Are you — and your partner — on the same page about what you’ll do in retirement?

While saving money is certainly a key component of retirement, it’s just as important to understand — in advance — what you and your partner are planning to do with all that spare time.

Writing in the Victoria Times-Colonist columnist Kevin Greenard shares some key insights on what retirement can look like for people, and the need for being on the same page.

Years ago, he notes, he set up a seminar that “had nothing to do with the financial aspects of retirement.” Fifty couples, he writes, who were within three years of retirement were gathered to hear Barry LaValley of the Retirement Lifestyle Centre speak.

“The presentation highlighted that many people entering retirement don’t really have a clear understanding of what they are retiring to,” he writes.

Greenard notes that LaValley has these key retirement questions — none of which are money-related — posted on his website:

1. Why are you retiring?
2. What is it that you will miss most about your job?
3. How will you replace the things that you liked most about your work?
4. What are you looking forward to the most about your retirement?
5. What areas of your retirement life need a plan?
6. What are the opportunities that you see in your retirement?

Even with some advance “homework,” the couples at the retirement seminar seemed to be in different places when it came to how they saw life after work, Greenard writes.

“When we ask couples what they want to do in retirement, they are often together and not 100 per cent prepared for the question,” he writes. The answer to this question, he continues, directly impacts their wealth planning and future retirement cash flow needs. “What we have learned over the years is that many couples have vastly different thoughts about what retirement looks like to them,” he notes.

He gives some examples (not using real names) of this lack of same-pagedness. “Mr. Smith was interested in buying a sailboat and going on adventures,” while Mrs. Smith didn’t like sailing, didn’t want a boat, and hoped to “spend time volunteering with charities that she is passionate about.”

“Mr. Jones was thinking of getting a motor home and driving across Canada, and making extended trips to the U.S.,” while Mrs. Jones “wanted to stay close to home and spend time with her grandchildren.”

Mr. Wilson wanted to spend money on getting the kids established in housing, but Mrs. Wilson “didn’t mention helping the children out at all, either financially or with her time.” Instead, she wanted to be “spending more time on the golf course and fully utilizing their memberships.”

“In speaking with couples afterward, we explained that without them having meaningful conversations with each other, it was difficult to have a meaningful conversation with us,” Greenard writes.

They were able to help the couples by getting into specifics — how much would Mr. Smith’s boat cost, and how long did he hope to make use of it? The same questions were posed to Mr. Jones, who relieved his spouse by saying he only hoped to have a motor home for a couple of years — and that she could fly home for holidays with the grandbabies.

All such retirement expenses need to be written into the couple’s Total Wealth Plan, he concludes, so it is important for both spouses to be on the same page with future retirement activities and expenses.

“The entire exercise of reaching a consensus with respect to what retirement will look like is one of the primary objectives that we try to help clients achieve when doing a Total Wealth Plan. In many ways, we are the facilitators of these conversations that are often avoided. Communication and planning in advance help us create a more meaningful and relevant Total Wealth Plan,” he concludes.

This is a great article, and the approach taken with the retirement seminar was both creative and valuable.

Whether your retirement involves loading up a Winnebago, or baking cookies with your granddaughter, a little extra money for your future self will always help. If you are lucky enough to have a retirement program through work, be sure you are contributing as much as you can to it, and paying your future self first. If you don’t have such a program at work, check out the Saskatchewan Pension Plan. Through SPP you can set up “pay yourself first” savings via pre-authorized contributions from your bank account. Alternatively, you can pay SPP via your online banking bill payment service. Or even via a credit card. The money you set aside via SPP is professionally invested, at a low cost, and grown to provide future retirement income. It’s a made-in-Saskatchewan retirement security solution!

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Avoiding the top 10 mistakes in retirement

Writing in the Times-Colonist, wealth advisor/portfolio manager Kevin Greenard highlights 10 things that can go wrong for retirees – and steps you can take to avoid those problems.

It’s critical, his column begins, to “not underestimate” the impact of inflation on retiree purchasing power. With inflation recently running as high as 8.1 per cent, he recommends “determining an appropriate asset mix, an optimal number of holdings and position size, ensuring appropriate diversification to manage concentration risk, taking a disciplined approach to rebalancing, and managing your time horizon for investing.” In other words, account for inflation in the design of your investment portfolio.

Next, he talks about longevity – you need, he writes, to factor in the possibility that you may live as long as, or longer, than your parents. “If you have one, or both, parents who lived well into their 90s, or are alive and in their 90s, then it’s prudent to plan that you too will live into, or past, your 90s,” he writes.

Greenard says his firm always assumes a conservative future return rate of four per cent. If you withdraw funds assuming a rate of return that is too high, you can deplete your money too quickly and have little to no money left 25 years into retirement.

He also talks about the risk of being “too conservative” with investments. Those of us who “store cash under the mattress” or invest only in safe, interest-bearing investments like Guaranteed Investment Certificates can actually lose money over time compared with those who take a little more risk with their asset mix. “The key is to find a happy medium that you are comfortable with, and invest only in good quality, non-speculative investments,” Greenard writes.

It’s a fine line, he adds – those who take on too much risk can also have problems. “We have seen many scenarios where significant sums of money have been lost as a result of investing in speculative, high-risk holdings, or having not managed concentration risk by holding excessive position sizes,” he explains.

Other problems that can be addressed include a lack of communications about retirement goals, failure to map out cashflow needs, and not starting a retirement savings plan early enough.

“If you have put off saving for retirement, we encourage you to start today. To benefit from compounding growth, the sooner you can start, the better off you’ll be for it in the long run,” he advises.

His final points are the importance of having an estate plan and a “total wealth plan,” as understanding your overall wealth goals will make planning the retirement component much easier.

Greenard makes some very good points in this column. We have neighbours and friends who over-decumulated from their retirement savings in the early years of retirement and had to either go back to work or adjust (downward) their lifestyle costs.

The best advice we ever received about retirement income was to do a “net to net” comparison, work income versus retirement income, which ties in to what Greenard writes about knowing your cash flows.

When you factor in the lower taxes you pay when retired (generally), and the fact that you are no longer paying into the Canada Pension Plan, Employment Insurance, a workplace pension or other retirement arrangements, you may find like we did that the income “gap” between working and retiring isn’t as huge as a “gross to gross” comparison might suggest.

If you haven’t started saving for retirement, the Saskatchewan Pension Plan is a resource you need to be aware of. SPP is an open defined contribution pension plan that any Canadian with registered retirement savings plan room can join. Once you are an SPP member, you can contribute any amount annually up to $7,000, and SPP will prudently invest your savings at a low cost. At retirement time, SPP have several income options, including an in-house line of lifetime annuity payments. Check out SPP today!

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