Financing my retirement - Part three
Transitioning from retirement to retirement home
Do you have plans to downscale and move into retirement home, and use the proceeds from the sale of your home as your nest egg?
If
so, here are some ideas on how to maintain control over your funds,
make the most of them, and even set some aside to act as a meaningful
legacy.
Most people often consider retirement planning in three separate stages:
1) Putting aside savings during working years;
2) Planning the transition from working life to retirement;
3) Simplifying life by moving from a larger home to a retirement home.
Saving
during working years can be tough for people who are self-employed, or
who don’t have pension plans that will result in a tidy pension. If you
use mutual funds as your saving plan, your savings are at risk due to
the unknown timing of the ups and downs of the stock market. Also low
interest rates are great for borrowers but terrible for savers, since
the low rates are not keeping up with the rising cost of living. If
you’re still working, you do have the advantage of time and may be able
to wait for markets to recover or interest rates to rise.
But if
you are nearing retirement, time isn’t on your side. Fluctuating markets
become a major concern when you need to access your money to fund your
retirement and your retirement needs. And when you are selling your home
to fund your retirement, freed-up cash may look like a lot initially,
but retirement living can be expensive and it’s all too easy to burn
through funds if they’re in low-interest or risky investment vehicles.
You’ve
also got to consider that you may well need funds set aside for
increasing healthcare costs. When you are emotional about changes in the
health of yourself or your spouse, this is a poor time to make
important financial decisions.
Planning in advance will allow you
to maintain control over your hard-earned savings, and breathe easier
about financing your future.
An understanding, impartial
retirement planning professional can help you with your plan. He or she
should engage in discussions between you and your loved ones about your
vision for your retirement, and how you want to be remembered through
legacy planning. Involving your family in your plans can alleviate
future tensions or misunderstandings.
By choosing an independent
broker to help you with your plan, you will have access to a wealth of
financial planning options that aren’t offered through bank products.
You should investigate no-risk financial solutions that allow you to
stay in control of your assets while providing you with guaranteed
income to live comfortably.
Here are some of the key points to discuss when creating your plan.
1) How much is enough to carry you through your retirement years?
What are your lifestyle expectations and what will they cost? What are
your current needs and what should you be keeping aside to cover
possible future needs?
2) What are the best investment options to allow the proceeds of the sale of property to fund your retirement?
No-risk options that will guarantee your desired lifestyle and
well-being for life should be considered first. Typically these options
will include such things as annuities and other guaranteed insurance
products; they also are attractive since they generally offer a higher
guaranteed rate of return.
3) Do you wish to set aside funds to help support your children or your favourite charitable causes? By
switching some of your savings into similar products offered by
insurance companies, you will be able to assign beneficiaries to receive
any left-over funds. On your passing, the transfer to your
beneficiaries occurs outside of your estate and therefore is not subject
to probate fees and taxes, and legal expenses, ensuring your
beneficiaries receive more. The transfer will also occur in a few weeks,
compared to delays of four years or more with non-insurance and bank
products.
4) Do you currently have a disability? Are you taking advantage of all available tax breaks to help ease the costs of retirement living?
5) Have you assigned someone you trust to be your power of attorney? If
you become incapacitated, it can be critical to have a friend or family
member in your corner to help make critical life decisions and assist
in the management of your finances.
6) Do you have a valid, up-to-date will? Do
you really want the government to be your primary beneficiary if you
die without a will? You can remain in control of your assets, even after
you pass away, by making decisions now that will allow you to leave
behind a memorable and meaningful legacy that will touch lives for years
to come.
I am happy to answer any questions you have. Drop me a line at jack@bequestinsurance.ca.
Up next: How you can stay in control of your finances when going from home to retirement home
