If you’re anything like us, Joe and Mark here at Cashflows & Portfolios, we’ve been thinking about retirement for some time now.
Joe has been semi-retired for a few years now. Mark is now in his semi-retirement years and is planning to retire from the corporate world completely in 2026.
As we prepare for full retirement (and you might be too…) we believe there are several key areas you’ll want to consider. Planning for retirement is both financial and emotional. We’re going through a bit of that respectively right now. We believe some level of planning and thinking about your future can give you both greater confidence in your financial readiness while helping address other necessary things as well.
Read on – what we believe are the 7 Essential Items as part of your Retirement Planning Checklist.
Item 1. Determine Spending Needs
While having a clear view of all our potential or current retirement income sources is helpful, no doubt, all the income streams in the world don’t really help you much unless you understand, clearly, what you intend to spend.
Professionals from all walks of life and sectors have a knack for making the simple extremely complex.
The same goes for the financial industry.
In the spirit of keeping things simple, we would suggest the following back-of-the-napkin examples about retirement numbers and rules to consider. These are good starting points for your retirement income planning journey, but at the end of the day, when you need real math done, please consider a retirement income plan beyond these rules of thumb.
We provide those low-cost retirement income planning services to all DIY investors here.
How much do you need to retire?
“It depends” is usually our answer.
Here are some updated retirement numbers and rules to consider when answering that question.
Retirement Rule #1 – Rule of 20.
- The premise: for every $20 saved, you can live off $1 in retirement.
Examples:
- On your retirement date: $300,000 saved, and you can likely live off $15,000.
- On your retirement date: $500,000 saved, and you can likely live off $25,000.
- On your retirement date: $1 million saved, and you can likely live off $50,000.
This assumes your retirement date is in your early 60s, whereby you will also have government benefits flowing in soon too (e.g., Canada Pension Plan (CPP) and/or Old Age Security (OAS)).
Otherwise, using a “4% rule” is too low.
From our research and findings on this rule:
“So, 50% of the time (market returns willing) you will finish with almost X3 wealth on top of a lifetime of spending using the 4% rule.”
- The premise: take your anticipated retirement expenses (after-tax) and multiply this amount by 25 for your “retirement number”.
Example:
- If you want to spend $72,000 per year after-tax, then your “retirement number” is $1.8 million invested.
As someone who is a bit worried about having “enough” this rule could make sense, but says nothing about variable spending needs.
A better approach is likely following some sort of Variable Percentage Withdrawal (VPW) method.
My Own Advisor has a link to some free VPW calculator tools in this post:
Retirement Rule #3 – Replace 50-70% of your income during retirement.
- The premise: take 50-70% of your current full-time income, and that’s what you’ll need in retirement. The thinking here is in retirement, some key expenses are gone: raising a family and/or paying your mortgage and/or saving for retirement since you’re in retirement.
Not a bad rule of thumb, but again, while you might have no mortgage and you’re no longer saving for retiremen,t this may not account for other expenses that may appear as a result: more travel, higher healthcare/aging costs. More on that in a bit.
At the end of the day, figure out what you intend to spend in retirement. That’s always your starting point. Then you can move on to item 2.
Item 2. Determine your Dependable Income Sources
We focus on dependable income sources, purposely, since hope is not a plan.
As a starter for our own retirement income planning considerations, both Joe and I (Mark) looked at these components: Canada’s retirement income pillars and what income might be available from each pillar, and when for us:
- Pillar 1 is the Old Age Security (OAS) pension and its companion program, Guaranteed Income Supplement (GIS) at age 65.
- Pillar 2 is the Canada Pension Plan (CPP) starting at age 65 or ideally later.
- Pillar 3 includes your mix of tax-assisted vehicles such as Registered Retirement Savings Plans (RRSPs), Tax Free Savings Accounts (TFSAs) and other accounts – starting RRSP withdrawals in our 50s.
- Pillar 4 includes other assets accumulated over your lifetime such as your primary residence, vacation property (if you are lucky to have one), or living off dividend income from stocks held in a taxable account – starting in our late-40s and 50s.
In Step 2, we basically listed all our available income sources and the potential timing of those income sources along with other considerations you might wish to review as well:
- Maximize your Registered Retirement Savings Plan (RRSP). If you have unused RRSP contribution room from previous years, take advantage of the ability to “catch up” your contributions.
- Eliminate debt. We both believe servicing debt eats into your available income when you’re retired.
- Make your portfolio tax-efficient. Are you paying more to the government than you have to? Different types of income are taxed in different ways. Too much interest income, which is fully taxable in a taxable accont should be avoided beyond an emergency fund while capital gains and Canadian dividends receive preferential tax treatment when held in a taxable account. You should also strongly consider maxing out your TFSA with equities as well = tax-free growth. :)
- Company pension(s). Enough said!
- Inheritance/family estate. Is that in your financial future at all? “Bonus money” if so?
- Part-time or hobby work. Maybe there is part-time work or hobby income in your future?
Once you figure out your dependable income sources, you can focus on adjusting the timing of those income sources, including the examples above.
Item 3. Determine your Withdrawal Strategy
Generally speaking, we are fans of taking down/withdrawals from registered accounts before taxable accounts and making all other account withdrawals before Tax Free Savings Accounts (TFSAs).
Leave TFSAs “until the end” for the next healthcare reason below.
Beyond when you can retire, we help all Canadian DIY investors with our low-cost retirement income planning services with their potential withdrawal strategy.
Item 4. Plan for Healthcare Costs to Rise
Understanding your healthcare priorities and matching them to appropriate coverage types can strengthen both your financial and emotional well-being in retirement. Sure, we’re not the United States, but it’s important to consider a mix of healthcare plan affordability, plan flexibility,and cost predictability if you are unable to self-insure your drug or dental coverage as you age.
Item 5. Plan for the Estate
We believe that as you age, one of the most important steps you can take to feel prepared and confident in your retirement planning is to update your estate planning documents. First, make sure your will, POA, and other related documents are up to date. This ensures that your assets are distributed according to your intentions and can help avoid any unnecessary legal complications.
As part of your estate planning review, review your beneficiaries.
My Own Advisor has a great, extensive post on this very subject here.
Naming beneficiaries ensures your loved ones will be taken care of as you intend.
Finally, name an Executor. Having a trusted person in this role after you pass on can provide peace of mind to ensure your financial affairs are managed according to your wishes.
Item 6. Get Emotionally Ready
Joe and I (Mark) are going through this right now…we feel it’s critical to prepare financially and emotionally for whatever comes next.
One key aspect of emotional readiness we’re working on, respectively, is how we are redefining our time. Our purpose. Our meaningful day-to-day value without the corporate world.
We’re both working through our own goals, bucket-list items, family connections, and/or ideas about learning or building something new. Whether it’s pursuing a hobby, volunteer work, learning a new skill, traveling, or anything else – having a clear sense of purpose (for each of us) should make the transition smoother and more enjoyable to full retirement.
Item 7. Plan your Lifestyle!
Lifestyle planning is a vital piece of the retirement puzzle – because, beyond being emotionally ready, it challenges you to think about how your current living arrangements align with your values and needs. Will you age in place? Will you downsize? Do you want to travel, and if so, for how long – so, could renting be an option?
Ultimately, more stuff = more potential problems.
So, a smaller, more manageable space can reduce costs and support your retirement lifestyle goals as well.
By planning your lifestyle thoughtfully, you can ensure your retirement isn’t just an escape from work but it’s the start of a new, well-deserved chapter.
We hope this post helped outline what we believe are the 7 Essential Items in any Retirement Planning Checklist.
Need any Support with your Retirement Income Projections?
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We enjoy helping different DIY investors who have different objectives and goals!
In just a few years, we have helped hundreds of clients, and we’re ready to help more before the end of 2025 too!
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Thanks for your readership and engagement.
Mark and Joe.