Monthly Archives: January 2013

Financing My Retirement Part 3

Financing my retirement – Part three

Transitioning from retirement to retirement home

Do you have plans to downscale and move into retirement home, and use the proceeds from the sale of your home as your nest egg?

If so, here are some ideas on how to maintain control over your funds, make the most of them, and even set some aside to act as a meaningful legacy.

Most people often consider retirement planning in three separate stages:

1)    Putting aside savings during working years;

2)    Planning the transition from working life to retirement;

3)    Simplifying life by moving from a larger home to a retirement home.

Saving during working years can be tough for people who are self-employed, or who don’t have pension plans that will result in a tidy pension. If you use mutual funds as your saving plan, your savings are at risk due to the unknown timing of the ups and downs of the stock market. Also low interest rates are great for borrowers but terrible for savers, since the low rates are not keeping up with the rising cost of living. If you’re still working, you do have the advantage of time and may be able to wait for markets to recover or interest rates to rise.

But if you are nearing retirement, time isn’t on your side. Fluctuating markets become a major concern when you need to access your money to fund your retirement and your retirement needs. And when you are selling your home to fund your retirement, freed-up cash may look like a lot initially, but retirement living can be expensive and it’s all too easy to burn through funds if they’re in low-interest or risky investment vehicles.

You’ve also got to consider that you may well need funds set aside for increasing healthcare costs. When you are emotional about changes in the health of yourself or your spouse, this is a poor time to make important financial decisions.

Planning in advance will allow you to maintain control over your hard-earned savings, and breathe easier about financing your future.

An understanding, impartial retirement planning professional can help you with your plan. He or she should engage in discussions between you and your loved ones about your vision for your retirement, and how you want to be remembered through legacy planning. Involving your family in your plans can alleviate future tensions or misunderstandings.

By choosing an independent broker to help you with your plan, you will have access to a wealth of financial planning options that aren’t offered through bank products. You should investigate no-risk financial solutions that allow you to stay in control of your assets while providing you with guaranteed income to live comfortably.

Here are some of the key points to discuss when creating your plan.

1)    How much is enough to carry you through your retirement years? What are your lifestyle expectations and what will they cost? What are your current needs and what should you be keeping aside to cover possible future needs?

2)    What are the best investment options to allow the proceeds of the sale of property to fund your retirement? No-risk options that will guarantee your desired lifestyle and well-being for life should be considered first. Typically these options will include such things as annuities and other guaranteed insurance products; they also are attractive since they generally offer a higher guaranteed rate of return.

3)    Do you wish to set aside funds to help support your children or your favourite charitable causes? By switching some of your savings into similar products offered by insurance companies, you will be able to assign beneficiaries to receive any left-over funds. On your passing, the transfer to your beneficiaries occurs outside of your estate and therefore is not subject to probate fees and taxes, and legal expenses, ensuring your beneficiaries receive more. The transfer will also occur in a few weeks, compared to delays of four years or more with non-insurance and bank products.

4)   Do you currently have a disability? Are you taking advantage of all available tax breaks to help ease the costs of retirement living?

5)    Have you assigned someone you trust to be your power of attorney? If you become incapacitated, it can be critical to have a friend or family member in your corner to help make critical life decisions and assist in the management of your finances.

6)    Do you have a valid, up-to-date will? Do you really want the government to be your primary beneficiary if you die without a will? You can remain in control of your assets, even after you pass away, by making decisions now that will allow you to leave behind a memorable and meaningful legacy that will touch lives for years to come.

I am happy to answer any questions you have. Drop me a line at jack@bequestinsurance.ca.

Up next: How you can stay in control of your finances when going from home to retirement home

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