November 20, 2018
From attending parties to raising kids to running a business, life is busy. Amid the joys and stresses of daily life, staying on top of your finances can be a challenge, let alone finding time to plan for the long term. And even if you had the time, how are you supposed to know what’s important for your financial future and when you need to take action?
As November is Financial Literacy Month (#FLM2018) in Canada, we’ve created the Your Money, Your Life series aimed at addressing these questions and highlighting key financial considerations for different age groups. Every individual is unique, so these aren’t hard-and-fast rules. Instead, they are signposts meant to guide you toward financial decision-making that makes sense for your situation.
The following article addresses financial matters of importance to Canadians in their 60s and beyond.
Retiring with a wealth of time and resources to share
For many Canadians, life in your 60s and beyond is focused on enjoying the freedom that comes with wealth accumulated through decades of hard work. At this age, you are likely either preparing to retire or enjoying retirement. While this period can bring new joys such as more time with grandchildren, it can also bring new challenges such as deteriorating health.
So what are the key financial considerations that should be on your radar at this age? Here are a few of the major financial issues and milestones common among your peers in their 60s and beyond:
- Retiring or enjoying retirement
- Having more time for hobbies and charitable/philanthropic work
- Spending time with family/grandchildren
- Suffering from additional health problems
- Dealing with the death of a spouse
The path your life has taken may differ from your peers, so your financial situation and needs may not be the same as theirs. Nonetheless, there are basic financial steps that generally make sense for people in their 60s and beyond.
Making the transition to retirement
From a financial perspective, your 60s and beyond are a period of great transition as this is when you will likely shift from working life to retirement. With this shift comes a new financial perspective as you flip from wealth accumulation to preservation and enjoyment.
Here are five key steps that you can take in your 60s and beyond – in addition to the steps that you took in your 20s, 30s, 40s and 50s – to ensure you maximize your financial well-being:
1. Make a lasting impact. One of the great privileges of wealth is the ability to share it. As you look back on the successes of your life to date and look forward to the golden years laid out ahead of you, the desire to share your good fortune and positively influence the world around you may grow stronger. Philanthropic efforts tend to be more impactful when they are closely tied to your values and those of your family. So which causes are most important to you?
2. Grow your RRSP while managing the risk. According to Statistics Canada, the average retirement age for Canadians is 63.6 years, although this rises to 68.0 years for self-employed individuals. If you are still working and have income in your 60s or beyond, you can keep boosting your RRSP portfolio with new contributions. However, the closer you are to retirement and the time when you will start drawing on your RRSP, the more important it becomes to reduce the risk profile of your investments as you will have less time to ride out a major market downturn. As your RRSP may be a key component of your retirement plan, it’s crucial to protect and optimize
3. Choose assets aligned with your changing risk profile. As your risk appetite declines at this age, permanent life insurance remains a versatile financial tool that can help you transfer wealth to your loved ones in a tax-efficient manner. Even in your 60s and beyond, you can purchase additional coverage, or better yet, convert term insurance that you bought in the past into permanent life insurance. The latter approach lets you bypass medical testing, so it’s an option even if your insurability is questionable due to health reasons.
4. Obtain long-term care insurance. A loss of independence following an accident or due to a long-term illness is one of the greatest challenges that some Canadians face as they grow older. Statistics Canada data suggests that 6.8% of Canadians over 64 years old live in a nursing home or seniors’ residence. Long-term care insurance can complement disability and critical illness insurance to provide additional financial support if you find yourself unable to care for yourself. This coverage can help provide peace of mind that you will be able to afford in-home care or extra support in a retirement home should you one day require it.
5. Update and optimize your estate plan. Like it or not, one day you will be gone. The good news is that while you’re still alive and well, you have the power to put in place plans to provide for your loved ones. One Canadian bank estimates that $750 billion will change hands in the form of inheritances passed down from older Canadians to younger generations between 2016 and 2025. Estate planning gives you endless options for how, what, when and where your wealth will be shared. The key is to maximize the positive outcomes while minimizing any burdens that may fall on those who survive you – for example, passing on the family cottage without leaving behind a huge tax bill.
Ensuring your financial plan is in order
Ideally, your 60s and beyond should be a time when you can worry less about money and focus more on your family, health and leisure. However, even if you have reached your 60s and discovered that you are financially unprepared, the good news is that it is never too late to take action and improve your situation.
Seeking out support from a trusted financial advisor can help you better understand your options and ensure your wealth management plan is tailored to your needs. For a discussion about how we can help you reach your financial goals, contact Rubach Wealth at (647) 349-7070.