As I transitioned from simply managing my own finances to helping other with their financial planning I have had the opportunity to see finances through the eyes of many people. While I am a ways from retirement I have observed some common misconceptions or oversights that people have.
Getting a financial planner
Self directed investing is an amazing thing and as I've written before it can be the single most valuable thing you can do to build wealth over the long term but when your done saving and ready to start spending it can be invaluable to have somebody who can help you build a tax efficient plan, these planners have the context to know which accounts your should withdraw from first, how frequently you should pay yourself, what asset allocation makes sense, etc. Having a good financial plan that is tax efficent can be the difference between you leaving your children a sizable inheritance rather then a small nest egg and a good financial plan doesn't need to cost you an arm and a leg.
Fee vs commision based planners
Fee based planners: These folks charge a flat amount and will help you construct a plan for retirement. These are often favorable if you have alot of assets as the amount of work they are doing doesn't change because the size of the accounts. Depending on the planner you can either take the plan and execute it yourself or pay them an annual fee for them to action on it for you.
Comission based planners: These planners will take a portion of the assets under management, this becomes more expensive the more assets they manage for you. If you have a pension or other type of defined benefits plan and your managing a small TFSA or RRSP this could be cheaper then the fee based planner.
If you have a passion for personal finance you can save alot of money by managing your own retirement plan. All the information you need for a successful retirement is available freely online and if you need a second opinion you can always reach out to online forums to get feedback on your plan.
Even if your completely confident in your financial plan its always good to get an experts opinion so getting your plan vetted by a CFP or QAFP would likely be worth the investment.
Be active in your retirement planning
Retirement can be particularily stressful if you dont have a pension. Studies show that feeling in control of your living situation is highly correlated with your happiness but unfortunately you don't have much control over the stock market, a few bad years of investment returns or an unexpected recession can make it hard to enjoy your golden years but there are ways to mitigate this.
Playing an active role in your retirement plan can be a great strategy and allow you to feel in control. I'm not saying you should be picking stocks to buy/sell but instead of ignoring your retirement accounts all together you can pay attention to your investments and react to them appropriately.
For example if your investments underperform this year maybe you don't perform an inflation adjustment on withdraws, you supplement some more income with a side gig, re-evaluate your risk tolerance with your planner if you are overly nervous about your finances. Inversely if your investments overperform and your ahead of your retirement plan you might decide to extend your destination vacation, gift some money to family, upgrade the deck for the summer!
Hiring a financial planner and simply never looking at your investment performance may work for some but in pratice it is hard to completely ignore the economy and curiosity may get the best of you when headlines indicate things may not be going well in your retirment accounts.
There is no silver bullet
The internet is chock full of folks telling you the secret to an easy retirment but (unfortunately) there is no single secret. Everybody is unique and as a result the retirement plan that works for me may not work for you, the best way to figure out what works for you is to do your own research and talk to a professional you can trust.
As for the research part here are some amazing resources you can start with:
- Common Sense Investing Youtube channel: Ben Felix from PWL Capital explains common finance misconceptions
- Rational Reminder Podcast: Ben Felix and Cameron Passmore talk about sensible investing and financial decision making and interview acedemic and industry experts. Some episodes related to retirement:
Episode 159: Bill Schultheis: Build Wealth and Get on With Your Life
Episode 137: David Blanchett: Researching Retirement
Episode 135: William Bengen: The 5% Rule for Retirement Spending
Episode 122: Prof. Moshe Milevsky: Solving the Retirement Equation
Episode 104: Fred Vettese: A Complete Guide to Retirement Income
Episode 89: Safety-First: A Sensible Approach to Retirement Income Planning
Episode 59: Financial Economics and Annuities: Rational Planning for Retirement
- Canadian Couch Potato: You can learn a lot from CCP regarding self directed investing and appropriate asset allocation using passive index fund investing!
- /r/PersonalFinanceCanada: Reddit is not a replacement for professional financial advice but this forum is a fantastic resource to ask questions and get a better understanding of the options you have regarding retirement planning
If you also seek out a financial planner its best to find an individual or company that is CFP or QAFP certified and that has overwhelming positive recommendations. I have heard great things from folks that have used PWL Capital they are an affordable comission based wealth management company that does a great job working with their clients to build great retirement plans. (I have no affiliation with PWL but think they are doing great stuff).