Finishing touches
The last 10 years before retirement are critical to financial plans
By the time people reach age 55, they should have a financial plan in place and a good idea of what they want retirement to look like, and they should feel comfortable about how they are going to achieve it. However, a recent Scotiabank investment poll indicates that 63 per cent of respondents are concerned about not having enough money to support their retirement and only 32 per cent of Canadians have a written financial plan in place.*
Robert Wilson, a senior financial adviser with Scotiabank in Elmsdale, N.S., often works with older investors, between ages 55 and 65, as they approach retirement. He notes that it’s never too late to begin saving for retirement — and it’s never too early to review a financial plan to help you maximize the return on the assets you’ll be counting on.
“A wide range of people come to see me,” says Wilson. “Many people have more investable assets at this point than they’ve had previously in life. However, we also have people approaching age 55 who are coming in and looking to start saving for retirement. Every person is different, and we recognize that our job is to build a financial plan around their life story.”
While customers often start by asking about growth and income, Wilson turns that question around to learn more about the customers themselves.
“Growth and income are some of the last subjects we address,” he says. “Our first job is to identify any needs they may have in retirement and then match that to their current situation. Most people I speak to understand they will get Canada Pension Plan benefits, will have Old Age Security and will have some kind of plan or pension in place, but they haven’t yet crunched the dollar amounts on retirement. Most people can’t tell me if they’ll be comfortable at 70 or 75 per cent of their income. I love it when a customer asks, ‘When will my money run out?’ That’s a perfect place for us to step in.”
On the plus side, many customers have more money at their disposal to make retire- ment plans a reality. Generally, their mortgages have been paid off and children are finishing school or have already been launched into the world.
“It’s human nature that we spend what we make,” says Roberts. “This is a good time to tag that disposable income for savings.”
How much does a person need to live comfortably in retirement? It depends on the individual, but Wilson likes to start with 70 per cent of their current income.
“We often find that 70 per cent of your current income is a good number to build a plan around,” he says. “We can fine-tune that number based on their retirement plans— travel, buying a cottage, or living a conservative lifestyle. The closer you are to retirement, the more predictable your needs become, which is why revising a financial plan can be so important. My job is to look at the customer and identify any gaps in their retirement picture. We will also look at potential growth possibilities, ranging from conservative to aggressive, in a way that’s most comfortable for them.”
Wilson might offer a number of savings and investment vehicles, ranging from a taxfree savings account ( TFSA) to a retirement savings plan (RSP), as well as investment options like mutual funds.
“Mutual funds were once considered a dull sort of in- vestment, but the industry has changed so much that we can offer funds that represent a lot of different investment tastes and styles,” he says. “If your RSP holds securities representing Canadian companies, we can diversify and use your tax-free savings account and find a mutual fund that represents companies around the world.”
Wilson acknowledges that people get a lot of advice on investment and retirement from relatives, neighbours and colleagues. It may be well- meaning but it usually only paints a financial picture in very broad strokes, based on their personal experiences only. New products, new strategies and tax changes need to be considered by a qualified financial professional.
“Your f i nancial pl a n should be customized to your needs,” says Wilson. “If I’ve done my job, I’ve helped customers get their own lives organized and set a path forward.”
* Based on an online survey conducted by Harris Poll for Scotiabank among 1,002 panel members focusing on their saving and investment patterns, attitudes and behaviours. Data was collected from Oct. 6 through Oct. 14, 2016. This article is for general information purposes only and is not intended as specific financial or tax advice.