There are many definitions for retirement planning. The most common is: “In a financial context, refers to the allocation of finances for retirement. This normally means the setting aside of money or other assets to obtain a steady income at retirement.”
Retirement planning is clearly more than just setting money aside for retirement. There is also a myth retirement planning should only be undertaken when one is close to retirement. Clearly this is not the case. One can start planning for retirement when you receive your very first paycheck.
There are essentially three main components that fall under the retirement planning umbrella:
Investment Management: the process of managing money to a client’s determined risk profile ensuring that the client is not being exposed to more risk than they should be. Risk management encompasses managing the correct mix between different asset classes commonly known as asset mix, examples of different kinds of assets would be stocks, bonds and income trusts. In the investment management world having the correct asset mix is right at the top of the priority list.
Risk Management/Lifestyle Protection: is designed to take care of those situations that might arise in life that can derail a normal path to retirement. Some of these scenarios are death, disability or becoming critically ill. In these situations there are many solutions available from Canadian life insurance companies. It is hard enough to deal with a death, disability or a critical illness in the family, but not being suitably insured for these events will make it even harder. One of the advantages of being an employee of a company is that you might have some insurance coverage with them. It is always a good idea, however, to make sure that this coverage goes far enough in the event of one of the above scenarios occurring.
Estate Planning: is to make sure that your estate is well taken care of in the event of your death.
A plan will allow you to pass on your estate to the next generation as efficiently as possible. Included in the estate planning process is making sure that you have a legal and valid will, a power of attorney and/or a health care directive (known as a representation agreement in BC).
Please remember to always consult your advisor before taking any action.
Written by Stuart Kirk, CIM
Stuart Kirk is an Investment Funds Advisor with Manulife Securities Investment Services Inc and a Retirement Planning Specialist with Hicks Financial Inc.
The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc or Hicks Financial Inc (www.ghicks.com). Stuart can be reached at stuart@ghicks.com.