For those nearing retirement, financial planning takes on a new level of importance. The focus shifts from simply saving and investing to carefully considering how those savings will support your lifestyle.
In our last article, we reviewed the tools and investment options available to build your retirement strategy. Now, we will explore the key considerations for those within 5–10 years of retirement. These decisions, ranging from forecasting income and expenses to timing government benefits, can make a meaningful difference in ensuring a smooth and confident transition into retirement.
The first step in preparing for retirement is to forecast your expected income against your anticipated expenses. This exercise provides clarity on whether your savings, pensions, and government benefits will meet your needs.
Creating multiple scenarios—such as retiring earlier or later, or adjusting spending habits—helps you see how flexible your retirement plan is. Having these projections in place allows you to make informed adjustments now, rather than facing surprises later.
As you near retirement, the question is not just whether you will receive Canada Pension Plan (CPP) and Old Age Security (OAS), but when to begin collecting them.
The decision often comes down to factors such as your life expectancy, health, and overall income strategy. For example, deferring benefits can increase long-term income security, but starting earlier may provide greater flexibility if you plan to retire sooner or expect higher expenses in your early retirement years.
For those with a defined benefit pension plan, one of the most significant decisions you will face is whether to take the commuted value or an annuity.
The right choice depends on your personal circumstances—such as your risk tolerance, health, and retirement goals. An accountant or financial advisor can help you compare the long-term financial implications of each option.
The years leading up to retirement are also the time to simplify and strengthen your financial position.
These steps not only provide peace of mind but also ensure that your retirement savings are directed toward your desired lifestyle, rather than financial obligations.
The years of nearing retirement are a critical time to make decisions that will shape the decades ahead. By forecasting income and expenses, making informed choices about CPP and OAS timing, carefully evaluating pension options, and addressing housing, debt, and insurance, you can set the foundation for a confident transition into retirement. Since the best approach will vary depending on factors like your health, lifestyle goals, and comfort with financial risk, seeking professional guidance can provide clarity and ensure your plan is tailored to your needs.
In our next article, we will explore Living in Retirement. Dive deeper into managing your income, spending, and lifestyle once retirement has officially begun.
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
GBA LLP is a full-service accounting firm in the Greater Toronto Area, but we primarily service all of Ontario as well as the rest of Canada virtually, except Quebec. Our team of over 30 provides audits and reviews of financial statements, compilations of financial information, and corporate tax returns. We provide specialized corporate tax and succession planning for small and medium businesses, in addition to general advisory services.
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