How to plan for your financial future in your 60s

Whether you plan to retire right at 65 or work a little longer, you’re likely looking forward to this important stage of your life. Here are some tips to prepare you for this significant milestone and turn your retirement dreams into reality.

The do’s:

✔ Identify all your sources of retirement income

Make a careful note of all your sources of retirement income. These will include government pensions, workplace pensions, Registered Retirement Savings Plans (RRSP), Tax-Free Savings Accounts (TFSA), and even money from your home. Speak with an advisor on helping you with a financial plan that works for you.

✔ Plan for inflation and unexpected expenses

Inflation and unexpected events can significantly affect your retirement savings. In recent years, the average rate of inflation in Canada has been 2% per year. This means the cost of goods and services has been rising by 2% every year. Imagine what this will mean to you years into your retirement. It’s important that you build this into your retirement plans to get a full picture of your future finances.

✔ Consider a part-time job

Maybe you aren’t ready to say goodbye to working entirely. A part-time job in your 60s will not only bring in an extra steady income, but it could also give you a sense of fulfillment. Find a part-time job that works best for you. If you own your own business, you can also consider making a few adjustments to your schedule and delegate more.

✔ Understand the 3 phases of retirement 

It’s helpful to think of retirement in three stages. In the early stage, spending tends to be higher, as more time might be spent travelling and crossing items off your bucket list that may have been put off while working. In the middle stage, time spent with family and friends often takes priority, as routines are established. In the later stage, the spotlight is typically on estate planning, health care, and all the added associated costs.

✔ Check your investment portfolio mix

As you get into your 60s, you should take a closer look at all asset classes in your portfolio and reallocate them accordingly. Remember that stocks will require a longer waiting period if there is a prolonged downturn in the market. Adjusting the mix between cash and stock could keep your retirement plans on good track.

The don’ts:

✘ Rush into downsizing your home

More than half of surveyed Canadians between 55 and 64 are considering selling their homes to help fund their retirement.¹ Downsizing may seem like a great idea because of the significant gains in home prices over the last decade. You should, however, be mindful of all the costs involved in selling a home, including any applicable land transfer tax, capital gains tax legal fees, and others. Good planning and timing are crucial.

✘ Stop saving

You still have time to grow your savings in your 60s so your retirement funds can last longer.

Over 5.9 million Canadians contributed to an RRSP in 2019, down 1.5% from a year earlier. However, the amount they contributed rose 1.8% to $44.3 billion for a median contribution of $3,260.

✘ Keep hush about your estate plan

Though it can be an emotional conversation, speaking with family about an estate plan now can help avoid conflicts down the road. Giving your loved ones an understanding of your wishes can go a long way. It’s common to choose a family member to be the executor and it’s important to choose the family member carefully. This role comes with significant responsibilities and both parties should be comfortable with the decision.

✘ Draw too quickly from retirement savings and ignore the 4% rule

Saving enough for retirement is important but drawing out too quickly could badly affect your long-term plans. According to a recent study, people aged 50 and over reported saving an appropriate amount of income (an average of 20% annually) but planned to withdraw 15% of their retirement savings annually, which is three to four times the rate that is typically recommended.²

Don’t also forget the 4% rule. Withdrawing 4% of your retirement savings each year (adjusted for inflation after the second year) is a good guide to ensure your retirement funds do not run out before 30 years.

✘ Forget to pay off or pay down your mortgage

The proportion of seniors with mortgage debt has almost doubled from 8% to 14%, while overall debt has also jumped by 27%. Paying down your mortgage and other debts as much as possible will ensure a relatively worry-free retirement as you enter your 60s.