We all know we’ll be spending money in our retirement, but chances are few of us have thought about exactly how we’ll spend our time. Financial experts say that while financial planning and management is crucial, so is lifestyle planning.
“Lifestyle is about what is going to give you joy,” says Amalia Costa, head of retirement strategies at Royal Bank of Canada. “For some people it’s returning back to school. For some it’s activities like golfing. For a significant number it’s volunteering. How do you want to spend your time?
Travel is a popular objective for retirement years, but can vary widely in terms of cost, scope and frequency. “For one person it might be a long driving trip while another may want to take a trip to India for a month. Those will have very different price tags. It’s really important to have a vision, to understand upfront what kind of lifestyle you want then to plan specifically for that," Costa says.
Kim Parlee, vice president of TD Wealth Management, agrees that the more detailed people can be about how they hope to spend those years, the better.
“A lot of people think retirement is just like going on vacation,” Parlee says. “But it’s important to remember that retirement can last for 20 to 30 years and beyond.
“The key thing people are so focused on is the number: ‘I need X-dollar amount to retire,’ and they don’t look at income flow,” she adds. “How are you going to sustain your lifestyle when you retire?”
The key to achieving the retirement you want is setting lifestyle goals.
"We start with lifestyle planning before we start with financial planning,” Costa says. “It’s quite eye-opening ... People really get to understand their vision and what’s important to them. With that we can develop a very personalized, meaningful plan to enable that vision.”
Important to prepare for the worst
While we all hope to be spending our golden years enjoying good health and endless entertainment, Parlee notes people still need to prepare for possible setbacks.
“Two-thirds of working Canadians expect to retire in their 60s, and 16 per cent want to keep working until their 70s,” Parlee says, referring to findings from the recent TD Retirement Realities Poll. “What happens if you can’t work that long? What if you have to leave the workforce early because of health problems or for family reasons?
“We’re lucky in Canada when it comes to health-care costs, but dental work is not covered by health insurance,” she adds. That’s something that’s going to need to be paid for. Then there are family changes: divorce or emergencies; maybe adult children are having issues or need to come back home. You can’t plan for every crisis, but can plan to have a buffer if you need it.”
To do that, Parlee says start saving now, no matter how far off retirement may seem and regardless of how small an automatic monthly withdrawal may be. Tools like retirement savings calculators can help.
“People get so caught up in saving for such a big number; it seems unattainable,” she says. “Or they think it’s [retirement] very far away. Put away $100 a month. Put away $50 a month. The goal of step 1 is to get to step 2, not step 102. “The key is just to start.”
The TD Retirement Realities Poll also found that 15 percent of Canadians will spend less than five years saving for retirement. By contrast, in hindsight 69 percent of current retirees say they should have saved for 25 years or more.