How to Save Your Retirement Plans from Falling Apart

This could make or break your retirement plan.

Having your retirement plan go sideways is a big deal—especially if you’re already in it.

So how can you prevent that from happening?

First, it’s important that you …

• Enter retirement debt free
• Build a cash savings
• Keep tabs on your spending … but that’s just part of the greater picture.

If you want to know how you can save your retirement plans from falling apart, tune into the latest podcast episode where I spill all the details you need to know.

Listen here.

Show Notes:

Hey there. Welcome back. So to make sure you have the heads-up you need, I’m going to share a few things to keep your retirement plan on track. In order to avoid a major derailment down the road, we need to pay attention to a few areas. Let me share them with you. 

First, number one, get out of debt. The goal is to be debt free by retirement. Hot tip to get there I suggest you plan and track your progress. Have a planned end date because just winging it is not going to work. You should retire with no debt and stay debt free throughout retirement. 

Next is to have cash savings. Have an emergency savings account that is liquid. It’s outside of your investments in retirement income. Cash is queen always, and things come up. And this is what we learned through the high inflation time and through COVID, is that it was always important to have a nest egg. 

So that is one of the things that if it’s lacking, you’re going to find that in retirement you’re gonna start to use from buckets that weren’t planned for those emergency items. So make sure you’ve got your cash savings. 

I also recommend constant money and savings check-ins—keeping tabs of your expenses and your savings buckets. That means sitting down and actually, I don’t know, I recommend once a month, but it’s about sitting down, going through what bills are coming up, what big expenses are happening throughout the year, down the road? What’s going to cost money? 

It’s just keeping tabs. Always checking in and being aware of your finances is important. This lets you get in front of anything that might affect your money and plans. 

This next step can be really emotional and I’ve witnessed it. I’ve been partaking in these conversations with people. They’re happening more often in my office, and it’s definitely going to threaten your retirement plan. I’m talking about lending or gifting money to your adult children or family members. 

It is vital that you maintain your boundaries with supporting family. It’s an expensive world out there, and we want to give our children, our family members, everything we can. But not at the expense of our own retirement. I always use that saying that you have to put the oxygen mask on yourself first before you can help anybody else on that plane. And it’s the same thing in life. It’s the same thing with our money. 

Gifting can take a toll on you emotionally and financially. Continuing a cycle of bailing family or adult children out will definitely have your plans falling apart, so keep that in mind. 

Another thing to watch out for: Don’t underestimate what you think you’ll spend in retirement. This one is all too common fudging numbers to make it work on paper to retire early.  Convincing yourself,  Yep, I’m good. I’m just gonna cut back. And, it’s funny, we play these games in our head and try to convince ourselves and I call it kind of mental magic. 

It’s easy to fool ourselves that we’ll cut back. We’ll not spend on some things we choose, that we’re going to stop spending on something that has become a routine in our life. And maybe it’s even the little tiny bit of gifting is that if you’re having to cut back by 30 or 40% in your lifestyle, you might be living in a dream world that could get you offside down the road. 

This means being realistic and actually having that deep hard look and diving into expenses because really a retirement lifestyle should match your current lifestyle. Now, we do take off things like… I work backward and we can figure out the taxes, and we know that off your paycheck, you’re not going to have to pay CPP and EI in retirement. You’re not going to have the mortgage once the mortgage is done. And so we do all that and then we want to just make sure that we have the exact same lifestyle. 

Sometimes that makes me out to be a bad guy. Calling out what I think is too big of a gap between expectations. But if it makes you rethink, if it makes you consider and it saves you down the road, I’m okay with being the bad guy that says “you’re out to lunch”. 

And if it makes you walk away and sit down and be like, “you know what, I do want to still give the kids, the grandkids, that couple thousand dollars a year, they’re going to university and maybe that means working an extra year or two so that I can do those things they want to”. 

But it’s all about just making you rethink and plan for it. And so just don’t fool yourself that you can take a retirement saying “I’m willing to cut my lifestyle expenses”. I honestly think by cutting 30 or 40%, it’s unrealistic. 

I even think 20% is starting to get pretty slim, and it means if you already have the habit of being very aware of your finances and budgeting, then you know, maybe we can work within that 10-20% difference. But if you’re used to always having money in the bank, and you’re not used to doing a strong monthly budget of awareness, then there’s some really big flags going. 

A recent survey by the Employee Benefits Research Institute, which is in the states, reveals that 30% of retired Americans say that their expenses in retirement are higher than they anticipated. It’s gotta be the same up here in Canada. Even though that’s an American survey, I do think that is probably closer to an accurate look. We might be fooling ourselves with what we spend.

Another thing that could derail—and this might sound like I have to go through the negatives—And this is, human by nature. You might remember these negatives to help you keep yourself on track in retirement. But this one I wasn’t going to talk about. I had jotted it down and I put a question mark: Should I chat about this? 

And I thought, you know what? I think I need to: Only investing in bonds in GICs. That’s it. Your entire investment portfolio is only in bonds in GICs, now unless you’ve got a lottery win and uber millions, and your lifestyle is super low, that could work for you. And it seems like a win right now for GICs.

That’s why I wanted to mention it right now because GICs are paying 4% compared to pre-COVID when GICs were paying 1.6%, this feels like a win. And so people might naturally be inclined to want to cash everything into a GIC or bond. But what happens in 3, 4, 5 years when GICs only pay 3% inflation will eat any of your earnings? 

GIC strategies work for income, and right now pay 4%. But reminder and reality check that inflation is still 5% right now. In fact, your groceries are actually closer to 8%, so it’s not going to work for your entire retirement lifestyle investment savings. 

So there’s a purpose and strategy for having GICs, but being too conservative and only a hundred percent in low-interest paying investments, you’re gonna lose all your purchasing power in your lifetime. And I think this is something that I needed to share because this will derail your retirement. 

If you thought, you know what, I’m not going to think about it, I’m gonna put every single thing I have in all of my savings and retirement savings, I’m just going to go into the bank. It’s so easy. I don’t have to make an appointment with a special wealth advisor. I don’t have to find a certified financial planner or pay anybody. All I’m going to do is put everything into GICs. It feels easy. It feels safe. 

It’s actually going to derail your retirement plans if your money does not last your lifetime and you can’t keep up with inflation. So I felt like I just had to mention that it takes some strategy and it takes some really good planning. There is a use for them but planning with purpose. 

Okay, and that kind of leads into talking about investments a little bit. This next piece of advice to keep you on track leads into investment and it’s about looking for a quick win. Or the latest investment stock tip. This is true. This is happening. People feel like they’re not getting traction fast enough and start to want to tweak it. You should not be gambling with your hard-earned money.

There is no such thing as a quick hit that will double your money or a stock pick that is a lottery win. The risk is very high, continuing that process will have you taking money out, thinking you can time the markets. You are not smarter than the market. I am not smarter than the market. 

The market is a wild beast on its own all it takes is one announcement by some yahoo or latest report that comes out, or a CEO of a company has a sexual harassment misconduct or something ridiculous, and all of a sudden there’s a swing in the market. We cannot foresee that. It is wild. 

Strong, good investments are boring. Over time just staying the course will have you ahead. You don’t need to tweak, you don’t need to cash out and say that’s it. I’ve read about this company—a friend gave me a stock tip—I am gonna put my money in there. And by jumping around and doing that, you’re going to end up losing in the end. 

The off whatever, that percent chance that someone, we hear about it—the urban myth that someone has done it. Odds are though, you’re going to put your retirement plan at risk. 

I have clients that have maintained the same amount in the retirement investment portfolio for the last 6, 7, 10 years while drawing out retirement income that was the same as their working income. That means keeping the same lifestyle in retirement is when they worked the strong, boring investment plan. 

Yeah, boring. Steady pays dividends, pays them income each month. Boring is beautiful. It has maintained their balance because they stayed the course and didn’t start tweaking a good plan in the hopes of a quick win. Whew. I’m getting heated up here. Can you hear me? 

And it’s really hard. It takes patience, so don’t start gambling on the latest thing. That is a surefire way to have your retirement plans fail. 

So switching gears outside of that, the next point here is health benefits in retirement. If you choose to not continue a health benefit plan to save a few extra dollars, you might get blindsided down the road by something that might come up in your health medication costs later on. You might need coverage. 

So passing on continuing a health benefit plan could backfire and cause regret down the road. If medications or a condition develop and you choose to discontinue health benefits, you might have unwanted costs that were not in your plan. So this is something I really like to talk about and consider so that it doesn’t come back to bite us in the butt later.

Last step I’ll share to keep you on track, here it is: Plan your retirement income out in advance. What I mean is: Map out your entire lifetime of withdrawals, not just pulling out random withdrawals from your investments as you spend and as you need it. It means actually taking a look and mapping out everything down the road to make sure it lasts. 

You might want to save the 1% advisor fee. And I will say that if you are in the accumulation stage, you’re young, you’re just starting your savings, that’s a different story. But right now when we’re talking about actually cashing in and having to use retirement investments as income, planning out the withdrawals, planning out how and what bucket to take it out from, you do not want to start gambling and doing it yourself. 

Unless you’re a certified financial planner or an accountant and you have the time, you will most likely pay more than the annual advisor fee of our, 1% of assets just in extra taxes or investment loss. Never mind the time to manage it.

For example, knowing when you should take CPP. Should I start at 65 or 70? Doing those scenarios, taking income from what buckets, and when the tax calculations, you name it, the list goes on. Without having the professional executive withdrawal plan of how long your money will last, you might just cost yourself down the road.

Take advice, seek professional help. A little planning prevents these costs from derailing your retirement. Everything I’ve gone through today is like that stop-check. Go through, make sure you know about these things. You think about them because you don’t want to, you’re not gonna be 70 or 72 and say, hey, I’m gonna go back to work.

Most likely that’s not going to happen. I don’t think…. you don’t want to be a Walmart greeter unless you want to for social reasons. And in that case, that’s because you choose to, not because you have to. 

My parting advice is to take some time today and plan to succeed. It’s often said that failing to plan is planning to fail. I happen to agree with that wholeheartedly. I like to plan for the unexpected, so when it does arrive suddenly you’ll be prepared. That’s it. 

You can find show notes at astrafinancial.ca and if you have any questions, send me a note. Take care.