How to retire happy
By James Parkyn - PWL Capital - Montreal
Retirement can be financially and psychologically stressful. Here’s how to make a smooth transition
Canadians are retiring in greater numbers than ever, and they’re enjoying longer, more active lives while retired. Their main concern is often not money, but what to do with all their newfound time.
It can be quite a challenge. After focusing for decades on career and saving money, now they have no job to occupy their time and they often wonder about their purpose in life.
Our Capital Topics podcast series addressed retirement a couple of times, and there was such strong interest that we decided to follow up with a more comprehensive eBook. I’m excited to announce that it’s now available.
Financial and psychological questions
My eBook “The New Retirement” covers both financial questions and the sometimes-trickier psychological ones. Clients of all ages frequently ask us about both types of issues.
They wonder how much income they’ll need for retirement and how much they can safely spend. A lot of their questions, however, are psychological.
How can they transition to a retirement lifestyle? How will they find meaning, foster good relationships and stay healthy?
It’s not just older people asking the questions. It’s gratifying to me that younger clients are responding positively to the eBook. They not only want to help their parents prepare for retirement, but they also realize they need to think about the same dilemmas themselves.
Top retirement regret: lack of connections
The challenges were highlighted by Rob Carrick, the personal finance columnist at The Globe and Mail. He asked his retired readers to share their biggest regret.
Money wasn’t at the top of the list. In fact, only 5% said they regretted not saving more for retirement. Instead, leading regrets included failing to work harder on connections with family, friends and community. Many also wished they had thought more about how to fill their days.
In over 25 years of experience, I’ve had many conversations about the same things. Retirement for most people is an abstract destination. We work hard to put away money, but we rarely think in depth about how we’ll spend two, three or even four decades in retirement.
Planning for retirement happiness
I find the happiest retirees have often done just that: They thought ahead about retirement and did a little planning for how they want to live. If you’re already retired, don’t worry; it’s never too late to get started on this. Embracing the future with a plan helps with any big step in life.
Where do we start? First, look at the big picture: your vision for retirement. Who are you as a person? What are your retirement goals? How will you accomplish them?
The eBook includes a checklist of eight questions to clarify this vision.
When should you retire?
Where will you live?
How will you keep healthy?
How will you maintain and improve relationships?
How will you fill your day?
What other claims will there be on your time (e.g. managing finances, taking care of your household or loved ones)?
How will you manage stress?
How will you give back to the community?
Paying for retirement
Once you define your retirement vision, it’s easier to figure out how to pay for it. The financial transition is of course another challenge.
It’s important to consider two questions. How much income will you need in retirement? And how much can you safely withdraw from your savings each year?
We often hear that you should aim for 70% of your pre-retirement income before taxes to maintain your lifestyle in retirement. This may apply for some people, but not for others. Leading Canadian retirement expert Malcolm Hamilton says most Canadians will do just fine with less than 70%.
The 4% rule vs a tailored approach
As for how much you can safely spend, it depends on the person. For some, the 4% rule applies. It states you can spend 4% of your nest egg in the first year of retirement and then adjust the dollar amount for inflation each year with minimal risk of running out of money.
For many retirees, a more tailored or flexible approach is best. Our team helps clients create a retirement financial plan based on their specific retirement goals, spending, taxes and estate planning.
Then we follow up regularly to review portfolio performance and evolving personal needs, and adjust spending and withdrawals accordingly.
Happy retirement is within reach
The good news is that many people can afford to spend far more in retirement.
The fact is that a happy retirement is within our reach, especially with a little planning. Thinking about the psychological and financial challenges can smooth the transition and help you enjoy many healthy, active and meaningful years, connected with family, friends and community.
They maybe even be some of the best years of your life!
Find past blog posts, our eBooks and podcast on the PWL Capital, Team Parkyn-Doyon La Rochelle’s web site and on our Capital Topics website. And download your free copy of my eBook The New Retirement.