You’re stuck between two worlds, part of the “sandwich generation” where both your parents and kids rely on you. The weight of the world is on your shoulders, but as much as you love helping your family, you’re also exhausted and ready to think about your own retirement. How can you plan for this next phase effectively so that you don’t let your loved ones down?
Planning for retirement can be a complex process, especially when you have financial dependants. Most pre-retirees wonder if they have saved enough money to make it through the years ahead—and you’ll need a steady stream of income for yourself and your dependants that lasts a lifetime. After all, you don’t want to run out of money in retirement.
It’s a good idea to discuss your scenario with professionals such as your investment advisor. While we’re not investment advisors, the below tips give you some important points to consider and discuss with them as you plan for future retirement.
Take care of yourself
Yes, taking care of your family is a rewarding experience; however, it can also drain your personal finances and emotional well-being. You need to be in top shape to meet the needs of your family, and getting respite is essential. According to the Mayo Clinic, a leader in health and wellness, there are some simple steps you can take to preserve your well-being, which can be as simple as asking for help from others.
There are also federal caregiving benefits available for people who are away from work to care for elderly parents and young children, which may provide you assistance to make it through this challenging time.
When you retire matters
If you’re in the retirement corridor or five years away from retirement, it’s time to take stock of your personal financial situation and create a stable income stream. This would start by reviewing your retirement savings (RRSPs), company or work pension, other income sources and government sources of retirement income (CPP, OAS) to see how much money you have to retire.
Retiring during a strong healthy economy and bull market has its advantages. According to The Globe and Mail, when you retire matters because “the threat of receiving lower or negative returns early in a period when withdrawals are being made which can have a significant impact on the overall value of a portfolio — and how long it lasts.” However, you could retire during an unhealthy economy or bear market. If this is the case, keep track of your expenses and consider making lifestyle adjustments if needed to make your retirement savings last.
Regardless of the economy or markets, creating sustainable lifetime cash flow will help you to ride the ebbs and flows.
Retire somewhere close to family
Your connection to family and friends matters. You will want to consider where you retire, particularly if you have dependants who need you—whether they live in Canada or overseas. Retiring abroad may sound like a terrific idea, but the distance from your loved ones could pose a challenge.
Many pre-retirees plan to retire to their second property or become snowbirds and spend upwards of six months out of the country. This is doable, but you will want to consider the impact this might have on your family and friends, and discuss any potential tax implications with your advisors.
Retirement readiness and your finances
You’ll want to retire in comfort, and to do that, you’ll need to factor in your lifestyle and financial commitments. To figure out how much money you’ll need in your golden years, set up a retirement income plan. This may include three sources of income:
- Your savings
- A company pension
- Government benefits
In Canada, there are several sources of government benefits for retirees that you may review, such as income support through government pension payments. This includes the Old Age Security (OAS) program, the Guaranteed Income Supplement (GIS) and the Canada/Quebec Pension Plan.
Once you crunch the numbers, you will have a good idea of your retirement readiness and how you can support your family. At that point, you may have to consider the following:
- working longer
- saving more money
- limiting your lifestyle choices
Try this retirement calculator to get an idea of your retirement readiness.
Financial security for you and your dependants
Your dependants could be your parents, grandparents, brothers, sisters or young children.
There are a few things you can do right away to look out for your financial health and your dependants down the road:
- Open up a Tax-Free Savings Account (TFSA) and maximize yearly contributions.
- Set up or contribute to a Registered Education Savings Plan (RESP) for dependants who may wish to pursue a post-secondary education.
- Consider a Home Equity Line of Credit (HELOC) to tap into some of the equity you’ve built up in your home as means to generate some additional financial resources for dependants or to fund your retirement.
- Set up or contribute to a Registered Disability Account (RDSP) to ensure the long-term financial security of a person who is eligible for the disability tax credit (DTC).
Create a lasting legacy
If you don’t already have a will, it’s essential you include this as part of your retirement planning. The main benefit of having a will & estate plan is to protect your dependants and ensure they are taken care of should something happen to you. Each province in Canada has different laws governing estates, so it’s a good practice to contact a will & estate lawyer to discuss an estate plan.
Retirement is a time of joy for most people. With proper planning, you can create a retirement plan that takes care of you and your loved ones. As always, seek professional investment advice when making financial decisions for you and your family.
How Wyth can help
Learn more about Wyth mortgages. We specialize in alternative and complex lending solutions for every stage of your home buying experience.
For those with a high net worth or complex estate needs, our subsidiary, Wyth Trust can provide further assistance with your will and estate planning.
The content of this article is provided for general information purposes only and is not intended to be investment or legal advice. While this article provides tips for you to consider, it does not reflect the multitude of factors that can contribute to your individual situation. Seek counsel from your trusted professionals when making any investment, legal and financial decisions. While we strive to offer help, we accept no liability for any loss or damages arising out of your use or reliance of the information in this article, including liability towards third parties.