When I was younger, the notion of having financial
freedom at age 55 sounded fantastic. With the passage of time, however, I’ve come to realize it was only an
idea. It never did become one of my concrete financial goals, with associated plans and action strategies. In
my work preparing clients for their retirement, I’ve learned firsthand that Freedom 55 is a figment of many
people’s imaginations. Now our retirement can last up to a third of our lives. That’s a long time to support
one’s lifestyle on accumulated savings, especially when so many cannot count on attractive pensions that
previous generations relied upon. Not only were specific saving strategies not implemented early enough, but
life experiences and associated expenses interfered with our plans, and the extreme market volatility we’ve
experienced over the past several years has also taken its toll on our nest eggs.
Here are three strategies for
preparing for your retirement, whether your goal is Freedom 55 or Freedom 75:
1. What is your vision?
The first: Spend the necessary time developing your vision of your retirement years. What will you do? Where
will you live? Will you retire fully at age 60 or work part-time to age 70? We’re fortunate to be living
longer, healthier lives than previous generations, with many options to choose from.
Your vision should anticipate negative
realities too. What will your older years look like if you become disabled or challenged by chronic medical
conditions? Will you or your spouse have costly medications or assisted living expenses? What will happen to
you as your mobility and mental capacity diminish?
Other considerations include your wishes and desire to leave an estate and possibly an enduring legacy. Who
and what are important to you and how do you want to pass along your estate assets? The answers to these
questions and considerations are all part of your vision for your life plan.
2.
The
financial reality
Armed with this information, the next step is to get a financial plan that puts dollars and cents around your
vision. This is the point where you clarify if your retirement savings, and sources of retirement income, are
sufficient to support your desired lifestyle, and if they’re capable of lasting over your anticipated
lifespan.
The financial plan will show the effect of various scenarios such as modelling the drawdown of assets to meet
retirement expenses, and selling real estate to meet advanced-age expenses. If a shortfall is anticipated,
the financial planning process can model the impact of various trade-offs such as foregoing an expensive
annual holiday in favour of less frequent trips or delaying retirement by a few years.
3.
Get
professional help
Lastly, work with a trusted and experienced financial advisor to assist you in confirming your retirement
readiness and to partner with you in making the transition from full employment to retirement. After years of
accumulating savings, I’ve learned there are many questions about the most efficient and effective way to
move to the next life stage of living off those savings.
The “best” retirement outcome from a financial
perspective is where one’s savings are withdrawn and consumed at a sustainable rate; there is sufficient
retirement income to fund one’s desired lifestyle; and the savings last over your entire lifespan. Working
with professionals will go a long way toward keeping you on track with these components.
Is Freedom 55 passé? I believe one can make
Freedom 55 an attainable goal. If you follow the strategies outlined above and start early enough, Freedom 55
can come to fruition.
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Bev Moir, MHSA, FCSI, senior wealth advisor,
ScotiaMcLeod, can be reached at bev_moir@scotiamcleod.com or bevmoir.com
This article is for information purposes only. The author is an employee of ScotiaMcLeod, a division of
Scotia Capital Inc. (“SCI”), but the data selection, analysis and views expressed herein are solely those of
the author and not those of SCI. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
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