you. They’ll not only punch in the numbers for you, but they’ll help you understand what you can get from government programs like OAS, how much you’ll pay in taxes, all while factoring in inflation and life expectancy.
Understanding the gap can help you better gauge the gap between your “on-track” areas and your “needs improvement” areas.
Avoid Financial Pitfalls by Finding Your Blind Spots
4. Understand what could throw you off.
Whether or not you are a DIY investor, this is easily the most overlooked step of anyone’s financial plan.
For any working person, especially if you’re accelerating toward retirement, the last thing you need is for a serious health event to prevent you from going to work and earning money, or a significant damage to a property that takes up all your savings.
More catastrophic than the short-term unexpected expense is the opportunity cost of that money to get you to your retirement goals. In other words, the $100 you weren’t able to save this year, will cost you $103 or more in additional savings next year just to catch up! (Assuming a modest 3% growth rate on your investment).
IT’S IMPORTANT TO TAKE STOCK OF THE FOLLOWING MAJOR RISKS:
- Disability caused by an accident or illness
- Serious illness in the family
- Major unexpected damage to your home or property
- Caring for an aging parent
A Certified Financial Planner can help you evaluate your actual financial risk. This involves understanding both the probability and severity of the risk; how you’re currently positioned to deal with it; and what your options are.
For example, someone who earns a significant portion of their income through overtime or bonuses will be significantly underinsured with just their work disability benefits, which pays out only up to 66% of their base pay.
The greatest investment plan is only as good as the weakest link.
5. Make a two-degree shift. Then, repeat!
This is my favourite step of all! Being a math enthusiast and having been trained as an engineer, I do believe in the power of numbers. A simple two-degree shift can really change the trajectory of your retirement!
And, although it will feel like it’s never enough at first, making that change – and knowing how superfluous of an impact it will make – will get you excited to do more!
TAKING ACTION CAN BE TOUGH IN THE FACE OF A DAUNTING GOAL. GET A CERTIFIED FINANCIAL PLANNER WHO WILL NOT ONLY GIVE YOU THE NUMBERS AND TALK OVER YOUR HEAD, BUT SOMEONE WHO WILL BE YOUR CHEERLEADER ALONG THE WAY.
ARE YOU, OR SOMEONE YOU KNOW, 50 AND HAVE/HAS NO RETIREMENT PLAN? WANT TO GO OVER YOUR OPTIONS WITH A CERTIFIED FINANCIAL PLANNER? PLEASE DO SHARE – SEND ME AN EMAIL AT SHYAM@GROWYOURWEALTH.CA!
If you need an accountability partner, or an objective review of your situation, click here to schedule a 30-min virtual coffee!