For most of our working lives, retirement can feel like a distant dream. But a sudden change late in your career can mean that, ready or not, your retirement starts now. The thought of retiring before you had planned can be shocking. But don't panic. You've been preparing for this your whole working life. It's just the timeline that's changed.
What’s your first step? Gather all your relevant documents and talk with an advisor to develop a plan to move ahead. Here are some key things an advisor will cover with you.
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What are your sources of retirement income?
A retirement portfolio is made up of many pieces, including:
- government benefits,
- workplace benefits,
- income from a registered retirement savings plan (RRSP),
- part-time income,
- home equity,
- and more.
You’ll want to work through your income sources with an advisor and take a financial inventory. This exercise will help make sure you have enough to pay for the lifestyle you choose. It will also help make sure you can maintain your ability to draw an unreduced Old Age Security (OAS) pension. But drawing down your savings sooner than expected may mean you’ll have to make some trade-offs.
What can you do with your RRSP?
You'll want to lay out a plan for what to do with your RRSP if you have one. For example, it may be tempting to convert it to a registered retirement income fund (RRIF) right away. But, depending on the situation, it may be wise to wait. You don’t have to decide what to do with your RRSP until you turn 71.
What can you do with your early retirement package?
If your employer gave you a package to retire early, you’ll want to get some advice on that, too. An advisor can show you how to help maximize your retirement income and keep your expenses low.
How does the stock market affect your retirement?
With retirement only weeks or months away, market volatility* may concern you. Holding onto the gains you’ve made in your investments might be on your mind too. An advisor can help develop a strategy with the level of risk that best suits your situation. This can help, since you’ll likely need to start drawing that income sooner than expected.
(*Market volatility refers to dramatic swings or ups and downs in the markets.)
An advisor may suggest a portfolio stress test. This allows you to see what might happen if your investment returns drop during your retirement.
Another option is to use part of your retirement savings to buy an annuity. Life annuities give you a guaranteed monthly income for as long as you live. This can help give some cushion during market downturns.
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What will your retirement expenses be?
Everyone’s vision of the ideal retirement is different. And it will take some time to figure out what you want and need out of your retirement years.
Embrace that transition. “Instead of accumulating savings, now you are in a period of de-accumulation and preservation of assets. It can be hard to adapt,” says Scott Evans, an advisor at BlueShore Financial in North Vancouver, British Columbia.
The good news? “You will almost certainly spend less than you did while you were employed” he says. “You’ll have no lunches to buy and no work-friendly wardrobe to maintain.”
By working with an advisor, you can attach numbers to some of the things you want to do in retirement. That will help you find ways to shift resources around to best serve your new needs and goals.
Do you need to change your will, insurance policies or estate plans?
As we grow older, we need to have everything in order in case of a serious illness or injury. This is especially important if you plan to spend time out of the country in retirement. It’s a good idea to review important documents every four years, or whenever you have major life changes. This includes your:
But keeping track of all that paperwork can be hard work. An advisor can help you change the beneficiaries listed on your pensions, insurance policies and investments. A lawyer can update your will and power of attorney.
What will happen to your workplace benefits?
Your employee pension plan and your workplace RRSP may be integral parts of your retirement savings strategy. But it’s wise to think beyond those assets. Some employers offer their retirees extended medical and dental benefits. They may also offer to let you keep your workplace life insurance.
“An advisor can help you determine whether some of these options are competitive or if a private policy is better,” says Evans. “If you’re lucky enough to have a defined benefit pension plan, there may be some features to consider, such as indexing it to inflation or making it payable to your spouse after your death.” An advisor can help you weigh your options.
Get professional help with your finances
Successfully funding your retirement isn’t about checking boxes on a standardized list. It’s about going on a quest to understand:
- what you have,
- what you want, and
- the various rules and regulations that frame your options.
It can be hard to manage your finances, especially if you’re facing a sudden or unexpected retirement. Luckily, you don’t have to deal with it alone. You can work with a Sun Life Financial advisor, who can help you make a plan to move ahead.
Most advisors now offer to meet Clients virtually by video chat. Find an advisor today.
This article is meant to only provide general information. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.