Hello everyone and welcome to the Retiring Canada Podcast. In today’s episode, we'll discuss a checklist for pre-retirees who are within the next five years of retirement.

Specifically, we'll cover:

- Two items you should review each year as you near retirement

- Balancing the concern of running out of money versus leaving a large inheritance

- The benefits of compounding your healthy choices

- The importance of having a war chest of low-risk, fixed-income investments

- The key drawbacks of a balanced fund in retirement

- What retirement “feels” like

- The importance of hiring an advisor team who will be there for the long haul and not retire at the same time you do

- Lastly, as always, a few action items for you to consider.

If you're listening to this podcast, chances are you've spent the last 20+ years diligently saving for retirement. Your years of hard work and consistency have now positioned you to comfortably retire within the next five years, assuming your current trajectory.

These five years can pass by quickly, and the final stages of retirement prep during this period, both emotionally and financially, will set you up for a truly fulfilling next chapter of your life. Today, I want to dive into some of these checklist items to better prepare you for when the time comes to start enjoying every day like it's Saturday!

Five Years Out

First and foremost is maintaining a healthy lifestyle. All the money in the world cannot give you your health. So, if you're five years out from retirement, think about your daily routine and see if you can incorporate healthier choices throughout the day. It can start as small as a five or ten-minute walk if you are able.

Just as your investment accounts have benefitted from small, incremental investments compounded over time, the same is true for the incremental, compounding benefits of a healthy lifestyle. You have worked hard to get here, and staying healthy will ensure you are around to continue enjoying what you have prepared for so long to achieve.

Second, review your mortgages, loans, and lines of credit. If you are able, consider making accelerated payments towards any outstanding debts to try and have them settled by the time you reach retirement. Eliminating or reducing your fixed expenses alleviates your monthly budget from restrictive payments and allows you to spend more on enjoying your retirement, especially during those first few years which tend to be the most expensive.

With that out of the way, having access to debt such as a Home Equity Line of Credit can be an asset in retirement. It can act as a safety net or emergency fund, be used to finance renovations or car purchases, and give you the option to delay withdrawing money from your investments if the markets are down or if there are significant tax consequences. Establishing this type of secured debt before you retire and your income stops can keep your options open.

Four Years Out

First, it's time to dig out that investment statement and see how your money is being invested. As you near retirement, you need to start thinking in terms of “how am I going to turn this into an income” versus “how do I grow this as much as possible.” This change in mindset is important because your risk runway is starting to shorten.

Look at your portfolio and complete a risk profile questionnaire. These can be found online or with your current advisor. I'll include a copy of an investor risk profile questionnaire from Vanguard Canada in the show notes as a reference. Once complete, check if the current level of risk in your portfolio aligns with your new risk profile as you near retirement.

Next, build a retirement income plan that will help fund your retirement when the income tap gets turned on. Consider creating a war chest of fixed income for the first few years of your retirement. This could include cash, high-interest savings accounts, GICs, bonds, alternative investments, and more. Depending on your situation, one to three years of retirement income not impacted by market fluctuations could be valuable. This will ensure you can shift withdrawals from your equity accounts to your more stable assets during a down market.

Three Years Out

While you still have a regular income, consider tackling any major expenses now before you retire. This includes home renovations and vehicle purchases. For renovations, now is a great time to consider upgrades so they can be paid for while you are working. Similarly, consider the vehicle situation. You may decide that you only need one vehicle in retirement. Having these conversations now may impact your decisions on what vehicle to purchase today.

Two Years Out

It's time to request a Canada Pension Plan estimate. You can do this by submitting a paper application or by creating a My Service Canada Account. Choosing your CPP start date is a substantial decision that should not be taken lightly. Some Canadians may need to take it as early as 60, while others may consider delaying until age 70 if they have both the investment means and health to do so.

Once you receive your CPP estimate, build out a few scenarios with your financial planner to ensure you choose the optimal start date for your circumstances. Knowing these amounts will give you a firm understanding of the timing and amount of money needed from your investments to fill the retirement income gap.

One Year Out

Now that you're one year out, finalize your retirement budget. Generally, retirees spend more money in the first few years as they start to experience their bucket list trips and get used to their new lifestyle. This is normal! Ensure you have your retirement income plan ironed out, including the war chest of cash and high-interest savings, so you can enjoy these first few years without worrying about market fluctuations.

If you have a pension, submit your retirement date to your employer. You'll receive a retirement package outlining your pension benefit, health benefits, and more. If you have a defined benefit pension, work through your options including the pension benefit versus commuted value, the percentage of benefit allocated to a surviving spouse, potential retirement allowances, and more. If you have a defined contribution plan, decide whether to manage the nest egg yourself or hire a financial planner.

Day 0: You Retired!

Congratulations! Retirement is a significant milestone, and it's something you need to experience to truly understand. Reflect on your journey and rejoice in this next chapter of your life. It's normal to feel a mix of excitement, nervousness, elation, anxiety, and fulfillment. Embrace these feelings and approach your new life with an open mind and a growth mindset.

Action Items

1. Talk to a few retirees to get their perspective on things. Find out what worked, what didn’t, what they would change, and what was most rewarding.

2. Plan, plan, and then plan some more. Retirement can creep up quickly, so it's essential to be prepared. If you're a DIY investor, ensure you don’t have any blind spots in your planning. If you see value in professional advice, engage with a Certified Financial Planner early and often.

3. Consider the age of the advisor you choose. Align yourself with an advisor who will be there for the long haul.

Lastly, enjoy the time you have. Remember, you can't take it with you when you leave. Cherish the moments with your family, children, grandchildren, and friends. If you have the means to retire now, consider doing so and enjoy the fruits of your labor.

That will do it for today’s episode. Let me know if there are other key considerations for a pre-retiree as they approach retirement, whether financial or non-financial. For links and resources discussed, please check the show notes or visit retiringcanada.ca. Be sure to sign up for my weekly Retiring Canada newsletter.

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.