If only retirement were as easy as the TV sitcom Frasier makes it seem. For former cop Martin, retirement meant sitting in his favourite chair in his well-to-do son\u2019s penthouse.
In real life, retirement looks a lot different. Whereas Frasier made retirement seem like a single point in time, it is anything but.
\u201cRetirement is a time of transitions,\u201d says Tina Di Vito, director of retirement solutions at Bank of Montreal<\/b>\u2019s private client group in Toronto. \u201cAdvisors need to have a different conversation with their clients \u2014 one that goes beyond finding out what they\u2019d like to do in retirement and financial projections. We are accustomed, as advisors, to rely on questionnaires, forgetting that our clients need be looked at as a family unit. We need to probe deeper into events shaping their lives in retirement.\u201d
In his book Buying Time<\/i> (John Wiley & Sons Canada Ltd.), Daryl Diamond, a specialist in retirement income planning and president of Diamond Retirement Planning Ltd. <\/b> in Winnipeg, lays out the most common events:
> accommodating adult children;
> dealing with aging parents;
> becoming a caregiver;
> receiving an inheritance;
> change in health of a family member;
> disability of a partner;
> loss of a partner.
These events point to just how dynamic the post-retirement planning process can be. \u201cIt\u2019s like trying to put together a jigsaw puzzle when the picture on the box keeps changing,\u201d says Diamond. \u201cThere is no formula \u2014 there are simply too many variables.\u201d
It may be impossible to know what the final stage of retirement will look like, but we do know the picture will take shape over three distinct phases. There are strategies to make the transition from one to the next as seamless as possible.
> The Early Years.<\/b> This is the honeymoon phase, which generally lasts about five years. Both partners are healthy and active, and want to do all the things they\u2019ve put off. Not surprising, it\u2019s also the most expensive time in retirement.
\u201cIt\u2019s a real balancing act,\u201d says David Christianson, a fee-only planner at Wellington West Total Wealth Management Inc. <\/b> in Winnipeg. \u201cAs an advisor, my goal is to help people quantify their recurring expenses to ensure their income will be adequate over the long term.\u201d
Christianson recommends creating a spending plan so retired clients aren\u2019t left tallying up after the fact to determine whether the savings account balance has gone up or down. A retired person does not have the same opportunity to make up for overspending, and debt is much more difficult to eliminate for those on fixed incomes.
\u201cIt\u2019s our job to make clients aware of the impact of spending,\u201d says Di Vito. \u201cWe are good about advising on asset allocation and investment risk. But we shouldn\u2019t allow clients to spend more than is reasonable for their portfolios.\u201d
Christianson also suggests taking stock on a quarterly basis, clearly differentiating between one-time expenses and recurring expenses, and budgeting accordingly. \u201cWe are always asking: \u2018Is income adequate? Are there unusual expenses coming up? Are you running at a surplus?\u2019 Nobody likes surprises \u2014 least of all, us,\u201d he says. \u201cWe want our clients to have the confidence they need to transition into the rest of their retirement.\u201d
> The Middle Years.<\/b> This is the phase that was plan-ned for in the buildup to retirement. All of the pension income has kicked in and clients are falling into a quasi routine. They\u2019ve done the things they really wanted to and they\u2019ve learned what they enjoy doing in retirement. Spending has become more normalized and they are living on less than the income generated each year. Capital is continuing to accumulate.
This is the time to start talking about assisted living, says Di Vito: \u201cThis doesn\u2019t necessarily mean a nursing home and huge health-care expenses. It can simply mean housekeeping or Meals on Wheels. But it\u2019s a good idea to start a savings program for care.\u201d
That can mean budgeting or looking to growth products.
\u201cWhen a client is retired,\u201d she adds, \u201cwe tend to focus on investments that create a steady cash flow, forgetting that they still may have a 30-year time horizon.\u201d
Christianson undertakes comprehensive annual updates of each client\u2019s financial plan. \u201cWe look at resources and do a new measurement of achievable retirement income for the rest of their lives. We want to see that projection increasing every year. So, if a person is retiring at 60 and we are projecting they will have $80,000 a year, inflation-protected, at 65, I\u2019d like to see that be $100,000 a year projected forward, because that way we are keeping pace with inflation and they are still in great shape.\u201d
@page_break@> The Later Years.<\/b> This is a time when lifestyle slows down. With travel and other activities curbed, daily expenses decrease. But this is also a time when one or both spouses may need care.
\u201cIf they\u2019ve been living on relatively low incomes, provincial government programs will cover most of the care expenses,\u201d says Christianson. \u201cFor those with higher incomes, you have to be sure they have enough to draw on.\u201d\t IE<\/b>
<\/p>\n","protected":false},"excerpt":{"rendered":"
Unlike the static period portrayed in the TV sitcom Frasier, retirement is usually a series of stages requiring specialized advice<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3013,3018],"tags":[],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/328849"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=328849"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/328849\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=328849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=328849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=328849"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=328849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}