Retirement means something different to each of us and is likely different from your parent’s retirement. Peter Laslett (Cambridge Professor) in 1989 published a book called “A Fresh Map of Life”, establishing a new “Third Age” in our lives. This new stage is a block of time in our life before we face health issues, during which we can define our own view of what we aspire to in retirement, focussing on personal self-realization and fulfillment. To get the most out of your “Third Age”, there are things you should do before you reach it.
1 Establish your goals for your retirement.
Having a stated goal or vision for your retirement is the first step in making sure you achieve what you want out of your “Third Age”. You probably have “pent up” demand for certain activities whether sports, travel, family time or engaging in new interests. Maybe you will transition slowly into retirement, through consulting or part-time work. You will need to provide structure to your day, goals to achieve, mental and social engagement. Most of us will be able to shape this third age to our own interests and enjoyments, at-least to some degree.
Discuss with your spouse/partner what each of your goals are and how you would like to spend your time. Maybe one of you is retiring before the other, how will that affect things? Take the time to understand and respect each other’s goals, and find the balance between each other’s desires and any constraints, whether time, interest, health or financial.
2 Medical Benefits
Most Canadians have access to good medical benefits through their employment. Take advantage of these benefits while you are still employed for yourself, your spouse and any dependents on your health plan. Get a complete physical and deal with anything that needs to be addressed while you’ve got the support of the company’s paid medical benefits. Access your company’s EAP (Employee Assistance Program) for any advice you might want; this is one of those underutilized company benefits that you don’t value until you use it. Once you’ve left the employment world, it can be difficult to find the right expert to help you out.
You will need to consider how you want to replace those medical benefits after retirement, both before and after the age 65. ManuLife and SunLife provide an insurance benefit product that mirrors your employment coverage if you sign up within a short period after retiring (usually 60 days). Many professions offer access to medical insurance through their professional organizations. Based on your personal medical history, investigate products for both traditional hospital/drug/dental/eye and also newer services such as physiotherapy, etc. Consider what you may need now and what you may want after the age of 65 to complement public medical coverage.
3 Company Car vs Personal Car
If you have been fortunate enough to have a company car during your employment, you are going to have to get a new car when you are finished your employment. Sometimes your employer will be willing to sell you the company car for book value or a reduced amount. Consider this option particularly if the car has been well cared for and under your control. Remember though, there is usually a taxable benefit associated to buying a company car at below market value.
4 Other Employment Benefits
You may have other company benefits through your employee. Maybe you have life insurance, disability insurance, or critical care insurance. In most cases these will expire when you retire. If you need them after retirement, it’s usually better to purchase them when you are younger. The time to investigate them is several years before retirement to decide what you want to replace with your own insurance coverage that will continue after retirement. Not everyone needs insurance; consult a trusted professional to figure out what’s right for your situation.
Professional dues and continuing education is frequently covered by your employer. Many professional associations offer reduced annual dues with retirement. If you plan to continue working after retirement in your profession on a part-time basis, you will need to include these costs in your plans.
5 Major/Minor House Repairs
Take an inventory of whatever major or minor house repairs need to be done and get them done before you retire. Maybe the roof is approaching 20 years+; maybe you need to modernize the bathrooms or kitchen, maybe the backyard needs a new deck. Fit these unusual expenditures into your last few years of employment while you still have regular money coming in so that you won’t have any major bills in the first several years of retirement. If there are any expensive surprises, you want to address them before you retire and have options on how to pay for them.
6 Knowledge Transition
If you have been with a company or in a role for many years, maybe even more than 10 years, you’ve got a lot of company history, practices, and accumulated knowledge that has helped make your team and company successful. Share this accumulated knowledge before you retire. Develop a plan with your team and your manager for knowledge transfer. Sharing this knowledge in a structured manner acknowledges your contributions and better equips your team to be successful after you leave. Instead of your retirement being an on/off switch think of it as a gradual transition during which you will prepare yourself for your next life stage, knowing that you are leaving a capable team equipped for success.
7 Update your Wills/Power of Attorney
Many of us prepare our wills and power of attorneys’ once and then forget about them. They should be updated regularly for both changing legal situations and changing personal decisions. If you haven’t updated for your will for 8-10 years, this is the time to have your lawyer review it for anything that needs to be updated.
8 Have a Personal Financial Plan Prepared
An in-depth personal financial plan is the road map that will consider your combined financial assets, government and employment retirement benefits. It will determine the best way to meet your life goals with the resources at your disposal. It can help you value lump-sum payments, deal with stock options or other employment or retirement incentives and determine the most tax efficient investment option. It will identify actions to minimize your tax bill and maximize your government benefits (timing of CPP, minimizing OAS clawbacks, etc). It will help you reduce risks within your portfolio to match your lifestyle needs. It will give you a plan for annual withdrawals from your investment resources to meet your life goals and life span expectations. And it will identify tax efficient estate distribution, whether within the family or to your favorite charity. Have a financial plan prepared by a professional to ensure you get insight into how best to use the resources at your disposal to meet your financial goals in retirement.
9 Practice Financial Discipline
If your financial plan calls for you to reduce your annual expenses after retirement, practice this discipline for a couple of years before you retire. Test your assumptions for reasonability, whether its about the frequency of eating out, reduced clothing bills, etc. Make sure you will have a comfortable lifestyle and the discipline to stick within your budget. Use your last couple years of employment to pay off your mortgage if you haven’t already or to pay off your credit cards every month. Practice financial discipline before you retire so you will be well prepared to live within your budget during retirement.
10 Enjoy Life
Enjoy your retirement. Your “Third Age” is your time to enjoy life in whatever way suits you and your spouse/partner best. Look after yourselves, be it your health or your wealth. And Enjoy.
There are a significant number of books available on how to plan for your retirement. Some that I have read and can recommend include:
What Color is Your Parachute? For Retirement – John E Nelson & Richard N Bolles
The 7 Most Important Equations for your Retirement – Moshe A. Milevsky
Don’t Just Retire Live It, Love It! A Personal Planning Guide To Enhance Life After Work – Rick Atkinson
Written by Gail Cosman, CA, Senior Wealth Advisor, Tridelta Financial