Hello everyone and welcome to the Retiring Canada Podcast. In today’s episode, we're going to discuss 15 retirement mistakes you will regret.
Specifically, we are going to cover:
- The power of learning from others
- My list of 15 mistakes to avoid, many of them not financial in nature
- A few planning resources to help you narrow the gap
- Lastly, a few action items for you to consider
Mistakes are a part of life, and I think we all know that by now. But one of the amazing things about life is that it gives us the opportunity to learn from our mistakes and the mistakes of others. This journey of seeking wisdom can enhance our lives and reduce stress.
Today, I hope to help you engage deeper in thought about retirement and address blind spots you may not even realize exist.
One of the most fulfilling aspects of my career as a financial planner is being a sounding board for hundreds of individuals and families as they navigate the complexities of life, family, careers, relationships, and money.
Beyond my professional knowledge and experience, it’s the lived experiences of these individuals and families that shape my advice as a financial planner. This helps clients avoid common traps and mistakes that aren’t always financial in nature.
So, let’s dive into the 15 retirement mistakes you will regret.
1. Falling for Too-Good-to-Be-True Offers
Three years ago, a client reached out to discuss an investment opportunity pitched at his work. The founders promised 8%-10% returns, practically guaranteed in a secure real estate investment. Many of his colleagues were signing over their $500,000+ retirement portfolios, so he thought he should too.
After discussing the validity of the offer, my client trusted my judgment and kept his retirement nest egg in traditional investments. Fast forward a year, and the whole thing imploded. Investors were left with decrepit buildings as the founders pulled the plug and disappeared.
This kind of thing is more common than you think. Don’t assume it can’t happen to you. Even intelligent people can get grifted into scams. If it sounds too good to be true, it probably is. Do your due diligence and ask a professional.
2. Not Setting a Retirement Goal
Setting a goal is the cornerstone of good planning. Without a goal, what are you working toward? Take it a step further and envision what retirement actually feels like, not just an arbitrary number.
Imagine your dream retirement scenario. For me, it’s being out on the lake, fishing with my son as the sun rises. This vision helps bring your future into the present and gives perspective on life.
I believe in envisioning my future, whether before an important meeting, a potential tense situation, or when thinking about my family's future. Take a moment to envision what your retirement will feel like.
3. Claiming Your CPP Pension Too Early
Choosing a CPP start date is one of the most important decisions. Many pre-retirees want to take this pension as soon as they can because it’s their money. However, the CPP pension is likely one of the most valuable assets you own, and choosing the wrong start date can significantly impact your investments and your ability to retire.
The CPP pension is an inflation-indexed annuity and a risk-free asset not available for purchase privately in Canada. Choosing the right CPP start date will give you more flexibility in how your money is invested, greater control of your taxable investment accounts, and help ensure you have a sustainable retirement income for life.
If you’re curious about what your retirement income could be, use the CPP Calculator online. When you're ready to optimize your CPP start date, reach out to a professional financial planner.
4. Putting Your Kids First
Sure, you want your children to have the best, but footing their bills at the expense of your own retirement savings could come back to haunt you. It’s often the continuous aid and support that can jeopardize a retirement.
Be careful. If you're not prudent now, you might end up being the one moving into your kid's basement.
5. Buying into a Time-Share
Time-shares can seem appealing during retirement, but buyers who don’t grasp the full financial implications can quickly regret the purchase. Maintenance fees, special assessments, and travel costs add up. If you develop buyer's remorse, the market is flush with used time-shares, and scammers abound.
6. Avoiding the Stock Market
Conventional wisdom may suggest avoiding the stock market in retirement, but this ignores the risk of inflation. If you retired today with a plan to spend $100,000 a year, you’d need nearly $165,000 after 20 years due to inflation.
Long-term retirement investors need stocks (equities) in their portfolio to grow faster than inflation. Understand the potential long-term risks of being too conservative with your nest egg.
7. Not Disconnecting from Tech
Addiction to technology isn’t just a young person's affliction. Be mindful of your screen time and be intentional when it’s time to unplug. Being present, especially with loved ones, is invaluable.
8. Ignoring Your Health
Health is wealth. Small, incremental decisions impact our financial future, health, and well-being. Keep your body and mind moving to enjoy your retirement.
9. Neglecting Estate Planning
Estate planning isn’t just for the wealthy. Even modest assets require a valid will to specify who gets what. Review and update your estate-planning documents regularly.
10. Obsessing Over Your Investments
Constantly thinking about your money can make it difficult to disconnect and be present, and it may lead to poor decisions. Have a plan and adhere to it.
11. Borrowing Against Your Home
While having a home equity line of credit can provide flexibility, consider its impact on your cash flow and overall financial picture before using it.
12. Not Considering the Impact of Inflation
Inflation is a major risk in retirement. Your money needs to keep pace with inflation to maintain your purchasing power.
13. Failing to Plan How to Fill Your Newfound Free Time
Retirement is more than just numbers. The emotional aspect is often more difficult to navigate. Prepare your body and mind for this next chapter of your life.
14. Not Making a Plan
Failure to plan is planning to fail. Have a clearly defined path that includes “what if” scenarios to set yourself up for success.
15. Not Retiring Sooner
Don’t move the goal posts once you achieve your goal. When you reach your retirement goal, create a sustainable income plan, and prepare emotionally, take the leap. You can’t take it all with you when you’re gone.
Alright, that does it for today. Let’s jump into your action items for this episode:
Action Items:
1. Create a list of real, tangible and intangible goals for retirement.
2. Visualize how retirement will make you feel.
3. Develop a clearly defined plan that includes “what if” scenarios.
For the links and resources discussed, please check out the link in the show notes or visit retiringcanada.ca.
If you enjoyed the show, please subscribe and leave us a review on your favorite podcast app. Be sure to sign up for my weekly Retiring Canada newsletter.
And remember, when it comes to your retirement, don’t take chances.
Make a plan so you can retire with confidence.
All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.