Way to go! After years of working and saving, the time has finally come to turn the page. You can now reap the rewards of your hard work. While this transition is exciting, it does require a major shift in mentality. You'll now have to rely on accumulated savings, which may bring up a lot of questions.
We're here to help! To assist you in navigating this pivotal period with confidence, here's a guide to getting retirement off to a good start.
7 essential steps to take before retirement
To ensure a smooth transition, you'll need to do a number of things in the months leading up to retirement. Take care of the paperwork now to enjoy peace of mind later.
01Start administrative and financial procedures
- Check your statements of participation in government pension plans. Make sure all your years of contributions are properly accounted for to maximize your income.
- Claim your benefits: Pensions are not automatic. Apply to Retraite Québec (QPP) and the federal government (Old Age Security pension/Guaranteed Income Supplement) a few months before your retirement date.
- Ask about your employer-sponsored plan: Understand withdrawal options (life annuity, lump sum, transfer to a LIRA, etc.).
- Review your insurance: Group insurance often ends at retirement. Assess your life, disability, and drug insurance needs to avoid unpleasant surprises.
02Establish a retirement budget
While this will certainly be a time to kick back, the key to a happy retirement is sound financial management. Your reality will change as your salary becomes a fixed income and your buying habits adjust.
Some work-related costs will disappear (transportation, clothing, RRSP savings), while others may increase, such as leisure, travel, and health care. Now's a good time to make a list of your fixed (housing, insurance) and variable expenses (groceries, outings).
03Review your withdrawal plan each year
You look forward to enjoying an active retirement; your financial plan should be the same! It's not enough to develop a withdrawal plan on day 1 and never touch it again. Plans, health, and financial markets will fluctuate.
Make it a habit to review your strategy every year:
- Did you spend more or less than expected this year?
- Are you planning a major purchase next year (renovations, vehicle)?
- Will you have to convert your RRSPs to a RRIF soon (mandatory at age 71)?
To build a solid strategy and understand your optimal withdrawal order, learn how to initiate a withdrawal plan (RRSP, RRIF, TFSA).
Keep an eye on your savings with My Game Plan
My Game Plan is a tool that helps you monitor and adjust your withdrawal plan in real time. Think of it as your financial co-pilot for retirement! Add goals, such as travel or renovations, and see how decisions impact your assets.
04Optimize investments to beat inflation
Just because you're retired doesn't mean your money has to stop working! A common mistake is becoming too cautious too quickly, choosing only guaranteed investments with very low returns.
Your retirement could last 30 years. If your savings generate no returns, the rising cost of living will eventually erode your purchasing power. To protect yourself against this risk, read our article on all you need to know about inflation and its impact on savings.
05Optimize your taxes: Don't leave money on the table
Good tax planning can save you thousands of dollars. Strive to maximize your net income (what's left in your pocket).
As soon as you retire, evaluate the most advantageous options:
- Pension income splitting: Spouses can transfer up to 50% of eligible pension income to their partners to reduce their tax bill as a couple.
- Tax credits: Find out about age-related and pension income credits.
- Withdrawal order: Withdrawing funds from a TFSA does not impact your taxes in the same way as withdrawing funds from an RRSP. A well thought-out strategy will optimize taxes.
06Create a new routine and stay active
This is where the fun begins! Retirement is your chance to focus on special projects, big or small. You finally have the most precious resource of all—time.
Here are a few ways to structure your day:
Stay physically active
- Sign up for classes: yoga, swimming, dance...
- Join a walking or cycling club to combine sport and socializing.
- Garden to nourish body and soul.
Stimulate your mind
- Learn a new language in preparation for a trip.
- Take university classes for seniors.
- Join a book or board game club.
Nurture social ties
- Volunteer for a cause close to your heart.
- Spend quality time with your family. Many choose to travel and spoil their grandchildren during retirement, creating unforgettable memories.
07Take care of your health and well-being
Health is your best asset for making the most of retirement. The transition to this new chapter often involves a change of pace that can lead to a sedentary lifestyle if we're not careful.
To maintain a good quality of life, consider the following lifestyle habits:
- The World Health Organization (WHO) recommends aiming for at least 150 minutes of moderate-intensity physical activity per week.
- Maintain a healthy weight and consult your health care professionals regularly for treatment tailored to your situation.
- Stay socially active. Human contact is essential for mental well-being.
The benefits of an active, engaged life are widely recognized. An active retirement is often synonymous with a happy retirement!
We're here for you
Entering retirement is a major step, but you don't have to take it alone. Whether you need to verify investments or get tax answers, don't hesitate to contact a FlexiFonds mutual fund advisor.
Enjoy every moment, you've earned it!
