As clients approach retirement, their initial questions are typically about their finances. They question if their investment strategy should change and if they have enough money saved to last them throughout their retirement. These concerns are addressed when we meet and discuss their Total Wealth Plan. The purpose of this article is to take a step back and encourage our clients to have a meaningful conversation about what retirement looks like for them.
Retirement is different for everyone
One seminar we did years ago had nothing to do with the financial aspects of retirement. We gathered 50 couples that were within three years of retirement and brought in a guest speaker, Barry LaValley, of Retirement Lifestyle Centre. The presentation highlighted that many people entering retirement don’t really have a clear understanding of what they are retiring to.
Below are that he poses to people who are trying to formalize their retirement move:
1. Why are you retiring?
2. What is it that you will miss most about your job?
3. How will you replace the things that you liked most about your work?
4. What are you looking forward to the most about your retirement?
5. What areas of your retirement life need a plan?
6. What are the opportunities that you see in your retirement?
Are you on the same page?
When we invited clients to Barry’s seminar, everyone was prepared to learn about and discuss retirement planning. Every client was given a workbook with some exercises to complete, and couples were given two workbooks to complete individually.
Within the workbook, couples were asked questions similar to the ones above.Part of the exercise was for everyone to put their thoughts down in writing without talking to their partner. Then the information was shared. We then obtained permission to read out a few examples. What became clear was couples had vastly different retirement plans and they had not yet had meaningful conversations with each other about retirement.
When we ask couples what they want to do in retirement, they are often together and not 100 per cent prepared for the question. The answer has a direct impact on their Total Wealth Plan, and the capital that they will require to reach their retirement cash flow needs and goals.What we have learned over the years is that many couples have vastly different thoughts about what retirement looks like to them.
Below we have shared some examples from seminars and meetings we have had with clients about retirement over the years.
Examples of different retirement goals
Mr. and Mrs. Smith
Mr. Smith was interested in buying a sailboat and going on adventures. Mrs. Smith didn’t even put boating on her list. In expanding on this example, Mrs. Smith explained that she didn’t like sailing as much and didn’t want to spend their retirement savings on buying a new boat. Mrs. Smith wanted to spend time volunteering with local charities that she is passionate about.
Mr. and Mrs. Jones
Mr. Jones was thinking of getting a motor home and driving across Canada and making extended trips to the United States. Mrs. Jones wanted to stay close to home to spend time with her grandchildren.
Mr. and Mrs. Wilson
Mr. Wilson wanted to help his children get more financially established. His idea was that he would help them out financially by either giving them money for a down payment on a principal residence or to pay down their existing mortgages. In addition, he wanted to assist them with small renovations or projects that needed to be done.
Mrs. Wilson didn’t mention helping the children out at all, either financially or with their time. Her retirement wishlist included spending more time on the golf and tennis court and fully utilizing their memberships.
Mr. and Mrs. Brown
Mr. Brown’s idea of retirement was to work less and still do some consulting. He loved what he did and said he has no plans of ever retiring. Mrs. Brown loves birding and has always wanted to travel to other parts of the planet in search of spotting and photographing other species of birds.
Mr. and Mrs. Green
Mr. Green has compiled a collection of 50 books that people have recommended to him over the years. His plan for retirement is to finally get through reading those books. Mrs. Green has dreamed of travelling to France, Italy and other countries to explore the foods and wines of the world.
Mr. and Mrs. White
Mr. White has a green thumb. He can’t wait to expand and manicure his garden. He is looking forward to spending more time in his yard. Mrs. White would like to buy a place in Hawaii and spend the winters in a warmer climate.
Mr. and Mrs. Anderson
Mr. Anderson likes fixing up and restoring old cars. He has a couple of vehicles that he has always wanted to restore but has never had the time. This was his number one goal for retirement. Mrs. Anderson would like to simplify their life, sell their home, and move into a condo overlooking the water. She would like to be able to lock things up, do no yard work, and travel more often.
Meaningful conversation
Some couples had clearly communicated with each other and were on the same page about what retirement looked like for them. Many couples were not on the same page and had not had meaningful conversations to bridge the large gap on what each visualized retirement would look like. In speaking with couples afterward, we explained that without them having meaningful conversations with each other, it was difficult to have a meaningful conversation with us.
Total Wealth Plan
When we prepare a Total Wealth Plan for clients, we are truly planning. We want clients to dedicate time and possibly get outside their comfort zone about what the retirement stage of their life will look like. Helping clients achieve their goals is one of the rewarding components of our job. There are times when we have to advise on whether or not those goals are feasible from a financial standpoint.
Let’s look at the Smith’s example from above. If Mr. Smith would like to purchase a boat, then this would have to be factored into the Total Wealth Plan.
Questions we asked: What type of boat? What do you estimate the boat will cost? What are the annual operating costs (for example, fuel, services, repairs, moorage)? What is the timing of the cash flow needs? How many years did you want to own the boat (five years, 10 years, perpetual)?
This was something that was important to Mr. Smith in retirement. We explained that we could do different scenarios in their Total Wealth Plan, one with them buying the boat and another with them not buying a boat.
The objective of this exercise is that if there was sufficient capital for them to purchase a boat, then possibly that would relieve some of the financial concerns Mrs. Smith has. Through discussions, they opted to purchase the boat with the plan to use it for five years and then likely sell it after that time.
Now, let’s use the Jones example from earlier. Mr. Jones wanted to buy a motor home and take extended trips throughout Canada and the U.S. Mrs. Jones wasn’t sure she could spend that long away from her family.
Through the discussions, Mr. Jones indicated he wants a motor home for a couple of years. He thought it would be nice to take the grandchildren on trips to Disneyland. He thought their family could also use the motor home to create memories.
In the conversations, we planned for additional costs within the Total Wealth Plan for Mr. and Mrs. Jones to fly home for the holidays. This way, they could prioritize family and still do some extended adventures with a motor home.
Mr. Jones liked the idea of taking the motor home south for the winter to warmer climates. They had the financial resources to hold the motor home for a longer period of time if they so desired. They both agreed to tentatively plan to sell the motor home after 10 years.
Planning is the key objective
The entire exercise of reaching a consensus with respect to what retirement will look like is one of the primary objectives that we try to help clients achieve when doing a Total Wealth Plan. In many ways, we are the facilitators of these conversations that are often avoided. Communication and planning in advance help us create a more meaningful and relevant Total Wealth Plan.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250-389-2138, email [email protected], or visit .
