Proper planning is the only way to ensure financial stability when it comes to retirement. When it comes to planning, it’s inevitable to understand your current financial situation and how you want your retirement to be.
The way people define retirement has completely changed. Today, retirement is acknowledged as a completely new and exciting phase of life. With the rising life expectancy in Canada, retirement doesn’t necessarily mean you quit working. You can choose to work in retirement either part-time or full-time in order to have a more financially stable future.
No matter your retirement preferences and goals, it’s important to consider factors that can have a negative impact on your retirement income. A professional financial planner specializing in retirement can help you identify and devise strategies to address factors affecting retirement. Some of the factors include:
Inflation
When planning for retirement, the rate of inflation is an important factor to consider. Simply put, inflation is the decrease in purchasing power of a dollar over time. If the price of a product was $50 in 1980, you might end up paying $300 in 2019 for the same product. If the inflation rate remains at the historical 3%, the purchasing power of a dollar will be cut in half in 23 years. This is why it’s important to include inflation in your retirement strategy.
Asset allocation
Asset allocation is when you divide your assets among different classes such as cash, stocks, and bonds or anything that can be included in your investment portfolio. It is reported that asset allocation is the most crucial determinant of portfolio performance potential over the long term. Each combination of cash, bonds, and stocks represent a different set of return and risk. You should try to have an asset mix that fits your objectives. In order to drive performance and reduce risk, you can diversify your asset classes. A financial planner can help you determine the right asset mix.
Investment Risk
Fluctuations in securities may deplete your retirement savings. Also, if you withdraw funds from your savings account to meet your retirement expenses, it can lead to depletion of your savings sooner than you anticipate. Therefore, investment risk is a critical factor that can affect your retirement plan.
Related: How to Develop a Tax-Smart Retirement Income Strategy
Health care
According to a report, almost half of the Canadian retirees turning 65 will be admitted to a long-term health care facility. With age and growing health complications, some people need special care in retirement. Both home care and retirement health facility can dramatically increase your expenses. In many cases, health-related problems are itself a factor why people retire.
Effective retirement planning is something that goes beyond saving and financial calculations. It involves a broad range of factors that include estate planning, tax, and risk management. In order to make your retirement prosperous and free of financial risks, talk to a reputable financial consultant.
About Kewcorp Financial
By leveraging the experience and knowledge of our retirement planning experts at Kewcorp Financial, you can address the most complex financial problems and plan for a more financially stable present and future. Contact us for more information!
