Retirement Planning Services

A Sunny Beach Day with a Beach umbrella and the sun as a dollar sign representing retirement planning done by hervin pesa, Calgary based Financial Planner

A Retirement Plan Allows You To See Where You Are Heading Decades From Now.

What Is Retirement Planning?

Retirement planning is the process of articulating your retirement goals and objectives and creating a plan of action to achieve it. Retirement planning will help you create a framework for your decisions when met with sometimes difficult choices. It is one of the core functions of financial planning, along with risk management, investment planning, estate planning, education planning and tax planning.


Our proven process will give you clarity when creating your retirement plan. The process starts with your goals and objectives. We will then gather financial information to see where you stand today. We will use the same information to create projections and financial models to see whether you are on track or if there are adjustments that must be made, and we’ll make recommendations accordingly.

The most common retirement-related questions are answered by creating a thorough retirement plan; here are some of the questions we receive regularly:


  • When Can I Retire?
  • Can I Retire?
  • How Long Will My Money Last In Retirement?
  • Am I saving enough for my retirement?
  • How much will I be able to spend during my retirement?
  • Should I take a pension from work or take the lump sum?
  • When Should I Take the (OAS) Old Age Security Pension?
  • When Should I Take my (QPP) Canada Pension Plan?
  • Should I Take my Work Pension Early?
  • Should I Retire Early?
  • How can I invest for my retirement?
  • What should my investments look like when I retire?
  • Do we use an RRSP (Registered Retirement Savings Plan) or a TFSA (Tax-Free Savings Account)?
  • What’s a Safe Amount of Money to Withdraw?

Unfortunately, there is no blanket answer for any of these. If You are curious about any of these questions or any issue regarding your retirement, you can apply for a consultation call here.

What Can Retirement Planning Do For You?

Having a Retirement Plan will Let You Live Better Than The Majority.

According to Statistics Canada, only 56% Of Canadians 65 and older earned an income that was more than $25,000 in 2017. The other 44%? They earned Less than $25,000. I don’t know about you; if I had any opportunity to ensure that I end up on the better side of this statistic, I would take advantage of it.

Having a Retirement Plan will Give You The Freedom To Spend Freely.

This may sound weird, but a proper retirement plan would give you the ability to spend with less guilt, both now and in the future.

Retirement Plans Can Help You Spend Freely Today

If you know you’ve already taken care of your financial goals, any excess can become discretionary. You can buy that next gadget guilt-free.

Retirement Plans Can Help You Spend Freely In the Future

Retirement has two main phases, the accumulation or the saving phase and the decumulation or spending phase. We believe that most clients who have successfully amassed wealth would have exercised tremendous discipline and sacrifice. 

For individuals who have done this for twenty, twenty-five, even 40 years, saving would be a deep-seated habit. What ends up happening is they are scared to spend money because all they know is saving. 

This would result in unused capital. As the saying goes, “you can’t take it with you,” so unless you truly want to leave a massive estate, not spending and enjoying your money while you can, is a waste of all your sacrifice.

Having a Retirement Plan Means Minimizing Your Risks

There are numerous risks that could lead to a mediocre or even poor retirement experience. The three mentioned below are based on the most common questions we get asked.

Managing Financial or Investment Risk

We can’t accurately predict the future, let alone dictate it. Any long term investment, especially the ones earmarked for retirement, would fluctuate in value over time. 

Therefore the best we can do is to create investment frameworks to guide our decision making when we hit those bumps in the road. This way, we know how to behave when we experience the inevitable volatility.

It pays to model out these risks. We base this on historical data backtest for investment returns and inflation and Monte-Carlo simulations.

Example

Here’s an example of a backtest report for a fictional investor named Ed our plan uses data going back to 1900. Ed has $1,000,000 in his portfolio today. He is hoping to withdraw $50,000 of today’s dollars from his portfolio. This means increasing his withdrawals by the annual reported inflation. Current data predicts that Ed will live until 94.

If he blindly made this increasing withdrawal, regardless of investment returns, he would have had a 54% chance of successfully doing so until he is 94.

 

Inflation Adjusted Retirement Income Probability Analysis Using Back Test Empirical Data

If, however, he applied a filter to his inflation adjustment and maintained the previous year’s withdrawal amount if the portfolio has negative returns, he would have an 80% success rate of meeting his retirement income needs until 94.

Inflation Adjusted Retirement Income Probability Analysis Using Back Test Emperical Data Applying Guyton Inflation adjustment.

A Proper Retirement Plan Will Reduce Longevity Risk

We are continuing with our example for ED. Even after making the inflation adjustment change, his odds of having money until 94, is still only at 80%.

Good chance, but I’m not getting on a plane with a 20% chance of failure.

Your longevity or life expectancy would be different, and you may only need to plan until you are 90 years old, but ideally, you don’t want to outlive your money.

Creating a retirement plan now will allow you to adjust based on this information, instead of when you are in your later years of retirement. For Ed, nine out of every ten scenarios resulted in having enough until past 89 years old, which is five years too short.

A Proper Retirement Plan Will Reduce The Risk of You Not Saving Enough

The simple solution to increase the odds of Ed’s retirement success is to draw less money annually. However, if he had the chance and knew earlier, he could have saved more money.
By working with a professional retirement planner, you should have a better understanding of how much you actually need to be saving to maximize your retirement success.

Retirement Planning is an Iterative Life-Long Process.

We create financial and retirement plans with industry-leading technology and expertise, but we can never predict the future.

Any good financial planner will tell you that plans are not as important as the actual act of planning.

This is because the plans you make today must continuously be adjusted as life unfolds. Your goals may change, and your retirement funding needs could change because of these changes.

When Should You Start Saving for Your Retirement?

The mathematical answer is to start as soon as possible. However, we know that other goals and the stage of life you’re in could hinder you from getting this done.

We suggest that even if you have to delay your retirement savings, you create a plan as soon as you enter the workforce and start your career. Even if that plan just starts as “maximize my RRSP match up at work.”

Here is a simplified comparison demonstrating the power of saving early for retirement.

Retirement Age: 65 Years Old
Assumed Investment Portfolio Return Before Retirement: 7%
Age Groups Used for Comparison: 25,30,35,40,45,50,55
Total Deposits are the same: $72,000 over the deposit period

 

Age

Years Before Retirement

Monthly Deposit

Total Deposits

Value at Retirement

Multiplier Effect

25

40

$150

$72,000

$393,722.01

5.47

30

35

$171

$72,000

$308,752.22

4.29

35

30

$200

$72,000

$243,994.20

3.39

40

25

$240

$72,000

$194,417.21

2.70

45

20

$300

$72,000

$156,278.00

2.17

50

15

$400

$72,000

$126,784.92

1.76

55

10

$600

$72,000

$103,850.88

1.44

Start Your Retirement Savings Sooner

By Delaying savings by five years, from 25 years old to 30 years old, the expected investment portfolio balance would be $84,969.79 less than if Ed started saving at 25 instead of 30, even though he had the same total deposits of $72,000. That is a 21.5% reduction.

Comparing The Multiplier Effect.

This column breaks down how well your money would multiply on the given scenario based on your total contributions to the total expected value at retirement.

25 Year Old:
5.47X = $393,722 / $72,000
55 Year Old
1.44X = $103,850 / $72,000

In this case, someone who started investing at 25 years old would experience a 5.47X multiplier while the individual starting at 55 would only have a 1.44X multiplier.

 

Start Your Retirement By Investing With What You Can Contribute Monthly.

The power of smaller monthly contributions earlier in life.

One common rule of thumb is to save at least 10% of your income to retirement. This may not feel doable to some younger clients who are just getting started, but as illustrated above, there is power in starting small because of compounding returns.

Based on our example, starting at 25 years old meant that $150 a month turns into almost $400,000 for your retirement. While starting at 45, even doubling the monthly deposits to $300 only resulted in $156,278.00.

So get started.

What Can You Do to Put Your Retirement On Track If You Feel Like You're Late To The Party

Understand That It’s Not Too Late To Get Started On Your Retirement Dreams

If the numbers above scare you because you started later, please don’t get discouraged.

We can take it as a lesson, but there are still things you can do, yes, you’d have to make adjustments, but there are still ways to live a happy and comfortable retirement.

If you feel like you’re off track, here are some things to think about that you can control.

You Can Save More For Your Retirement Goals:

For you to have an adequate retirement nest egg when you decide to retire, you may have to increase your monthly or annual contributions to your registered retirement savings plan and alternative investment strategy.

You Can Increase Your Earnings Today:

You may feel like your retirement goals are out of reach, and you can’t increase your retirement savings because there is no room to cut back on your spending. In this case, an additional option would be to try to increase your income. You can start by potentially working extra hours, consulting or getting a second job.

You Can Adjust Your Investment Plan:

Investments have a true risk and reward relationship. To meet your retirement requirements, you may require a portfolio that is tilted heavier to risk assets such as equities. Of course, this means reconciling if you are comfortable taking on the additional risks for the potential to achieve higher returns. 

You Can Reduce Your Spending In Retirement: 

We all have an idea of the type of life we want to live during retirement. However, we may need to make compromises to make sure you don’t outlive your money in retirement.

You Can Delay Your Retirement Date:

It may be necessary to retire at a later age to meet your lifestyle requirements. We generally believe that this would be a last resort unless you truly enjoy your work. While we project for a long retirement, there are no guarantees; the sooner you can enjoy the fruits of your labour and sacrifices, the better. We do our best to front-load the fun and leisure when planning for your retirement. We believe that working another unbearable year could be taken off the table by planning your retirement carefully.

Get Paid to Play:

You can greatly reduce the withdrawals needed from your retirement nest egg if you have alternative sources of income. This is different from delaying retirement because implementing this strategy means monetizing a hobby or expertise. 

This could mean: 

 

  • Selling Your Artwork if You Enjoy Painting.
  • Consulting Start-ups if you’ve managed businesses previously.
  • Teaching Golf Lessons if you enjoy time on the golf course.
  • Becoming a fishing guide if you long for time in the water.
  • Coaching Yoga Retreats for busy executives.
  • Becoming the neighbourhood handyman.
  • My Personal favourite, buying a set of water sports equipment and renting them out by the shores of your dream beachside retirement.

 

We’ve met people who decided to pursue their entrepreneurial dreams in retirement and we can guide you to do the same.

Want to Get started?

Work With a Fee Based Financial Planner In Calgary.

Hervin Pesa, CFP- Financial Planner Smiling

If you’ve always wanted to take charge of your finances but life has just gotten in the way, you might just need a little help.

I’m a Calgary based Certified Financial Planner and I’ve been helping Calgarians build and protect wealth since 2012.

Book a complimentary financial fitness session with me by clicking the button below.