Making your retirement savings last for the long haul

Break your retirement into phases for better planning 

Understanding how much savings you'll realistically need for the retirement you want is critical. A recent CIBC poll found that only 36% of non-retirees plan to have a traditional retirement where they stop work altogether right away. There are alternatives, such as phased retirement with reduced work hours, starting new part-time work, or taking on consulting or freelance roles. Additionally, not all years of retirement will require the same spending: your active early years might include more expenses for travel and hobbies, while your middle years may see a reduction in discretionary costs as everyday living stabilizes. In the later years, healthcare expenses could rise significantly.

Work with your advisor to create a detailed breakdown of your retirement phases, considering both income sources and spending needs. Discuss options like phased retirement or part-time work to supplement your savings. For example, ask, “How can I structure my portfolio to support phased retirement or supplement my income while preserving funds for future healthcare costs?”

Balance paying down debt with investing

Jamie Golombek highlights the importance of prioritizing retirement savings alongside paying down a mortgage in his report Mortgages or Margaritas (PDF, 465 kb) Opens a new window.. For many Canadians, their home is a significant part of their retirement plan, but balancing mortgage payments with investing is crucial. While paying off a mortgage is an important goal, doing so at the expense of not investing can leave you with a fully paid home but insufficient funds for other retirement plans, such as travel or healthcare.

Discuss with your advisor how to balance paying down a mortgage and investing for retirement. Ask, “What’s the optimal way to allocate my resources so I can pay my mortgage without neglecting my retirement savings?”

Account for inflation in retirement

One of the biggest risks to retirement savings is inflation. Over time, the rising cost of goods and services can erode the purchasing power of your savings, making it harder to maintain your desired lifestyle. To address this, include investments in your portfolio that are likely to grow faster than inflation, such as equities or real assets. Additionally, plan for inflation when calculating your income needs in retirement. A fixed income that seems sufficient today might not be enough in 10 or 20 years.

When working with your advisor, ask, “How can I adjust my portfolio to include assets that provide protection against inflation? What steps can I take to ensure my income grows alongside rising costs?

Rethink what counts as a “safe” investment strategy

While traditionally safe investments like GICs provide security, they may not offer enough growth to keep pace with inflation, particularly in a low-interest-rate environment. Retirees can consider incorporating a mix of income-generating and growth-oriented investments, such as dividend-paying stocks or balanced funds. These options can help maintain your portfolio’s purchasing power and ensure long-term stability.

Schedule an annual review of your financial plan with an advisor to discuss questions like “How can I adjust my withdrawal strategy to extend the life of my savings?” and “What investment options can provide both growth and stability?”

Time your government programs and benefits wisely

Government programs such as the Canada Pension Plan (CPP), Quebec Pension Plan (QPP) and Old Age Security (OAS) are an important element of many Canadians’ retirement income. By delaying the start of these benefits, you can substantially increase your monthly payouts, providing additional financial security later in life. Flexible savings tools like TFSAs can complement decisions about CPP, QPP and OAS by providing an adaptable source of income. For instance, TFSAs can help bridge income gaps while you delay CPP or QPP to maximize benefits or cover unexpected expenses without impacting taxable income.

Work with your advisor to explore strategies for coordinating these elements. For example, ask, “How can delaying CPP, QPP or OAS improve my overall retirement income, and how can I use my TFSA to support this decision?”

As Canadians enjoy longer retirements, this stage of life requires proactive planning and strategies to make your savings go the distance. Whether you’re saving for the future or managing withdrawals today, a comprehensive and forward-thinking plan and expert advice can help ensure a secure and fulfilling retirement.