It’s just a big question of money
How much will it take? A million dollars, two million, three maybe? Let’s forget right away that preparing for retirement is just a big question of money. It’s a myth. “Yes, you have to plan carefully for the financial aspect. But it’s not just that. The reality is rather that retirement is first and foremost a major life project,” says Léa Saadé, financial planner and regional vice-president, wealth management, at Professionals’ Financial. If you are captivated by what you are doing now, work, family, travel, etc., your interests will not suddenly change because you become a retiree. Of course, there will be changes and it is important to prepare well for the psychological aspect of moving to another stage of your life. This is why, moreover, there are retirement preparation courses. As for knowing how much money you will need, it is case by case, says Léa Saadé.
The cost of living will decrease
Don’t count on it too much. Of course, you will no longer have to bear the expenses related to having to go to work (transportation, clothing, lunch, etc.). “But overall, we don’t necessarily have all the necessary control over our expenses and costs, especially since it’s also a question of longevity,” says Nathalie Bachand, of Bachand Lafleur Groupe Conseil. You can reduce your leisure spending, but your health care spending is likely to increase at the same time. Léa Saadé agrees. Many people put forward the 70% rule, which means that expenses in retirement should fall to 70% of what they were before. “But this rule is not applicable,” she believes. It is not certain that the lifestyle will decrease; he could simply move on to other activities, she believes.
PHOTO MARTIN TREMBLAY, THE PRESS
Nathalie Bachand, financial planner at Bachand Lafleur Consulting Group
Make safer investments
So many people will tell you that upon reaching retirement, it is important to modify your investment portfolio in order to reduce risk and thus ensure that you do not lose the accumulated savings. In most cases, this is a myth that needs to be debunked. “The portfolio must continue to be managed according to risk tolerance,” says Léa Saadé. Longevity is also an important factor to consider, recognizes Nathalie Bachand. “A retiree’s portfolio needs to take into account liquidity needs,” she says. But that doesn’t mean it should only be made up of safe investments. Longer life expectancy means that retirees must also think in terms of the growth of their assets, and not simply worry about the security aspect of the portfolio.
Defer your pensions
Many will tell you that you should postpone as long as possible the moment you start receiving your government pensions, because they will be that much higher. It would be a waste of money to deprive yourself of this savings that you will receive. But in some ways, this is probably a myth that also needs to be debunked. “Making the right choices is not easy, because everything will ultimately depend on the time you are going to live,” explains Nathalie Bachand. But we can easily imagine factors, such as poor health, which would mean that the losers would be those who did not take advantage of it as soon as it was possible for them. However, the choice also depends on the other resources available to the retiree.