“Retirement is like buying a home.”
If you are in the process of purchasing a home, one question that is likely on your mind is ‘What kind of mortgage payments can I afford?’.
If you are thinking about retiring, you may be asking ‘How much income do I need?’ and ‘Will my investments and other sources of income be enough?’.
In both situations, you may think it all comes down to payment, a hard-and-fast number that can be calculated. Your advisor may have plugged your information and certain assumptions into a financial plan, which then spit out an answer: ‘Yes, you can afford this’ or ‘No, you cannot’.
We think this is one area where the financial industry has missed the mark. They have used financial plans as a sales tool, a black and white document that tells you exactly what steps to take or what investments to make to reach your goals. A + B = C. But the fact is, retirement is not an equation or a calculation; it is an experience.
If you are using a financial plan to come to a conclusion like ‘Can I retire?’ or ‘Can I afford to buy a house?’, you are only looking at one piece of the puzzle.
Because buying a house is so much more than mortgage payments. What if something breaks and needs to be repaired? What about furniture? Landscaping? Property tax? And the list goes on.
Retirement is so much more than a specific amount that will cover your costs of living. You need to think about things like: What do you want your lifestyle to look like? What will you do if you have an unexpected health event? Are there ways to save on your tax bill? How will you pass wealth on to the next generation in the most efficient way possible?
These questions are not something a simple financial calculation can figure out.
We believe in retirement planning that takes income, healthcare, legacy, tax, family dynamics, lifestyle, and unexpected expenses into consideration before determining a strategy for your investments. We believe that a retirement plan should be dynamic; it should be reviewed and updated at least every three years. Your plan should be like a compass, pointing you in the right direction, with some adjustments made along the way.
This viewpoint may be considered countercultural in our industry. Could you imagine if mortgage brokers sat down with their clients to explain that home ownership is not just about your mortgage payment, it is about all of those unexpected expenses you forget to consider? We would be willing to bet there would be less homes sold, less mortgages to arrange, and less business for those brokers.
It is our goal to shift your focus from payments to lifestyle. Because, while being able to afford your day-to-day expenses is important, your retirement is so much more than money. It is about spending time with family, checking items off your bucket list, and doing what you love now that you have the time to do it. Helping you realize your retirement vision is why we became portfolio managers. It is why we do this show.
Tune into QR Calgary every Saturday at 3:00 p.m. as we share what we have learned through our years helping clients transition into retirement to help you make the most of your experience.