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Create a complete picture of what your retirement will be
Retirement is one of the most important financial goals for many people. Unfortunately, many workers and retirees have a misleading or an incomplete picture of what their retirement will look like.
Some variables that must be considered are: how much will they need to save, how to invest savings effectively and how to make their money last as long as they live?
Here are nine of the top miscalculations regarding retirement:
• Not taking inflation into consideration. Inflation can take a large bite out of your purchasing power if your income does not keep pace with the cost of living.
• Not considering facts about long-term care. Most people do not factor the need of long term care into their retirement plans. If you cannot afford to self insure a prolonged long term care situation, you should consider owning LTC (long term care) insurance. A lengthy stay in a care facility can decimate a retirement portfolio.
• Not being clear on sources of retirement income. What will be your primary source of income, what other income sources can you draw on? Which investments should be used first?
• Not planning for a surviving spouse. It is critical that a plan is in place in the eventual death of one spouse before the other. What income sources will they have? Will they be able to maintain their current lifestyle? Can they afford to maintain the current debt load?
• Not planning for a longer life. Life expectancies are increasing and many retirees will live long beyond these statistics. Outliving your savings can be a very real concern.
• Not saving enough. Have you tried to estimate how much money you will need for retirement? Underestimating income needs can be a real concern in the future.
• Not understanding your investments.
Employees with company retirement savings plans are largely responsible for managing their own investments. It is important to know what asset class the investment is, as well as the risk tolerance. Your choice should be reviewed at least annually.
• Not obtaining proper advice. Utilize the years of knowledge and experience of a financial advisor to guide you through this and all life stages.
• Not being prepared. Do you have a plan if you receive a pink slip next week? You often have the choice of leaving your pension with the company, or transferring to an account under your direction.
A retiring allowance can also be eligible for a tax free transfer to a locked in plan that is managed by you.
Consult a financial advisor, is there a good reason to leave your pension with the company that you no longer work for?
For further information, Carol Plaisier, CFP®, Investment Advisor with DWM Securities Inc., can be reached at the DundeeWealth office in Parksville (250) 248-2399, or by e-mail: firstname.lastname@example.org or www.carolplaisier.com.
This article was prepared by Carol Plaisier, CFP®, FMA, AMP (Accredited Mortgage Professional) who is an Investment Advisor with DWM Securities Inc. This is not an official publication of DWM Securities Inc. and the views (including any recommendations) expressed in this article are those of the author alone, and they have not been approved by, and are not necessarily those of DWM Securities Inc.
DWM Securities Inc., Member-Canadian Investor Protection Fund, is a DundeeWealth Inc. Company.