9 Telltale Signs you will be comfortable in Retirement

We have debated for decades what it means to be “well taken care of” in our retirement years. The average for Canadians at age 65 is less than $200,000 in savings which includes TFSAs and RRSPs.

The majority of financial advisors recommend a figure closer to 3 x this number once we factor in inflation and annual income taxes. Obviously, what the amount needed for someone with modest retirement plans would be very different from someone who wishes to include more expensive travel and hobbies in their activities.

Having or not having a registered pension plan through their employer also impacts the amount needed to retirement.

Working for 4 decades with hundreds of clients, I have observed certain patterns that exist amongst those who get to retirement in comfort. Here’s a list of 9 telltale traits that you are on target for a financially secure retirement:

#1 – You are hands on with your money and make it grow for you

  • Whether you work with a financial advisor or are a DIYer those that retire with assets they feel comfortable with, have been hands on for decades.
  • They understand how important the Real Rate of Return (after inflation and taxes) is on their savings and maximize tax efficient growth.

#2 – They don’t chase the “biggest return possible” and are content with a more modest but consistent return

  • Get rich schemes rarely pay off and they tend to avoid Multi-Level Marketing opportunities offered by friends.
  • Rarely do they chase hot tips in stock or currency markets like cryptocurrency or penny stocks.

#3 – They have no debt or mortgage upon retiring

  • Carrying expensive debt in retirement means increasing cash flow to accommodate the payments, which in turn depletes assets faster.

#4 – New vehicles are purchased outright and not financed or leased

  • Long gone are the days when car loans were 0.9%, today they average 3.9% – 7.9%. Those that are financially secure once they retire tend to get new vehicles far less often than others who do so every 4-5 years.
  • Unless you are self employed where lease payments are tax deductible, leasing a vehicle for pleasure/family purposes is incredibly expensive debt to carry through retirement.

#5 – Supporting adult children is limited and not ongoing

  • Anyone with children will always want the best for them which includes getting launched in the very expensive Canadian real estate market. However, many parents get into a habit of bailing out their children’s poor financial choices, resulting in diminished assets for their own retirement needs.

#6 – CPP & OAS retirement benefits are considered a part of their retirement budget but not the foundation

  • Even for those who qualify for maximum CPP & OAS, budgeting in retirement will always be a challenge
  • With ever increasing Federal Government debt many economists and financial advisors foresee a day when OAS is radically reduced. OAS is funded by general revenues of the federal government and is not made up of contributions like CPP which has both employer and employee participating. As government debt escalates there might be a point in time OAS can no longer be funded, greatly affecting those who are dependent on it.
  • In America the conversation has already been brought up by Republicans who wish to dramatically redo Social Security and Medicare. Expect the changes to occur even more quickly if Trump is reelected in November 2024.

#7 – They surround themselves with knowledgeable advisors

  • Be it a sharp accountant, lawyer, financial advisor, realtor or stock broker, financially secure retirees tend to work with a team of advisors. Yes, there are very successful DIYers but the reality is most retirees take the advice of a trusted professional.
  • This is especially true for Estate Planning purposes as rarely do I see retired clients use a $25 Staples Wills Kit and “do it themselves”

#8 – Projections for inflation and life expectancy are realistic

  • It’s very common for those budgeting on what their retirement needs will be, to leave out inflation. They may think a $60,000 annual income will easily carry them through retirement, but at 3% inflation a decade down the road investable assets are now being depleted more quickly than originally thought.
  • The average non smoking Canadian female is projected to live to age 88. When I started in finances in 1980 the figure was age 84.

#9 – They have a Health Care action plan which includes not neglecting immediate personal medical/dental needs

  • Those that successfully plan out for a full retirement also factor in health considerations which can negatively impact investable assets. Sadly, I have had a number of clients with Dementia/Alzheimer’s or ALS now need expensive medical care later in life. Finding out our provincial medical system will only pay a portion of their complicated health needs has always come as a shock to the spouse or extended family.
  • If you have the luxury of a group benefit package, take care of your vision, dental and medical needs as they occur. Deferring health care needs can make a simple treatment now a much more complicated and expensive matter later in life.