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Three Unexpected Reasons Your Retirement Plan May Fail

 

We all aim to have a secure retirement, where we can focus on our passions and family without having to worry about money. But according to a CTV News survey, 40% of Canadians are worried about their future retirement. (1) Even if you do feel confident in your retirement plan, you may not be aware of unforeseen risks to your retirement. Here are three common yet unexpected reasons your retirement plan could fail:

 

 

1. Forced Early Retirement

As you accumulate wealth and build your retirement savings, there is always a risk that your career could end prematurely due to poor health, disability, a job loss, or to care for a family member. Early retirement can destroy even well-laid retirement plans. Especially for high earners, the loss of income during the final years of their career can spell financial disaster.

 

Being forced into retirement early is more common than you may think. Data from the Angus Reid Institute shows that 48% of retirees stopped working earlier than they had planned. (2) Working fewer years than expected can also decrease your Canada Pension Plan benefits during retirement.

 

To protect against this risk, you must plan for the unexpected. First, be sure to have adequate disability insurance to protect your income in the event of an illness or disability, especially if you’re a high earner. If you are laid off, do not take a severance offer until you speak with someone who can help evaluate what your company has offered and negotiate for more if appropriate. Finally, keep your resume and skills sharp throughout your career to be sure you can find another job if you are laid off.

2. Premature Loss of a Spouse

Losing your spouse is devastating, whether they are near their life expectancy or not. But losing a spouse during the final years of their career can be dangerous for the surviving spouse’s financial plan. Furthermore, retirement and long-term care costs may increase without a spouse to share costs and provide care.

 

It’s critical to involve both spouses in the planning process and consider benefits for the surviving spouse. Life insurance may be a solution, with some companies selling first-to-die policies that could protect against this risk. Wills, trusts, and beneficiary designations must be reviewed to ensure both spouses are protected financially. Finally, you will want to create a pension strategy to optimize the benefit for the surviving spouse.

3. Health Care Costs that Drain Your Nest Egg

Many Canadians are confused about how much they will have to pay for healthcare in retirement. According to a BMO report, Canadians can expect to pay over $5,000 a year for out-of-pocket medical expenses. (3) If you are one of the 50% of people who will require long-term care by the time you’re 75, (4) you can expect to pay from your own savings. Also, if you retire early, remember that your provincial health plan will not cover prescription drugs until you are 65.

Make A Plan To Succeed

Retirement planning can be complicated and stressful due to the many uncertain factors involved. However, by planning for the unexpected, you can reduce the chances that your retirement plan will fail. If you are concerned about your financial future or feel that your retirement plan needs a second look, book an appointment now!

 

About Carl

Carl Martel is the president and portfolio manager of Montag Private Wealth. Along with more than 15 years of capital market experience and 10 years of experience in real estate hard assets, he is a Chartered Investment Manager® and holds a Certificate in Derivatives Market Strategies from CSI Global Education, a Masters of Science from Laval University, and an MBA from l’Université du Québec à Montréal. A focused and pragmatic, results-oriented investment professional and entrepreneur, he specializes in serving the unique financial needs of high net-worth individuals and families, foundations and endowment funds, and business owners. To learn more, visit http://montagprivatewealth.com/ or connect with Carl on LinkedIn.

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(1) https://beta.theglobeandmail.com/news/politics/survey-shows-many-canadians-fear-they-wont-be-prepared-for-retirement/article30881681/?ref=http://www.theglobeandmail.com&

(2) https://beta.theglobeandmail.com/globe-investor/retirement/retire-health/nearly-half-of-canadians-forced-to-retire-earlier-than-planned-poll-shows/article25219041/?ref=http://www.theglobeandmail.com&

(3) https://www.bmo.com/pdf/mf/prospectus/en/14-1390%20BWI_Q3%202014_4%20keys%20CDN%20E07_web.pdf

(4) http://www12.statcan.gc.ca/census-recensement/2011/as-sa/98-312-x/98-312-x2011003_4-eng.cfm