A tailor-made retirement!

Not so long ago, people retired for good at age 65 and stayed retired until death. It was the norm, a kind of rite of passage. Since then, our vision of retirement has changed a great deal. With the increase in life expectancy, we have come to realize that 20 years of retirement is a long time! Not only do we have to save accordingly, we also have to find ways to stay busy.

Though some people decide to retire definitely at age 60, others prefer to retire gradually or delay it for a few years. Whatever you choose, a number of options are available to you. It’s what I like to call a “tailor-made” retirement! But with all the choices, it can sometimes be hard to find your way.

Should I stop or continue working? 

Today, retirement doesn’t mean you have to stop working. You can now choose phased retirement or work longer and enjoy all the related perks. Between "Freedom 55" and waiting until age 65, phased retirement can be a good compromise.

An interesting new option is offered under the Québec Pension Plan. Since 2014, you can apply for a retirement pension under the Plan as of age 60 while continuing to work. You therefore continue to contribute to the Plan while also increasing your pension.

Important changes to consider 

Legislative changes have also changed our way of planning for retirement. The best example is the Old Age Security pension, with the age of eligibility increasing from age 65 to 67. This has shuffled the deck with regard to income sources available in retirement. If you were planning to retire at age 65, you now have to cover a shortfall of about 6 000 $ per year for two years. This means, you have to save an additional 12 000 $ to make up for those two years alone.

The arrival of the voluntary retirement savings plan (VRSP) is also changing the retirement landscape. VRSPs are a tool that should make saving easier because all employers that do not offer pension plans will be obligated to offer VRSPs to their employees. The hitch is that participation is voluntary. Should you participate or not? Yet another choice to make! However, VRSPs can be a good tool to accumulate amounts and offset the additional savings needed due to the increase in the age of eligibility for the Old Age Security pension.

3 tips to avoid unpleasant surprises 

This is all well and good, but it gets a bit complicated when the time comes to determine a retirement strategy and to save accordingly. I’ve therefore provided 3 tips to help you avoid unpleasant surprises in retirement.

1. Plan to save more.
   The further retirement is, the harder it is to know whether full or phased retirement is the best option for you. Since full retirement requires a bigger bank account, you have to amp up your savings. Worst-case scenario, you’ll have enough to retire. Best-case scenario, you’ll have more money in your pocket.
   
   
2. Do the math regularly and consider your retirement more often.
   Retirement is a project. True, planning for retirement is much less appealing than planning for a tropical vacation. But the more you think about it, the more you’ll save. And this can give you the retirement you’ve always wanted.
    
3. Consult a financial planner.
   There’s no one better than a financial planner specialist to help you! Calculation tools like SimulR can be very useful, but they will never replace a financial planner, who can help you determine the strategy for your situation. 

Lastly, the biggest hurdle when planning for one’s retirement is knowing what you want in retirement. The more options there are available, the harder it is to plan. However, the effort you put into planning financially for your retirement is worth it. But one thing’s for sure…it all starts with a plan!


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