Let's look at how change can affect your retirement date, your retirement lifestyle and your requirement for retirement income:
- Life expectancy is increasing. People are living longer and healthier lives and that means your retirement plan should ensure you don't outlive your income
- It is no longer mandatory to retire at age 65 in most occupations. That means you may wish to work after age 65 to fund your longer retirement. Or, you may decide to continue working part time after retirement either to supplement your income or just because you want to
- Companies are learning to value older, more experienced employees. Yours may offer incentives that will keep you on the workforce after the old-school 'traditional' retirement age of 65
- Defined benefit pension plans are becoming less common. That means a growing number of employees can no longer assume they will have a 'defined' retirement income. Instead, these employees must bear more responsibility for their retirement plans and, perhaps, more uncertainty about a feasible retirement date
Ages 25-40 - These are the saving years when you typically have higher expenses and less to invest. You should maximize contributions to your Registered Retirement Savings Plan (RRSP). However, because you have a long time horizon to retirement, you can also choose a more aggressive investment strategy that targets volatile investments that might go down in the short term but may produce higher returns in the long term.
Ages 40-60 - These are the wealth-building years. Your debt is reduced or eliminated so you have more capital to invest. Maximizing contributions to your RRSP is still a very important part of your retirement plan and, as your retirement years approach, you may want to redirect your portfolio into lower-risk, fixed-income investments.
Age 60 and over - These are the retirement years. You will likely need to begin tapping into your accumulated investments in order to sustain your retirement lifestyle. Focus on investments that preserve your capital but also consider growth investments that can add to your retirement income and protect against the effects of inflation over the extended years of your retirement.
There are other important aspects to your retirement planed based on an effective income investment strategy - such as diversification and asset allocation - and a professional advisor can help you make the best choices to suit your lifestyle, regardless of changes.