There’s no one-size-fits all approach to financial planning, particularly when it comes to retirement. Proper retirement planning should be personalized to set up a retiree for a comfortable and long-lasting financial future. To complicate an already complex topic, there are many myths around retirement planning that make it even harder for Canadians to understand how, when and what they need for their golden years.
“Canadians need confidence that their money will endure, and that retired life will be everything they dreamed of,” said Christine Van Cauwenberghe, head of financial planning at IG Wealth Management. “This requires a holistic plan, dependable advice from a financial advisor, and some myth-busting to meet retirement goals.”
Here are three of the most common retirement myths and the reality behind them.
Myth #1: RRSPs are a complete retirement plan
An investment plan is not a retirement plan. A Registered Retirement Savings Plan, known as an RRSP, is a tax-efficient strategy, but it is just one piece of the puzzle. Most Canadians rely on several income sources during retirement, including company pensions and dividends from non-registered investments. A real, comprehensive retirement plan will also include estate planning, life insurance and ways to reduce tax.
Myth #2: $1 million is enough to retire
While it’s handy to have a magic number, the million-dollar myth doesn’t account for varying lifestyle factors. A commonly used percentage for annual retirement withdrawals is four per cent; however, when combined with other sources of retirement income, this could be a miscalculation for some. Will you retire early? What retirement lifestyle will you lead? There are dozens of questions that complicate this myth.
Myth #3: Your cost of living will be lower in retirement
With fewer commuting costs and potentially no mortgage payments, retirement may seem affordable. In truth, many financial advisors suggest retirees plan to have as much as 80 per cent of their working income. Many retirees plan to travel, still have debt or a need to financially support adult children.
Find more information on retirement planning at ig.ca or speak with an advisor.