Managing Your Money

The six age groups of financial planning

With the New Year there often comes new resolutions. If spending less time worrying about money is on your list, then here are some tips that will help reduce anxiety about finances. No matter your age or your retirement status, everyone should have some kind of Financial Plan. It can range from simply setting out some financial goals, and mapping out how to achieve them, all the way to detailed retirement projections with tax strategies and estate planning. If you’re willing to do the leg-work and research on your own, then coming up with a good plan is doable. However, one of the most important steps you can take is working with a professional financial planner to develop and implement a successful Financial Plan. There’s no doubt that good financial advice can improve the likelihood of financial success. According to a recent study** it was found that investors who do work with a professional advisor accumulate more assets, and are closer to achieving their financial goals. Here are some tips to consider, based on your age:

In your 20’s: Beginning your career at this stage, it’s important to also start good habits – both spending and savings. You may have some student debt to pay down, but avoid getting into more debt by buying things that you don’t need and can’t afford. This is the time to learn to live below your means and start a monthly savings habit.

Your 30’s: Now that you’ve been working a while it’s a good time to start figuring out how much you need to start saving towards retirement. Starting to save for retirement in your 20’s or 30’s can make a massive difference in the amount that you will need to save, when you factor in the beauty of compounding. You may be saving for a downpayment on a house or paying down a mortgage, but don’t neglect saving for retirement, or it WILL catch up with you.

Your 40’s: In your 20’s and 30’s retirement may have seemed far away, but now you can probably see it looming over the horizon. At this point you should establish what, if any, your “retirement gap” is, or how much you’ll fall short at retirement if you keep doing what you’ve been doing. By knowing the gap early, it will give you time to make adjustments in order to catch up. Using tax planning strategies could be an effective way of closing that gap more efficiently.

Your 50’s: With retirement right around the corner, and your lifestyle expenses more stable, you should be able to get a pretty good picture of what your retirement will look like, and when it can happen. Many people in their 50’s don’t actually see themselves stopping work, either because they truly enjoy it, they don’t know what else to do with their time, or they simply can’t afford it. For those in the first two cases, the focus need not be on retirement as it is defined. It could be more on establishing financial independence, giving you the choice to work because you want to, not because you have to. Either way, having a financial plan allows you to try different financial scenarios on paper, before trying them in real life.

Your 60’s: This will often be the point when you make the final decision to stop working or reduce to part-time work. It can be a very difficult and emotional decision for some, while others count down the days. Up until now, there has always been a regular flow of income. Now you start drawing from a pension, or your own assets to cover your needs. Analyzing your income and expenses is critical at this point to ensure that you can live the retirement you want, for as long as you need to. Knowing how much you can afford to draw out of your savings will help reduce worries of depleting savings too quickly.

In your 70’s and older: You’re a real pro at retirement now, but that doesn’t mean you don’t have financial worries. Whether it be a fear of outliving your money, or seemingly high income tax bills, this is no time to put money concerns on the back burner. Seniors who are paying higher taxes in retirement than while they were working, or having their OAS clawed back, need to consider tax planning strategies that could alleviate some of the tax burden. If you’re afraid to spend too much in fear of running out of money, a detailed financial plan could help alleviate some of that anxiety by giving you a good view of your financial future and how much you can afford to spend without running out.

There are already so many things to worry about in life. Avoid money being one of them by taking control over your finances. If you have a Financial Plan, and are still feeling anxiety about money, get a second opinion. If you don’t have a Financial Plan, take the first step to getting on track, and contact a financial professional. Spending less energy worrying about money will allow you to focus on other important things like health and enjoying life.

**Boosting Retirement Readiness and the Economy Through Financial Advice, Montmarquette and Viennot-Briot 2012 Canadian Study for the Conference Board of Canada

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Lynn MacNeil, F.PL. is a licensed Financial Planner with Investors Group Financial Services Inc. in Montreal, with 20 years experience working with retirees & pre-retirees. This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide legal advice. For a private financial consultation, or more information on this topic or on any other investment or financial matter, please contact Lynn MacNeil at (514) 693-3384 or lynn.macneil@investorsgroup.com

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