How to make sure you're still on track to meet your retirement needs
Given the big fluctuations in the stock market over the past few years, there is a good chance your investments are out of sync with your long-term plans. Will you still be able to afford the lifestyle you desire when you retire? Here are steps you can take to make sure your retirement plan remains on track to meet your needs.
Gauge your expenses: Start with your current annual budget and project how it's likely to change after you retire. While the costs of health care, travel and recreation typically increase in retirement, other costs come down - you'll probably spend less on commuting, and you may have paid off your mortgage.
Estimate your retirement income: Next, tally up any guaranteed income you will receive in retirement. You can project your Canada Pension Plan and other benefits using the CIBC Retirement Calculator. If you're eligible for an employer pension, your workplace can provide an estimate of the benefits you will receive in retirement. Subtract your expected annual income from your projected annual expenses. The difference between these two figures is the amount you will need to withdraw from savings to meet your budget. A common rule of thumb is to withdraw no more than 4% of your assets in your first year, and then adjust for inflation each year thereafter.
Consider cutting costs: Your financial advisor can help you determine whether your nest egg is likely to last the length of your retirement, based on the amount of your savings, your life expectancy and other factors. If you think you may fall short, plan on cutting costs-for example, by travelling less or moving to a less expensive house.
Consider working longer: Delaying retirement would allow you more time to contribute to your savings. You might even think about working part-time after you've retired.
The market's recent volatility may have disrupted your expectations for retirement. But planning ahead now could make a big difference in how comfortable those years will be.