I plan on retiring in five years when I turn 63. I also have two adult children who I want to help financially while I’m still alive. What should I be thinking about now?
We asked Leanne Kaufman, president and CEO of RBC Royal Trust, to answer this one.
Considering the average age of retirement in Canada is 65.4, according to Statistics Canada, you’re close to being on track. Women tend to retire at a slightly younger 63.6 years.
And, yes, your desire to help your two adult children is another important part of the retirement conversation, and not uncommon, Ms. Kaufman said. Increasingly, parents want to see their wealth make a difference while they’re alive rather than simply leaving an inheritance.
“That can be deeply meaningful; but it should be done thoughtfully,” she advised. “The single biggest risk to a gift-giver is outliving that generosity: giving away money today that you may need to live on far longer than expected.”
What do later-in-life investors need to know about prediction markets?
Before making any significant gifts, Ms. Kaufman recommended that you understand what you may need to support your own life over the long term: your expected retirement income, lifestyle, potential changes in spending and the possibility of needing additional support or care later – this is where that stress test becomes integral. Once you have a clear picture of your financial resilience, she added, you can then confidently decide on helping your children.
The form and timing of gifts matter, too. For example, a one-time contribution toward a home or education is different from continuing financial support. “Your plan should consider the tax, investment and estate implications, and whether a gift could put your own retirement security at risk,” Ms. Kaufman said.
Perhaps more importantly, she flagged another part of longevity planning that’s easy to overlook: the non-financial side. She asks these questions of her clients: Where would you want to live if your circumstances changed? Who would help you if you needed support? What role would you want your children to play? Have you discussed your wishes with them and put the appropriate legal documents in place?
“These conversations aren’t about assuming something will go wrong,” Ms. Kaufman said. “They are about preserving choice. You are healthy today, which makes this a particularly valuable time to have them. Planning when you have choices is much easier than making decisions under pressure later.”
Ultimately, longevity planning is about putting your future self into today’s financial decisions. The question, she pointed out, isn’t simply whether you can afford to retire at 63. “It’s whether you can afford the life you want at 63, while protecting the person you may become at 73, 83 or beyond. The aim isn’t to pick between enjoying your wealth now and guarding it for later. It’s to build a plan that lets you do both; one that doesn’t try to predict the future but prepares you to have choices when you get there.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
