Are you fearful of what your retirement will look like?
If so, you’re not alone. Many Canadians are fearful of what their retirement will look like because there is so much unknown of what it will look like.
Some of the biggest retirement mistakes are caused by a simple lack of communication and planning. Whether you are currently retired or still a few years out from that magic date, take a few minutes to read over the most common mistakes and see if any of them sound familiar to you:
Only one spouse is handling the finances - It’s very important that both partners actively participate in financial matters. If only one spouse handles everything and they become ill or pass away, it can be an tough shock to the surviving partner in an already difficult time.
You assume that your estate will be “simple” – Every couple needs to have a will, power of attorney and a representative agreement no matter how straightforward you feel your affairs are. Just because you are married, it doesn’t mean your spouse can automatically make decisions on your behalf if you are unable to.
Also, think very carefully about who you appoint as your executor. While many people assign an adult child to this role, you need to carefully evaluate if they are actually up to this task – and you also need to ask them if they want to take it on.
You have never really talked about your expectations for retirement – While you’re busy working and raising a family, life seems to fly by and you probably don’t have enough free time to worry about how you’re going to fill it. When you retire, you may find out you have a lot more time on your hands and you may see your spouse a lot more than you are used to.
It’s important to sit down with your partner and find out what each of you envisions for your retirement – you may have very different ideas of what it will look like and a discussion of what you foresee can go a long way in understanding and adapting to each other’s ideas.
Is your portfolio able to support an emergency? – Although you may be able to survive comfortably on your retirement savings, pension and government benefits, you need to evaluate how your portfolio will fare if an emergency strikes.
An illness, major home repair or other financial emergency should be considered up front and you need to have a plan in place to fund these unexpected costs. Ideally, an emergency fund in a TFSA or Non-Registered investment account should be earmarked for the unforeseen emergency which will give you a great deal of peace of mind.
Many couples have no financial or retirement plan – A properly structured financial plan will include all of the above items plus many more. Ideally this plan will be created at an early age and you will adjust and adapt it as you get closer to retirement.
However, no matter what age or stage you are at, if you don’t already have a plan in place it’s better late than never. Your retirement plan should have realistic estimates of how much money you will need in retirement and aside from what many people think, you will often need more income per year, not less to reach your retirement goals.
Retirement planning is an evolving process and one that requires regular checkups and adjustments to keep on track. While certainly significant ones, the above mistakes I outlined are only some of the many pitfalls that can have significant impact on your retirement and financial future.
If you haven’t done so already, speak to a certified financial planning professional to make sure your retirement is on the right path.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.