5 tips for a smooth transition into retirement

Stressed by deadlines at home and work, many of us take some solace that the effort will pay off in retirement, when we can finally relax. A life of R&R (or whatever you dream of doing later in life) can happen, but only if you take the time to prepare.

The decisions you make today can help you enjoy a worry-free retirement. With enough time, planning and expert financial advice, you can avoid potential pitfalls. Here are five ways that could help you have a smooth transition into your life after work.

1. Have a plan.

If you’re not yet working with an advisor, consider finding one who can help you create a retirement plan. The plan should take into account the income you’ll have coming in after you’re done working. That could include money from the government, such as Canada Pension Plan (CPP) or Old Age Security (OAS), workplace pension, individual savings (RRSP, TFSA, non-registered accounts) or any casual jobs you take on outside of work. The plan should also include any anticipated expenses. The goal? To give you a good idea of how much you’ll need in post-working years. 

Revisit your plan often to make sure you’re on track, especially if your personal circumstances change. As you get closer to retirement day, you may want to boost your savings with extra money that becomes available – mortgage dollars from a now paid-off home, for instance. Consider using that extra cash to max out your RRSP contribution room, while also using employer matching programs to increase your savings.

As you get older, you may want to gradually rebalance your portfolio to reflect your changing risk tolerance, since you’ll have less time to play catch-up if any growth stocks underperform. All the while, keep in mind the five key risks to your retirement income, such as inflation and unexpected health care expenses, and work to minimize them.

2. Get familiar with your options.

There’s no question that your savings play a vital role in retirement, but your plan should also consider other benefits you may be eligible to receive. As you assess how much you need for retirement, consider factoring in benefits like CPP and OAS in your plan. Even if you’re not looking to CPP and OAS for the majority of your costs, it’s another financial resource that can provide you with some stable and reliable income that will help take the stress out of retirement.

When you’re still in your saving and investing years, it’s also important to look ahead to see if there are tax breaks available to you, such as splitting pension income between spouses to lower your combined tax bill. With taxes, it’s especially important to plan ahead so you can ensure you’re getting the maximum benefit. At the same time, while you’re healthy and have some financial flexibility, review your insurance coverage – such as long-term care or critical illness coverage – to make sure you and your spouse are protected should you need more support than you expected while in retirement.

3. Don’t quit cold turkey.

The things retirees often say they miss the most from their working years include social contact at the office and the daily and weekly structure the nine-to-five gave their lives. You can still get that – and enjoy the freedom that comes with retirement. How? With skills shortages growing and the technology for remote work vastly improved, employers are more open to transitional work arrangements than in the past. Instead of retiring early and finding yourself bored, short of income or both, consider an extended “off ramp” that may involve part-time, contract or consulting work.

4. Find sources of passive income.

There are ways to configure your financial resources as well as your lifestyle to derive an income that doesn’t feel like work. Consider holding dividend-paying investments, inside or outside a registered account, or investment property. You might even consider hosting an international student during the school year. You could also downsize to a smaller abode and put the proceeds into income-generating assets.

The rules for retirement are constantly being rewritten. Many retirees now look at this time as an opportunity to start a second career by turning hobbies into dollars, such as doing casual repairs or garden maintenance, or teaching a fitness class.

5. Stay busy.

You may not feel like it at first, but new retirees can see significant benefits from developing a routine and carrying out activities that keep them involved in their community. Volunteering is a great way to give your time to worthy organizations while enjoying the camaraderie. Join a book club or a run club. You could also serve on a board or council. Paid part-time employment will simultaneously ease the emotional impact of the transition, help you determine the retirement lifestyle you really want and allow you to put off drawing down your nest egg. It’s especially important in this phase of your life to make and maintain relationships outside your household, especially with other retirees on a similar schedule.

There’s more to retiring than ensuring you have enough to cover your cost of living. It’s about living your best life at every age. Fortunately, most financial advisors have experience exploring elements of the retirement transition that go beyond budgets and asset allocation. Work with yours today to ensure your life after work goes just as smoothly as you’d hoped.