Illustration by The Globe and Mail
Q: I have seven years to go before I retire at 67. I’ve done a decent job saving, but my retirement plan that I’ve been working toward is something that I developed 20 years ago. I now realize I may not be prepared for health-care costs, long-term care and day-to-day living expenses over a longer retirement, as I’m also in excellent health. Any advice on finding the right balance between giving while living, keeping estates current as my life evolves and, most importantly, not running out of money?
We asked Leanne Kaufman, president and CEO of RBC Royal Trust, to answer this one.
This is an increasingly common question, Ms. Kaufman said, and, in many ways, it reflects one of the biggest shifts facing today’s retirees.
“Twenty years ago, retirement planning was built around the idea of stopping work at a certain age and funding a retirement that might last 15 to 20 years,” she said. “Today, people tend to be much healthier, more active and living longer than previous generations. That’s of course something to celebrate; it also means that retirement plans developed decades ago, and the life events being planned for, should be revisited.”
With the average Canadian now living well into their 80s, retirement is no longer simply a financial milestone – it is a life stage that may span 25, 30 or even 35 years, depending on the age one chooses to retire. According to Ms. Kaufman, that fact requires a broader perspective that includes financial, physical, cognitive and social well-being.
“As you have identified, from a financial standpoint, one of the most important exercises is stress-testing your retirement plan against different scenarios, to ensure your own financial future is secure before considering gifting to others,” she noted.
I’m two years from retirement and my portfolio is down. How can I recover?
She works through these scenarios with her clients: What happens if you live to 100? What if markets or inflation do not perform as predicted? What if you or a spouse requires care later in life?
“Most Canadians understand or have at least thought about the costs of travel and leisure in retirement; fewer have fully considered the potential impact of health-related expenses, home modifications, caregiving support or long-term care needs,” Ms. Kaufman said. Planning for these possibilities isn’t about expecting the worst, she added. It’s about creating flexibility and resilience within your plan. “Working with a financial adviser who specializes in longevity retirement planning can be invaluable here; they’ll be able to run through these questions and scenarios to bring you a clear picture of what’s needed for that next stage in your life.”
Your question about “giving while living” is very timely. “We’re seeing families move away from the traditional model of transferring wealth solely through an estate. Many parents and grandparents want to help loved ones when they need it the most, either supporting a first home purchase, education costs, caregiving responsibilities or other major life events; and there’s a lot of satisfaction that can come with seeing the benefits of that support during your lifetime.”
However, it is very important to keep in mind that generosity shouldn’t come at the expense of your own long-term security. Ms. Kaufman suggested that before giving any significant gifts, take time to understand what level of giving you can sustain while maintaining confidence in your retirement income and future housing and care needs. “You really want to aim for that balance, enjoying your wealth, sharing it with the people and causes that matter to you and preserving enough resources for the decades ahead.”
Finally, through all of life’s changes it’s crucial that you keep your estate plan current. “I’ve found most view wills and powers of attorney as documents that are completed once and filed away. In reality, they should evolve alongside your life. Family dynamics change, assets grow or are sold, new families are born, others pass away and new health considerations sometimes emerge.”
Ms. Kaufman recommended reviewing your documents and your overall estate plan (including beneficiary designations, trusts and asset ownership structures) every few years or after major life events as it is important to ensure it still reflects your wishes and supports the people you care about most.
“One of the most important mindset shifts I can suggest is moving beyond the fear of running out of money,” she said. “That concern is understandable, but the broader goal is to create confidence that your resources are aligned with the life you want to live.” She noted that the most successful retirement plans are not focused solely on preserving assets; they are designed to support purpose, independence, relationships, health and quality of life over time.
Longevity preparedness is ultimately about preparing for a longer life, not just a longer retirement, Ms. Kaufman said. By revisiting your plan now, integrating health and caregiving considerations, thoughtfully approaching wealth transfer and keeping your estate plan current, you can position yourself to enjoy the years ahead with greater confidence. “The goal is not to choose between living well today and protecting tomorrow. It is to build a plan that allows you to do both.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
