Jared Pilon
The third aspect of the "Planning Process' explores your retirement and how you and your family can be prepared for life after work.
Focus
Assessing the wealth you need to secure the retirement you want.
Review your family situation and needs
What is your marital status?
Planning for retirement starts with assessing your family's needs and, most notably, your marital status. This analysis should reflect on the income needs of your spouse, anticipated life expectancy, and their access to funds and/or pensions from their working years.
How many children & grandchildren do you have?
Determining the needs of your children and grandchildren can be a moving target as you continue to age and your extended family grows. Having a discussion with a lawyer can ensure your will is correctly drafted and provides for your family as you intend. Additionally, a wealth advisor should be consulted to determine if life insurance would be useful in planning for your retirement and the protection of your family.
Do you have family members with specific needs to consider?
Many individuals take steps to provide for family members with specific needs such as postsecondary education, disability, and financial dependence within their will. This might include the creation of a trust and may involve complex tax planning. An accountant can provide advice unique to your situation and allow you to protect family members with specific needs for years to come.
Pensions outside of the business
Do you or your spouse have pensions from a third-party employer?
Beyond looking at your business as a means to supplement your retirement income, it is important to consider pension funds that might be available to you through a third-party pension. Pensions are readily available through public sector organizations and from some larger private sector businesses. Details of amounts due to you, payment options, and transferability of funds should be reviewed with a wealth advisor before retirement to ensure continuity with your overall pension plan.
What is your CPP/OAS status and expected annual pension?
Service Canada can be contacted to obtain information concerning your Canada Pension Plan (CPP) and Old Age Security (OAS) statuses and expected annual pension. This will include information about taking CPP early or deferring CPP and OAS pensions. Depending on other financial factors, it may be prudent to defer these pensions if you are trying to extract wealth from your business in conjunction with pension and retirement planning.
Life, disability, and critical insurance options
Have you spoken with an insurance advisor to determine your needs?
Unexpected events can severely impact your business at any time. These events (death, disability, or critical illness) can derail your pension plan and result in significant stress for your family. Speaking with an insurance advisor will ensure that you have the proper coverage in place to protect your business, your family, and your pension plans.
Is there adequate coverage should an unexpected event occur?
Your business can change on a regular basis. This could include adding a new partner or hiring a key employee. It is important to have up-to-date coverage to fund a shareholder agreement or provide for a key employee when they experience a disability or illness. Semi-annual or annual discussions with your wealth advisor will ensure that coverage amounts are maintained adequately.
Expected timeline
When do you plan to retire?
If you have owned or operated a business for a sizable portion of your life, it can be difficult to picture retirement. The business has likely become very important to you, and you may be emotionally attached to it. With that said, it is essential to consider your retirement plans, as the business will eventually become better suited in the hands of a new ownership group. A well-executed retirement plan will allow you to leave on your terms.
How many years do you expect to live the retirement you want?
While this can be a subjective question to answer, it is an important one to consider. This process
should focus on a review of your family history, your current health and your overall expectations
based on the country you live in and the financial means you have.
Lifestyle needs now and in the future
What is your current household income?
Having a good idea of your household income in the early years of business ownership and as you approach retirement will help you understand how you will need to implement your pension plan. Beyond reviewing household income, you should have a solid understanding of your expenses, your ongoing investment needs, and any other major expenditures.
How do you expect your income to change upon retirement?
Typically, upon retirement, the majority of your debt should be settled, including the mortgage on your personal residence. An analysis should be done to determine if you will carry any other debt in retirement so you can plan accordingly.
Beyond debt repayments, you must analyze your expected lifestyle in retirement. Do you plan to travel, transfer wealth to your children, or donate to charities? All these factors will impact your pension planning and determine the wealth you will need to accumulate to enjoy the retirement you want.
Your next steps
Want to take the next step in the 'Planning Process'? Click the preceding link to download a free copy of the complete 'Planning Process' eBook.
Planning for retirement can be a long process that can benefit from a financial expert. Contact us at for one-to-one support to see how we can help set you up for success in your retirement.
Disclaimer
By using this website, blog or podcast, users agree as follows:
The information, services and/or products are for general information only and any reliance on the information provided therein is done at your own risk. If you make tax, accounting, investing or legal decisions after accessing this website, blog or podcast, it is recommended that you consult a qualified professional first.
The views and opinions expressed are those of the author, seller, guests or publisher and do not necessarily reflect the views of the organizations or businesses that these individuals are associated with.
Although we make strong efforts to make sure my information is accurate, we cannot always guarantee that the information on this website, blog or podcast is always correct, complete or up-to-date.
Posted: 10/22/24
