Illustration by The Globe and Mail
Q: I’ve heard a lot about “longevity planning.” It’s a common word used in health, but what about in money matters? How can I protect my future self first? I am 59, in great health and am considering retiring at 63. I have approximately $800,000 in an RRSP and have worked full time most of my adult life, but do not have a company pension.
We asked Leanne Kaufman, president and CEO of RBC Royal Trust, to answer this one.
Longevity planning may sound like a health care concept but, according to Ms. Kaufman, it’s equally important when thinking about your financial future.
“Now, you’re 59, in great health and thinking about retiring at 63, which puts you in a strong position, as time is on your side,” she said. But “strong position” and “set for life” aren’t necessarily the same thing. “That gap is exactly what longevity planning is about: thinking past the day you retire to ensure your money can support you for the decades that may follow.”
Ms. Kaufman said that, with roughly $800,000 in a registered retirement savings plan and no company pension, this is a good time to look at how your assets can translate into sustainable income and flexibility throughout retirement. She usually starts by asking her clients a simple question: What do you want your money to do for you at 63, 73, 83 and 93?
It’s important to note that your spending likely won’t remain constant throughout retirement. For example, the early years may bring more travel and experiences. But later, priorities may shift, and at some point, you may face higher costs around housing, health, transportation or care, she said.
“None of this is guaranteed, but a strong plan accounts for these costs, which can increase quickly. For example, private personal support workers can cost tens of thousands, and for 24-7 care – upwards of $300,000 annually,” she said.
Since you don’t have a workplace pension, it is important to understand how your RRSP, Canada Pension Plan and Old Age Security can work together to create a reliable income, Ms. Kaufman said. That includes considering when to begin receiving CPP and OAS.
“For instance, delaying your CPP to age 70 can meaningfully increase your lifetime monthly benefit,” she said. Delaying the benefit could also affect your calculations for how much to withdraw from your RRSP, the tax implications of different withdrawal strategies, and how your portfolio may perform through different markets.
It’s always worth stress-testing your plan against a longer-than-expected retirement, she said. That should include calculating what you will need after you stop working, while also ensuring that you’ve taken into account unforeseen circumstances, such as failing health, long-term care, market instability or losing your job before you retire.
“Longevity planning isn’t about predicting exactly how long you will live,” Ms. Kaufman said. “It’s about making sure you don’t run out of options if you live longer than expected.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
