10 ways to get retirement ready

10 ways to get retirement ready

You’ve worked your entire life.  You put some money away; invested, watched that money now and then over time.

Yet instead of living it up for everything you’ve worked so hard for you’re counting coins to make ends meet.

I don’t want this to happen to me.  I don’t want it to happen to you either.

Inspired by an article I read some time ago, why retirement might not work out for you, I’m going to go on the offensive – here are 10 ways I plan to get retirement ready.

Retirees or prospective retirees please chime in!

  1. I will favour stocks over bonds

Most retirees are worried about out-living their savings.  With inflation as a massive wildcard in our collective financial future, this fear is not unwarranted.

One way to combat inflation is to own more stocks (for growth) than bonds (for income security when equities tank) in retirement.  You could argue that a 70/30 stock to bond split might be a good starting point to enter retirement with.

I own 100% equities in our portfolio now.  We have that bias to equities because I consider my future defined benefit pension plan “a big bond”.  Eventual Canada Pension Plan (CPP) and Old Age Security (OAS) payments in our 60s will also be part of our fixed-income component.

Got a pension plan?  Lucky you.  Consider that a big bond.

Here is when to take CPP.

Here are the facts about taking OAS you need to know.

While it might be scary (for some) to watch the volatility of your stock portfolio go up and down like a yo-yo short-term, owning a nice blend of stocks and bonds should help you combat inflation rather well.

What % of stocks and bonds and cash do retirees out there use today?

  1. I will embrace diversification

Diversification is important when it comes to investing because by doing so, you can enhance returns while reducing the portfolio risk long-term.  A pretty great deal.

For most of us, diversification means an appropriate mix of stocks and bonds, a blend of small-cap, medium-cap, and large-cap stocks; owning various sectors of the economy; owning stocks from countries or investing in economies from around the world.

It can also mean owning assets that are not always correlated to common stocks, like real estate investment trusts (REITs).

Novel Investor Asset Class Returns TableSource: NovelInvestor.com

Pretty cool asset class return quilt here from Novel Investor.

While diversification will never guarantee you big profits, it will help you eliminate the risk of investment losses given not all assets move in the same direction at the same time.

When it comes to getting ready for my semi-retirement, I may consider owning some low-cost, all-in-one asset allocation Exchange Traded Funds (ETFs) to increase the diversification across my portfolio while simplifying my investing approach for my senior years.

These are some of the best all-in-one ETFs to own.

  1. I will consider a die-broke plan

My parents are very fortunate to have defined benefit pension plans and have a bit of RRSP/RRIF money to draw down in the coming few years.  I’ll be working on their strategy this year.

They also own most (not quite all) of their home.

With good planning and careful spending in their 70s, they will definitely have enough money to live comfortably for a few more decades – thanks to their workplace pensions and government benefits.

However, they are not planning to leave any inheritance – and that’s more than OK with the kids (!). 

They have a die-broke or at least a near die-broke plan to around age 95.

I think this makes great sense.  Working backwards (from age 95), you can calculate a more measured approach to spending money now while earmarking some funds to fight any longevity risk.

At the end of the day, as our lawyer said recently to us when we closed on our condo purchase:  “it’s only money”.

Figure out your estate plan and work backwards.  I suspect in doing so that will help your retirement preparedness.

Do retirees reading this site have a die-broke plan or an estate plan?

  1. I will track my spending (in more detail)

Ideally, all any retiree would need to know is – is enough money coming in to cover what expenses are going out? 

Consider the following as part of your back-of-the-napkin calculations:

  • Do you have a rolling monthly credit card balance? If so, you’re spending too much.
  • Do you have a growing line of credit balance? If so, you’re spending too much.
  • Are you able to keep a cash wedge or an emergency fund topped up with cash? If not, you’re spending too much.

To get to retirement in the first place, you probably needed a budget.  There is no reason why you shouldn’t keep one throughout retirement.

I plan to up my game in the coming years, to keep a more detailed tracking log of our spending as we enter semi-retirement.  This will allow me to better forecast any travel expenses we intend to incur.

For now though, I believe this is a better way to budget.

How do you budget?

  1. I will rely on multiple income streams

Canada Pension Plan (CPP) and Old Age Security (OAS) won’t be enough for us.  It might not be enough for you.

While a base-level of income security will be provided from both government programs, for most adults who have worked and lived in Canada for many decades, the sum of this income probably won’t be enough to cover all housing, food, transportation and health-related expenses.

By relying on multiple income streams, beyond government benefits, this will increase your chances to meet retirement income needs and wants.

Here are our projected income needs and wants in retirement.  Do you know yours?

  1. I will disaster-proof part of my life

Insurance, I believe in it’s truest form, is about risk management.

For what you cannot afford to lose, and for what you cannot afford to insure yourself, you buy insurance coverage for.  In doing so, you are transferring the financial risk away from you to someone else.

In a larger context, you should always insure against a catastrophic financial loss – things you absolutely cannot afford to replace.

For now, that means life insurance is a must in our working years as is some disability insurance coverage.

Here is a previous post about life insurance 101 and what types you might want to consider.

After work is done, or near done, we will re-assess our insurance needs.  We may self-insure to some degree but we may also have some group health benefits to pay for in semi-retirement.

Here is what to consider when your workplace benefits are disappearing.

Through some means of self-insurance, we will keep our insurance premiums modest while self-insuring the small stuff.

  1. I will mind my health (I should be doing more of this now…)

It’s no secret our health will deteriorate as we get older.

It’s also no secret that health care is very expensive and getting more expensive all the time.

As I get older, now into my mid-40s, I certainly appreciate all the elements that work together for general wellness.

I’m taking some incremental steps now to be more balanced and holistic when it comes to my health so I have the potential to enjoy many retirement years down the road. 

Good health is the ultimate form of wealth. 

I have no doubt almost any retiree would agree with me.

  1. I will be tax efficient to the extent possible

Fans of this site will know to date I take a “hybrid” approach to investing:

  • Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. We own nearly 30 different Canadian stocks within our non-registered account and across our Tax Free Savings Accounts (TFSAs).  We own these stocks because we believe buying and holding our DIY bundle of Canadian dividend-paying stocks will, over time, provide some nice passive income.

You can find more details about how I built my own Canadian dividend stock portfolio here.

  • Approach #2 – we’re owning more units of low-cost U.S. Exchange Traded Funds (ETFs) inside our RRSPs over time. While dividends from dividend paying stocks are great, we believe this is smart because we’re investing abroad beyond Canada’s borders.  In doing so, we’ll add growth and diversification to our portfolio. While we still own some Canadian stocks and some U.S. stocks inside our RRSPs, (names like AT&T, Verizon, Procter & Gamble, and Johnson & Johnson to name a few) but we’re buying more U.S. ETF units every quarter going-forward.

With this approach, I believe we’re rather tax efficient.

You can read about tax efficient investing and what to put where here.

Retirees, what accounts do you remain invested in and what stocks, ETFs, GICs, bonds, or cash do you hold there?  Why?

  1. I will (eventually) stay out of debt

I recently had a post about debt management on this site – since I believe you need to manage debt before it manages you.

We have aspirations to semi-retire and work on our own terms in our 50s after all debts are paid off.  That means no mortgage, no line of credit, no car payments going-forward.  Zilch owed to others. 

We believe this is the right path to take since it will increase our financial flexibility.

I know other readers of this site feel differently.

In fact, here is one successful investor who believes it’s perfectly fine to take some debt into retirement.

What’s your take on that?

  1. I will avoid financial piranhas (as best I can)

Financial criminals are everywhere, and it’s only getting worse with our digital age.

You could argue high fund fees are one form of financial exploitation but sadly there is much more to fight.

Here is how and why to ditch your expensive funds from your portfolio.

Sadly, retirees are particularly vulnerable to scams. Criminals target seniors because of their presumed wealth, relatively trusting nature and typical unwillingness to report these crimes.  

Arm your financial self and be on continual surveillance.

I wrote about some ways to fight financial fraud here.

Summary

It’s impossible to be perfect but I continue to believe when it comes to financial success, you don’t need to be perfect.  You simply need to do some little things consistently well over time.  That means:

  • Get invested and stay invested.
  • When invested, keep your money management costs as low as possible.
  • While you are investing, pay down debt until it’s gone.
  • Disaster-proof your life.
  • Manage your investing behaviour gaps.

These are the things we’ll continue to do to get retirement ready.  What about you?

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, we're inching closer to our ultimate goal - owning a 7-figure investment portfolio for semi-retirement. We're almost there! Subscribe and join the journey. Learn how I'm getting there and how you can get there too!

40 Responses to "10 ways to get retirement ready"

    1. Simply acknowledge my site and my post on your site, and you’re good 🙂 I will be working on your questions in the coming days – busy!

      Cheers,
      Mark

      Reply
  1. The only one I’m going to quibble about is #3. It’s like saying I’m going on a trip and asking how much fuel I will need to get me there. When asked how far the trip is I reply “I don’t know”. Now I’ve joked more than a few times that I want my cheque to the undertaker to bounce but in real life I’m going to make darn sure I have more than enough to get me there based on some reasonable assumptions.

    Reply
    1. Quibbles are good… they mean you are thinking for yourself!

      I too, want to have enough, but I/we intend to have a die broke plan whereby we will eventually use government benefits and our pensions for income and not our portfolio. This way, once we’re both gone, the pension assets fade away too.

      Thoughts on the drawdown order?

      Reply
      1. I believe we think a bit differently (not wrong, just different) on later stage issues. I take into account the loss of benefits (pension reduction down to 50%, loss of OAS, reduction in CPP) upon the demise of one of us. If one of us passes significantly before the other, will there be enough assets left to maintain a comfortable life for the survivor. One could use insurance for this but that gets expensive with age.

        As to drawdown, I am sooo bad at coming up with a plan and implementing it. For now, I’m going to accelerate moving assets from my RRSP to a non-reg account over the next 6 years (takes me to 65). Will evaluate applying for CPP on an ongoing basis but now *leaning* to waiting at least til 65. My LIRA will wait til 71 and convert to some kind of RIF. Wife’s RRSP will continue to grow til she hits 65 and loses the disability wage replacement and disability CPP reverts to normal CPP. TFSAs will continue to grow and it could be that we will never touch them. Having said all that, I could change my mind tomorrow. 😉

        Reply
        1. Some good pension points that I support and apply to us as well.

          What you’re outlining for drawdown is what I’ve been doing since age 55 to the extent reasonable. Draw a little extra now (RRSP & LIF) before CPP/OAS, take slight tax hit, reinvest in TFSA and into unregistered. Not large amounts but adds up over time.

          Reply
          1. I have been withdrawing amounts to take me up to that 20.5% federal bracket but it didn’t amount to much. I’m doing the farm stuff year to year so that income could end and the renter is moving out of the house in the city so I’m going to sell that thus losing that rental income. With all that, I should be able to withdraw more and if I encroach into the 20.5 bracket so be it. I’ll throw it all into the non-reg (likely ZLB and XIU) and donate the distributions to the endowment funds.

          2. That was originally my goal too, but so far we’ve been into the lower end of that 20.5 bracket. Provincial rates also higher here than MB.

            Trying to keep our incomes close to equal and just transfer 2K pension to me, but mine has always been a little higher. This year I should stay just below 20.5 bracket since we spent a bundle on house & travel and I decided to withdraw less and just use some cash instead, to pay less tax.

            My registered is getting knocked down a bit with bigger withdrawals since I only have unregistered dividends and some interest income, and a big chunk of registered is FI. No pension, farm or rental income for me!

          3. Personally, I don’t have too big of a problem with encroaching into the 20.5 bracket. It’s still lower than what it went in to the RRSP at so technically I’m ahead albeit only slightly. It’s kinda funny that the farm was never intended to generate as much income as it does and I was never even supposed to have the rental. Just something to adapt to I guess. The pensions were always a big part of “the plan” and I wouldn’t trade them for anything. 🙂

          4. Pensions are golden Lloyd. My generation won’t have much to rely on but I’m thankful I have mine even if it isn’t gold-plated.

          5. Ditto here on the 20.5. Way lower than what it was before it went in. When govt benefits arrive pretty sure we’ll have to bite the bullet on additional taxes.

            Great to read a story of how things have turned out so well financially. Nicely done and also great to read of your philanthropic ways and plans.

  2. I personally have trouble with the “die broke” idea. I get more satisfaction knowing I am providing something extra for my beneficiaries rather than forcing myself into more consumerism. And I hope they will feel the same and pay it forward when they look at their estate plans.

    Reply
    1. It doesn’t have to be consumerism Alan. You can have a plan to donate or gift monies while you are alive. My wife and I intend to do that a bit I suspect. I’m happy to pay it forward that way. I agree with you – I don’t need more crap/stuff 🙂

      Reply
          1. Same here, so we’ve planned on leaving what is left over to a disabled nephew and niece. As we live abroad our plan to to liquidate all our assets here (mainly property) at around age 85. Ideally we’d pass everything ahead of time using pensions to live on.

            The biggest issue (3 years 5 months) we’re struggling with is moving from a pay cheque where focus is on savings to pensions and cashing out investments. By far the hardest part wrapping your head around the idea you will have less money in retirement but can still maintain the same standard of living.

          2. “By far the hardest part wrapping your head around the idea you will have less money in retirement but can still maintain the same standard of living.”

            I’m coming to this realization now in my 40s. I mean, once paying the mortgage and saving for retirement, is done, I think we’ll be fine to live off what we have planned. Worse case, I’ll just work longer.

  3. Good list Mark. I too pretty much agree with it and am currently (I think) practicing that in retirement.

    I have a few minor points:
    RE asset allocation and inflation I think it is fair to say a person/couple might well determine a lower allocation to stocks is appropriate and still be fine, all things considered. Especially if a person is conservative, has access to decent CPP/OAS indexed $, and a fair bit of discretionary spending planned. I am an advocate of a rising equity path in retirement for some people as a little extra protection in the critical early years. We started retirement at 50/50 and are still below 70/30 plus have a substantial work pension…..a LOT more conservative than suggested and its working fine 5+ years later. And my risk tolerance during savings years was relatively high. I do agree however as time marches forward it “seems” like higher allocations to stocks will be necessary for many folks, with low interest rates “seeming” to be the new norm, and stock returns predicted to be less. Unfortunately we cannot accurately predict any of this and need to individually prepare accordingly.

    Die broke is nearly impossible to implement in practice I think for obvious reasons! We plan to age 99 and want to utilize assets but VPW won’t allow you to “die broke”. In reality I would always want to have some reasonable amount of cushion for me and for my wife. I too think about/plan re pension survivor benefits and having some additional cushion for that as well.

    And good health for sure…. Make it a priority on what you can control- diet, exercise, rest, fullfilling mental and physical activites and hope for the best on the rest!

    Reply
    1. For sure, “die broke” in theory but hard to practice – fair. I guess my point is, you can structure your drawdown plan that spends more personal assets sooner and leaves government benefits ’til the end. This is our approach for sure.

      Folks that have any sort of DB pension (after survivorship) can structure their portfolio that way.

      As for health is wealth, there is none greater.

      Reply
  4. Thanks Mark, most of these make perfect sense and is how we work toward the end game.

    1] Agree, no bonds unless they have a >4% return I consider my various CPP/Pensions as indexed fixed income,. I’m fortunate to have part of it come from other countries from both govt and corporate sources so I guess that is diversified as well. Won’t be taking CPP late I plan on taking it early (also do not plan to work till I’m 65)
    2] Also have ~30 positions diversified by sector and region that is a no-brainer.
    3] Agree, I’d opt for poor instead of broke though just need enough $ so they can put you in the fire when the time comes. At some point life is not worth living I have no intention to just stick around imitating a drooling vegetable, Also, assuming you’ve been a half decent parent, you do not owe your kids anything you are free to live life while it is still worth living and that will be well before you hit 95.
    4] Check, no credit card debt, no line of credit and sizeable cash reserve in the bank, although that will reduced shortly as we need to replace one of our vehicles unfortunately (cars are the worst idea ever)
    5] For now this is mostly dividends but who knows I might become a youtube star
    6] Yes this can not be overstated we have the big ones like life, medical/dental, AD&D, STD, LTD and house well covered.
    7] Yes! Buy a bike ride it almost every day vs driving and pocket $2-3k annually just commuting while feeling and looking great (so I’ve been told:)
    8] Yes, all our investments are in registered accounts I’m keeping a close eye on the RRSP/RRIF end value while trying to optimise current and future taxation for me and the Mrs.This I find is one of the hardest things to do to be honest and probably the one area where I’d seek professional input.
    9] Retiring with debt is a bad idea, we only have our sub 3% mortgage as structural debt and that should be gone in ~3 yrs well ahead of retirement.
    10] DIY is the way to go can’t believe that I still have regular discussions with friends and relatives about this. If stocks are not your thing simply get a brokerage account and invest in 2-3 low cost ETF’s. I know people that have $150K sitting in a savings account losing $1000 per year after inflation because they are afraid I made $15K with the same capital simply by being invested in solid blue chip dividend paying companies.

    I might one additional retirement thought and that is don’t just think about when but also where to retire. There are plenty of places a couple can live comfortably on less than $35K per year (vs > $50K in Canada) and never have to see snow again:)

    Ben

    Reply
    1. Thanks for your detailed comment.

      re: ~30 positions – which ones?

      Fair point about die-poor vs. die-broke.

      re: bike. Going to ride it to work today!

      re: debt. We have some condo debt but it’s manageable, but I hope it’s gone in a few years.

      re: I can’t believe some folks have that much cash. Wow. I would figure a cash wedge (in retirement) of about $50k or so (5% of total DIY portfolio; excluding pensions, excluding government benefits) should be enough. That’s just me.

      Reply
      1. I’m sitting on around 159K in cash or near cash (1 year GICs cashable every three months). It was 184K but we bought a vehicle. Having that much cash isn’t a plan for us, it’s just I don’t know what to do with it. Come on correction!

        Reply
        1. Similar numbers here on cash (some is USD so varies some), not counting a couple of GICS (non cashable) and some bonds coming due within about 6 mths.

          And yes a correction would make the decision on doing something more with it a lot easier. I’ve been hoping for one for several years now. Careful what you wish for. lol

          Reply
          1. “would make the decision on doing something more with it a lot easier.”

            lol…I’d probably still procrastinate. 🙂 I have to admit I am surprised at the markets lately. I just don’t see the reasoning for the enthusiasm to move this stuff higher. Some of the holdings have crossed the DRIP threshold down a notch. Admittedly it ain’t much in the big scheme of things it’s annoying. And as I used to tell my daughter, an annoyed Lloyd is not something to trifle with.

          2. Ha, you’ll be ready for the tumble and move on it, whenever the heck it gets here. I’ve been thinking its going to happen for a long time now. The longer it goes makes me think it’s going to last quite a while longer. That’s probably dangerous thinking and what can cause it to actually correct.That and frequent tweets.

            I think some of this enthusiasm comes from weak FI options out there. Some just can’t hold cash or settle for GIC/bond returns now. Governments (not Germany) globally still seem committed to pumping the markets and QE to keep things alive.

            I believe I have one holding where the drip threshold has now been thwarted due to price appreciation.

            I have no intention of annoying you then Lloyd.

  5. My retirement income will likely be CPP, OAS and dividends with some capital gains. Do I have to be concerned about the Alternate Min Tax if my dividends reach a certain level? Just want to make sure I am as tax efficient as possible.

    Reply
      1. Hey Mark,

        I read some of your posts and they are informative and interesting!

        For this post on 10 thing to get ready for retirement, I agree with most, but also question 3 a little.

        For item 1, agree fully (and basically 100% stocks) and have a universal life policy as a financial backstop to buffer the ups and downs of the stocks.

        For 2, fully agree. One thing I don’t recall discussed on diversification is holding US stocks to generate $US for trips to the US. By extracting $US from RIF or RSP, you can eliminate forex issues.

        For 3, as discussed above, I disagree or have a different view. One should minimize the risk of running out of money, but spend on everything that they want to in retirement… unfortunately, it’s extremely difficult to judge where that line is on a long term basis, and sometimes even year to year…

        For 4, fully agree.

        For 5, fully agree. I’ve been lucky to have saved inside my small business and can therefore control whether income comes from there or my RSP, or a combo.

        For 6, fully agree.

        For 7, fully agree that health is number 1!

        For 8, fully agree. I try to be tax efficient to a fault, making sure that I just get over one tax bracket to use up all the benefits of that lower bracket without getting into the higher tax bracket too much. Also am tracking total income to make sure I remain below OAS clawback level.

        For 9, fully agree. Staying out of debt provides so much flexibility in your finances.

        For 10, fully agree. So, one needs to keep abreast of the latest scams and never respond to unknown emailers/callers/testers

        Anyways, keep up the good work!

        Reply
        1. Good point on the #2. Are you moving USD $$ in-kind to any accounts yourself?

          Also, for point #3 – while I believe you should in fact minimize the risk of running out of money – you need downside protection and having a solid stream of cash flow is therefore always very good. For me, this comes in the form of my “bond” at work (DB pension) so I can take more equity risks with my portfolio (dividend paying stocks). There are only, IMO, about 50 potential stocks worth owning for growing income in Canada. Everything else is just very speculative.

          Thanks for the kind words 🙂 Love hearing from readers!
          Mark

          Reply
  6. For #2, I just pull out USD from my RSP and send to my USD account. US cash builds up in my accounts through dividends and when I sell any equities to modify holdings… RBC allows this transfer to be done on line which is really convenient.

    I am going to Hawaii in December and a cruise down south in March next year, and instead of thinking about when to convert to USD, I just take USD out of my account and take it on my trips.

    For #3, the thought process for me is to grow my assets aggressively, so that there are more than enough funds to make it past 100. Any excess when I pass will go to charities and my wife and son.

    As I indicated, too, my “bond” is the financial backstop I have in a universal
    Life plan. It has a cash surrender value of about 10% of my assets, and can be accessed in an emergency. The current plan for the universal life plan is to leave it alone and let it grow, too.

    Reply
    1. Gotcha re: pull out USD $$ and put into USD chequing/savings account.

      I will open up a USD chequing account again at some point. Likely later this year.

      I like your angle on a bond. Life insurance. That’s very good and I suspect not many would see it that way.
      I also have a cash surrender component with my life insurance. I also let it grow – why not?

      Mark

      PS – great on Hawaii – I would love to go there at some point!!

      Reply

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