By Dr. Roxanne Arnal, CFP®

Retirement isn’t just a destination—it’s a journey that requires thoughtful planning, especially in today’s evolving economic landscape. With Canadians living longer and facing financial uncertainties, it’s crucial to ensure your retirement plan is robust and adaptable.

Envisioning Your Dream Years

Optometry is a wonderful profession that permits doctors to own their own practices and commercial properties as well as structuring a flexible work life. Whether or not you choose to keep one foot in the door, chances are you also dream of traveling the world, volunteering, and spending quality time with family.

Take a moment to vividly imagine your ideal retirement. What does it look like? What activities bring you joy? Creating a detailed picture of your dream years helps in crafting a retirement plan that aligns with your aspirations.

Understanding the Risks

• Longevity Risk: The 2025 average Canadian life expectancy is pegged at 83.26 years for women and 79.12 years for men. This means your retirement could span decades, requiring a sustainable income stream.
• Market Volatility: Fluctuating markets can impact your investment returns. Without a strategy to manage these ups and downs during the withdrawal stage, your retirement funds may not last as long as needed.
• Inflation Risk: In the last 5 years alone, Canada’s inflation rate has ranged from a high of 6.8% in 2022 to a low of 0.7% in 2020. This erodes purchasing power over time, making it essential to plan for rising costs.

Mitigating the Risks

• Inflation-Proofing: Assume a reasonable inflation rate in your projections to ensure your income keeps pace with rising costs.
• Diversified Asset Allocation: A mix of cash, bonds, and equities can provide growth opportunities while reducing risk.
• Strategic Withdrawal Plan: Establish a strategy that allows you to withdraw from stable assets during market downturns, preserving your equity investments for future growth.

Insulating your Savings

The new system of creating lifelong cash flow involves insulating you from the need to sell equities during a market dip. Implementing a strategic asset allocation is key, ensuring you have 5-7 years of income needs covered with cash and bond holdings.

Historically, equity markets have recovered within five years, allowing you to replenish your cash and bond reserves when conditions improve.

Today, more than ever, it’s essential to build in growth opportunities in order to ensure your money lasts.

Conclusion

Retirement should be a time to enjoy life, not a period of financial stress. By understanding the risks and implementing strategies to mitigate them, you can create a retirement plan that supports your dreams and provides peace of mind.

Working with a Certified Financial Planner® can ensure that your retirement aspirations are met in a way that provides you with more joy and laughter.

Sources:

Statista.com

Statistics Canada

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