TORONTO — As Willi Fleerakkers’ retirement date approaches at a time of inflation and higher interest rates, it's hard for her not to worry — but when she reviews her plan, it helps to ease those concerns.
The Toronto-based health-care professional expects to retire in the next two years. She figures that between her pension, the Canada Pension Plan and Old Age Security, she’ll have what she needs, and if any surprises occur she has a Registered Retirement Savings Plan to fall back on.
Like many Canadians, Fleerakkers started to reconsider her retirement date as she got older, eventually setting it back by two years so she could afford to renovate her condo’s kitchen and save up a little extra.
“I thought, ‘You know what, I’m going to to save as much as I can, get this done ... and try and have a little bit of a cushion so I don’t have to tap into my CPP.’”
She paid off her mortgage last year, just in time to avoid a nasty shock from the steep rise in interest rates.
Inflation has caused the risk-averse investor some concern about the returns on her savings, but Fleerakkers knows that if she has any questions, she can call upon an expert to help her figure out what to do.
With more and more Canadians set to retire in the coming years, Fleerakkers is one of tens of thousands of people closely watching their retirement savings. Surveys show that many of them are worried about having enough to retire on, and some worry they won't be able to retire at all.
But experts say that with a sound financial plan in place, you can weather the transition with less stress even amid uncertain economic conditions.
“I think that's one of the challenges many Canadians face,” said Ryan Gubic, a certified financial planner and founder of MRG Wealth Management. “They don't have a plan. So they get close to retirement, and that creates a lot of stress for them.”
If you don’t have a financial plan yet, “it’s never too late” to make one, said Anthony Maiorino, vice-president and director of head family office services with RBC Wealth Management.
That plan can help you get a handle on your income and expenses in your last few working years, and what to expect after you cross the threshold, he said.
It can also help you make investment decisions, he said. For example, people often assume they need to invest more conservatively as they approach retirement, but you can’t know whether that approach is best for you without a detailed plan, he said.
Upon retirement, you may have several different sources of income, said Maiorino. He recommends looking at the Canada Pension Plan to see whether you can afford to take it later in order to get a higher monthly payment.
“If you wait a little bit for CPP that could mean a big difference,” he said.
Anyone who is considering pushing back their retirement age should consult an expert first, said Gubic. The same goes for determining when to take CPP or the Old Age Pension, he said.
Having a financial plan and an expert on call can really help take some of the stress off your shoulders, said Maiorino, especially amid higher interest rates and inflation.
“You can't just look at what's happening in the short term in isolation and build your plan based on that,” he said, noting that a good financial plan takes into consideration potential market corrections.
Maiorino and Gubic recommend revisiting your financial plan regularly, and in particular any time you go through a life change.
Gubic recommends working with a financial professional who specializes in retirement, to help you in the lead-up to retirement but also in the years to come.
“There will be many challenges and potential roadblocks along the way,” he said. “That financial professional or financial planning professional can help (you) avoid some costly mistakes.”
These mistakes could include not knowing how much you can afford to withdraw or what to invest in, or not being smart about your withdrawals from a tax perspective, said Gubic.
When mapping out your income for retired life, you should also take into account hard assets like your home and whether you intend to sell them, said Maiorino.
Amid all this planning, Maiorino recommends building up cash savings in the few years before you retire, with the aim of having three to six months’ worth of living expenses available, in case there are any delays on things like your pension.
“You never know when you retire, if there's going to be some sort of a glitch and maybe your pension at work doesn't start when it was supposed to or the paperwork got lost,” he said.
“The other thing is if you retire and ... the markets happen to be in a bit of a decline, you don't want to be pulling money out of investments when things are down. So you've got this little bit of a cushion to kind of help you along.”
This report by The Canadian Press was first published June 22, 2023.
Rosa Saba, The Canadian Press
