You've done all the right things during your working life. You’ve saved money in your registered retirement savings plan (RRSP) and in a tax-free savings account (TFSA). You might have joined your company pension plan, if one was offered. Perhaps you’ve even socked some cash away in non-registered investments.
You’ve been planning for your retirement for five, six, even 10 years. You’ve reviewed the value of your assets and drafted a retirement budget. If you’re married, you’ve discussed your retirement dreams with your spouse and worked out how his or her situation might affect your plans. Then, perhaps with some help from an advisor, you’ve set your retirement date, based on how much savings you’ll have and how much income you’ll need.
Now it’s nearly time to reap the rewards of all that hard work: You’re a year from starting the retirement you’ve dreamed of. What more should you do now?
Here, in chronological order, is a sample timeline to help you run out the clock on your working years the right way.
12 months (or more) from retirement: Do a trial run
To make sure you’re ready, estimate the payouts from your retirement-income sources. Those could include Canada Pension Plan (CPP) – you’ll find a handy CPP payout estimator here, or ask Service Canada for a more exact figure – your company pension, Old Age Security and your RRSP (converted to flexible income like a registered retirement income fund (RRIF) and/or guaranteed income like an annuity).
If that sounds like a lot of guesswork, don’t worry. A quick trip to a financial advisor (see the next step) will help you quickly cut through the alphabet soup.
Then do what 61-year-old Lonnie Vaksdal of White Rock, British Columbia, did before retiring from his job as a financial manager at BC Hydro in June 2017: Watch where your money is going, and see whether your expenses come in below your expected income.
“Before I made my final decision, I kept close track of my spending,” Vaksdal says. “Based on that and my estimated pension income, I was confident I could retire.”
If your expenses exceed your projected income, you may have to push that retirement date out until you have enough savings to give you the income you’ll need.
6 to 12 months from retirement: Visit an advisor (again)
If you still worry you’ll run out of cash in retirement, a visit with an advisor can dash that fear, says Sun Life Financial advisor Cliff Steele.1
For example, Steele often sees clients fixating on their gross income while they were working and feeling they need to bring in a high percentage of that figure to fund their golden years.
Not necessarily true.
“You have to remember that off of that [gross working income figure] comes income tax, contributions to CPP and possibly a company pension plan, employment insurance premiums and other deductions,” he says.
“Once you factor those out – with the exception of income tax, though it’s usually lower in retirement because your gross income is likely lower – and eliminate the costs of going to work, the amount you’ll need to live on grinds down a lot,” he adds.
An advisor will also walk you through your tax situation, to make sure you’re paying the right amount of tax in that all-important first year of retirement, and tapping your sources of income in the right order and proportion.
6 months (or more) from retirement: Get your debts in a row
According to the Sun Life Financial Barometer, a recent national survey, 25% of Canadian retirees are carrying debt. If you’re one of them, it needn’t upend your retirement dreams. The key is making sure your loans are properly structured.
“At retirement, a lot of people continue paying their regular mortgage or line-of-credit payments as they did when they were working,” says Steele. “But there may be ways to cut your debt-service costs.”
“For example, if you think you’ll only be in your home for, say, three to five more years, you may not need the aggressive mortgage payments you may have been making when you were working,” he adds. “If you plan to sell and you’ve built up a substantial amount of equity in the home, this is a way of lowering demand on your retirement income.”
Also, if you think you might need more credit in your next act, now is the time to line it up.
“It gets harder to access credit when you don’t have an earned income, so you should revisit your debt situation well before you retire,” says Steele. “Conversations about limits on your credit cards or line of credit are easier to have with lenders while you’re working.”
As well, now is the time to discover what if any health benefits your employer provides to retirees. If you will lose your vision care, prescription drug, travel insurance or other benefits when you stop working, look into replacing them with individual health insurance. Meanwhile, schedule all your health-care appointments, plan to refill your prescriptions and think about replacing your eyeglasses while you’re still covered.
2 weeks to 3 months from retirement: Set the date and give notice
Unless there’s a specific notice period in your contract, there’s no requirement stating how much notice you must give, though it’s custom to provide at least two weeks, as you would if you were leaving for any reason. If your position is senior or you think it might take your employer some time to replace you, it would be considerate to give longer notice. But you will want to take care when picking the date itself.
Vaksdal, for his part, went with June: “Unless you’re a fan of winter, I don’t recommend retiring in October,” he says. “By leaving in June, I was able to stay active all summer, which really helped me ease into retirement.”
The big day: Kick-start a lifestyle you control
So what can you expect once you pack up your desk?
“The biggest realization a lot of people have is that it wasn’t as scary as they thought it would be,” says Steele. “They find ways to keep themselves busy, like volunteering or taking a part-time job. Some of my clients are busier now than when they were working. It’s just a different kind of busy.”
Vaksdal, who signed up for twice-weekly yoga and Pilates classes soon after leaving the 9-to-5, has some advice for those shifting into retirement:
“Definitely take care of yourself first,” he says. “When you’re working, you’re always looking after someone else, whether it’s your kids or, perhaps, the people working under you. So I decided to focus on my needs and my fitness in the first year, especially as we tend to face more health challenges as we age.”
Now that he’s a year into his new lifestyle, he plans to pursue more volunteer opportunities, though he still loves his newfound flexibility.
“It’s nice not to have to cram everything in on weekends, like you have to do when you’re working,” he says. “You’ll still want to plan, but now you can take things easier and be more flexible.”
1 1. Cliff Steele,* CFP®, BBA, BMath, Sun Life Financial advisor
* Mutual funds offered by Sun Life Financial Investment Services (Canada) Inc.
Sun Life Assurance Company of Canada is a member of the Sun Life Financial group of companies.