14 Smart Things To Do BEFORE You Retire

Summary

This video script offers a comprehensive checklist for preparing for retirement. It emphasizes the importance of saving diligently, eliminating debt, building a cash reserve, and planning for upcoming expenses. The speaker also advises on managing time post-retirement, setting a budget, testing it, understanding pension and public retirement plans, calculating necessary funds, developing a tax strategy, stress-testing the plan, consolidating RRSP accounts, and assessing health insurance options. The goal is to ensure a smooth and financially secure transition into retirement.

Takeaways

• 💰 Save hard: Prioritize saving money, reducing taxes, and avoiding unnecessary expenses before retirement.
• ❌ Smash debt: Eliminate as much debt as possible, including mortgage debt, to reduce financial stress during retirement.
• 💼 Build a war chest: Create a significant cash reserve in an accessible account to cover emergencies and reduce anxiety.
• 🔧 Pay upfront: Set aside cash for big upcoming expenses like home repairs or major purchases before retiring.
• 🎯 Plan your time: Develop a strategy for staying engaged in retirement, such as hobbies, travel, or family time.
• 📊 Nail down the budget: Estimate spending needs throughout retirement, adjusting for changes in lifestyle and inflation.
• 🧪 Test your budget: Live on your expected retirement budget for a year or two to ensure it's sustainable.
• 🏦 Understand pensions: Know the details of your work pension and retirement accounts to make informed decisions.
• 👵 Plan public pensions: Think carefully about when to take public pensions like CPP or OAS for maximum benefit.
• 🧮 Stress test: Challenge your retirement plan with potential risks, like market crashes or high inflation, to ensure resilience.

Q & A

Why is saving hard important before retirement?

Saving hard is crucial before retirement because every dollar matters at this stage. It’s important not only to save money but also to minimize taxes and avoid unnecessary expenses to ensure financial security during retirement.

What is the significance of eliminating debt before retirement?

Eliminating debt before retirement reduces financial strain. Carrying debt, such as a mortgage, requires a larger income, which can deplete savings and investments faster. It also adds emotional stress, making it beneficial to enter retirement debt-free if possible.

What is a 'war chest' in the context of retirement planning?

A 'war chest' refers to a substantial cash reserve that is not invested in volatile assets and can be accessed quickly in times of need. It provides financial and psychological security during retirement, acting as a safety net.

Why is it advised to pay for big expenses upfront before retirement?

Paying for major expenses like home repairs or vehicle purchases upfront before retirement prevents financial strain when regular paychecks stop. Having funds set aside for these known expenses ensures that retirees are not surprised by large costs later.

How can retirees stay engaged and avoid negative effects on their well-being?

To maintain mental, emotional, and physical well-being, retirees should plan for meaningful activities such as traveling, volunteering, pursuing hobbies, or investing in family time. Staying engaged helps bring purpose and enjoyment to retirement.

What is the benefit of testing a retirement budget before officially retiring?

Testing a retirement budget a year or two before retiring helps ensure that the planned budget is realistic. It allows for adjustments if the budget is not feasible, preventing financial difficulties once income becomes limited.

What should retirees know about their work pension or group RRSP plans?

Retirees need to understand their pension or RRSP options, such as when to start drawing benefits, the impact of inflation, and whether to manage the pension independently. Knowing the specifics helps in making informed decisions about retirement income.

How do public pension plans like CPP and OAS factor into retirement planning in Canada?

In Canada, public pension plans such as the Canada Pension Plan (CPP) and Old Age Security (OAS) provide retirement income. Retirees must carefully consider when to start receiving these benefits, as timing impacts the amount of money received over time.

Why is it important to build a tax strategy for retirement?

A tax strategy in retirement helps optimize cash flow by minimizing taxes. Retirees can save significantly by strategically withdrawing from different accounts at the right time, which increases the value of their estate and overall retirement funds.

What is the purpose of stress-testing a retirement plan?

Stress-testing a retirement plan involves simulating adverse scenarios such as market crashes or high inflation. This ensures that the plan can withstand financial shocks and helps retirees prepare for unexpected events without jeopardizing their long-term financial security.