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Learning Centre

RETIREMENT….WHAT'S YOUR PLAN? (October 2004)

By: Tom R. Allain, CFP

It should be no surprise to you that most Canadians don't take the time to build a plan for their lives that addresses their retirement goals. If you are like most of us, you tend to treat planning for retirement much like standing on a train track staring at an approaching train - you can see the train in the distance, but it's so far away.

Of course, it will eventually pass your spot on the track and you will have to quickly jump out of the way to avoid being hit.

Is there a magic formula to determine whether or not you are able to live the life that you want in retirement? The answer is yes…and no. There are some things you can do today to plan for the future but it's up to you to take that step and accept that you can directly affect the course of your retirement and your enjoyment of it. To succeed at anything, you must have a plan.

There are six fundamental subject areas that must be inter-woven into any plan for retirement. These elements are the basic areas of knowledge upon which a retirement plan must be based. These foundations are the essence of the plan. Each subject area overlaps another and weaves itself throughout the retirement planning process. They include:

• Tax Planning;
• Cash and credit/debt management;
• Retirement planning;
• Investment planning;
• Insurance and risk management; and
• Estate planning.

Bringing these fundamental subject areas together is the retirement planning process, which follows six basic steps:

1. Identify and clarify your current situation
   This first step involves data gathering and a review of quantitative information such as your total assets and liabilities that comprise of your net worth statement, cash flow statement, insurance policies, tax returns, wills, powers of attorney, investment portfolios, employee benefit booklets, trust agreements, pension statements and some basic family history. Essentially, this step summarizes where you are today.
2. Identify your goals and objectives
   This step seeks to identify and prioritize both your financial and personal goals and objectives to facilitate the allocation of available resources to your most critical concerns.
3. Analyze your problems and opportunities
   Problems must be identified before solutions can be established. Analyzing your current situation will help to identify problems that may be acting as obstacles preventing you from accomplishing an identified objective.
4. Develop solutions
   If sufficient analysis has been performed in the previous step of the process, the development of solutions is straightforward.
5. Implementation
   This step involves putting the financial plan into action. An implementation and action plan should be created with appropriate strategies and tactics outlined in writing.
6. Monitor and review
   Regular reviews and updates allow any plan that has gone off track to be quickly set back onto the rails. Ongoing monitoring allows for any changes in an individual's lifestyle or economic situation to be reassessed, as well the opportunity to provide for any changes to strategies or tactics that might be required.

Because of the complexity of the calculations, most people would benefit from the services of a professional retirement planner when preparing their retirement plans.

While retirement planning may be an inexact science, having a plan and being approximately right is exceedingly better than having no plan and being precisely wrong!

Tom Allain, CFP, is an Independent Certified Financial Planner professional associated with Ten Star Financial Inc. specializing in comprehensive retirement planning, investment planning and insurance planning to owners/managers, and business professionals. (905) 796-1219, e-mail tom@trallain.ca or visit www.trallain.ca.