5 Essential Steps to Complete Prior to Retirement [Podcast]

Budget that mirrors your new lifestyle: Utilize a spreadsheet to examine the last year of card and checking account transactions to grasp where your funds actually go. Differentiate between a “core lifestyle” (necessities) and “enjoyment extras” (travel, hobbies) to modify expenses without experiencing deprivation during difficult periods.

Prepare for irregular expenses (without stress): Significant costs such as roofs, vehicles, and healthcare should not disrupt your plan if they are included. Plan for these items as dated line entries in your forecasts to assess affordability over the long run.

Emergency savings vs. cash reserve: In retirement, the concern isn’t job loss but liquidating assets at the wrong time. Keep a three-year cash reserve to bridge the gap between portfolio income and spending requirements, replenishing it when markets rebound.

Where to keep the cash (don’t overanalyze): Alternatives like high-yield savings accounts, short GIC ladders, or cash ETFs are appropriate. The difference in returns is minimal; choose the simplest and most liquid option.

Transition from accumulation to decumulation: Retain your established investment strategy during retirement. Cease DRIPs 1–3 years beforehand to amass cash and perform a five-step portfolio cleansing:
1. Establish a target for holdings and position sizes.
2. Eliminate minor positions by either adding to them or selling them.
3. Remove redundant positions that serve the same purpose.
4. Assess and offload underperformers if fundamentals deteriorate.
5. Reduce large winners to mitigate single-stock risk.

Generate your own income (any approach): Total returns finance your withdrawals. Sell a few shares in favorable years; draw from the cash reserve in less favorable years, providing control and agility.

CPP/OAS commencement (Canada): Acquire official estimates and weigh starting at 65 versus 67–70. Postponing benefits can enhance and secure your monthly income, with the trade-offs illustrated in projections. Ages 67–68 frequently represent an optimal point, while age 70 maximizes the benefit.

The pre-71 tax opportunity: Take advantage of low-income years for strategic RRSP withdrawals, contemplate early RRIF conversion for credits, and balance your lifetime marginal tax rate.

Purpose, routine, and relationships: Enjoying retirement necessitates planning. Establish a weekly pattern, determine early versus later goals, and converse about timing, daily routines, and personal time with your partner.

Immediate actions to take this week:
– Export last year’s transactions; sort base versus fun expenses.
– Determine your cash-reserve target: (annual need – portfolio income) × 3.
– Eliminate positions below 1% and duplicates.
– Request CPP/OAS estimates and model three potential start ages.
– Plan a “purpose activity” like club gatherings or volunteer opportunities.

Ready to Prepare for Retirement?

Retirement Loop is a network of over 500 Canadian pre-retirees and retirees offering tools like the RL Projections Tool and support to tackle retirement challenges collectively.

Canadians enjoying their retirement:
– Understand which accounts to access first.
– Develop a solid financial strategy.
– Utilize a flexible budget through various retirement stages.
– Establish multiple income streams, including pensions and investment income.

Download the free 20 Income-Focused Products Review or join the waitlist at retirementloop.ca/waitlist.

Related Resources

Books referenced:
– Retirement Income for Life by Frederick Vettese
– Die With Zero by Bill Perkins

Vero and Mark Young explore how passion, meaning, and service influence retirement fulfillment. [Podcast link]

Feeling bewildered by market fluctuations? Implement a clear 3-step plan for making well-informed investment choices.