Outline for investors in early retirement

The following outline is provided as an overview of and topical guide for investors in early retirement.

You have reached retirement age. Hopefully you have prepared yourself already and taken a serious look at retirement income planning and replacing most of your lost income from employment. The first part of retirement is the active one, during which you can hopefully enjoy the fruits of your labor.

This article is intended to help a reader learn about a subject quickly, by showing what topics it includes, and how those topics are related to each other.

The financial life cyle

Investors in early retirement are starting the decumulation phase of the financial life cycle.

Lifestyle and housing-related choices

Read about non-financial aspects of retirement to answer questions such as "where will you live" and "what will you do"
Specifically, review your housing situation: have your needs changed?
Think about the pros and cons of owning versus renting a dwelling

Retirement income planning

Review Canada's retirement income system
Are you using the conventional retirement planning approach or the safety-first approach?
Review your overall decumulation strategy:
- Decide when to start claiming Canada Pension Plan, Québec Pension Plan, Old Age Security and the Guaranteed Income Supplement (if eligible)
- Draw on employer pension plans or group retirement plans
- Should you unlock locked-in accounts?
- Among your various investment accounts (non-registered, Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA)), which one will you draw on first, and why?
- Which withdrawal method will you use for your portfolio: constant amount, variable percentage, conversion to annuities, a combination... Is your strategy sustainable?
Apart from generating regular income during retirement, you also want to plan for contingencies
If this seems too complicated, now may be a good time to consult a financial planner
Convert your RRSP into a Registered Retirement Income Fund (RRIF) no later than the year you turn 71

Investing

Refresh your knowledge on portfolio design and construction and see if you should revise your portfolio, now that you are retired
In particular, review your asset allocation, taking into account risk and return; is it time to get more conservative?
Do you now need an allocation to cash, in addition to fixed income and equities?
Look at simple index portfolios or asset allocation ETFs if you want to simplify your affairs
Rebalance your portfolio regularly
Update your investment policy statement
If you don't want to do DIY investing, consult a financial advisor

Tax planning

Look at Income splitting opportunities
Think about the tax efficiency of your investments
Utilize unused and new TFSA contribution room to shelter investments from tax

Estate planning

Update your will
Update your power of attorney document(s)
Once your estate plan is ready, communicate it to your loved ones

Insurance

Review the types and general principles of insurance
Home owners need home insurance and possibly title insurance
Renters need tenant insurance
Evaluate if your life insurance needs have changed
Are you a candidate for long term care insurance?
If your employer was supplying extended health insurance before retirement, which part(s) do you need to replace?

Banking, budgeting

Investigate low-cost banking packages for seniors, if applicable
You may still need a budget to manage your spending, especially since your spending habits will change

Credit and managing debt

Check your credit report regularly to protect yourself from fraud
Eliminate any remaining debt including mortgages, lines of credit and car loans
Manage your credit card(s)

What's next

The next phase in the financial life cycle is late retirement.

References

External links

GetSmarterAboutMoney.ca, Living your retirement
RetireHappy.ca, Financial Stages of Life