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Retirement Planning

What is retirement?

Retirement is a major life transition that is a process of assessing, and making adjustments that can be positive and or negative ^[1][2][3].Many retirees have difficulties adjusting to a loss of identity from their professional role, which can result in an unwillingness to accept their retirement options^[1][3][2].Retirement itself has many paths and is unique to each individual depending on their personality traits^[1].There is no cookie cutter template for retirement success, because life is unpredictable. Research has indicated that planning ahead can make the life transition smoother and is a key strategy in successful adjustment ^[1][3][2].This includes making clear goals; this can stimulate activities and give focus to one’s life again. So don’t fret! Plan ahead!

Planning Strategies for Retirement

Planning is a process that takes careful thought and consideration within your personal context that critically analyzes your personal resources. When planning ahead, please note never think that you are alone. Look to your social supports and networks for help such as your spouse, children, parents, community, friends etc ^{[4] [2][1]}.These resources have been shown to aid the adjustment process^[2][1][3].One should write down and brainstorm or do a mind map how one might want to spend their day, assess the kind of activities you like to engage in either social, physical, mental etc, what are my dreams, desires, what are my strengths, skills and knowledge ^[5]. By writing down your attributes this allows you to visually look at how you want to spend your valuable discretionary time. The exciting part of retirement is that you get to choose what you want to do with your and how you want to spend your time, so get creative! This kind of planning can look at personal fulfillment, family involvement, and understanding personal motivation such as money, personal reward, learning a new skill. Further, this allows you to pick out those items in which you see are most meaningful, and authentic to you. Planning can also include preparing lists such as where you want travel, how you spend your time with family, fixing up the house, getting more involved with the community etc ^[6].Make sure you have a balance of different ideas and that they are not specific to just career or just on physical health. You really want to strive for a holistic view of what you want your life to look like or to be like. This can include your bucket list. Once you have a clear vision of what you want to do then you can move toward your goal setting.

Goal Setting

Goal setting is seen as a valued tool to give focus, meaning, and energy and life purpose ^[7].This allows you to keep tabs on what means most to you and help a person understand themselves better. Goals can aid you in achieving something and can lead to success which can also bring joy and positive experiences to your transition ^[7].Lastly, goals can help determine motivation. Goal setting takes time, and can be difficult to determine. Attainment of goals can change over time, due to changes in your life or reevaluating what you wish to accomplish. Goal setting isn’t necessarily to run your future but to help you navigate it. Domains for goal setting can include:

• Financial
• Travel
• Take on a new hobby / devote more time to an existing one
• Teach/ Coach
• Family Time
• Volunteer
• Career or work related
• Health; spiritual, social, physical, emotional, cognitive etc.

Types of Goals

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SMART Goals

SMART goals are a common method used to guide goal setting. SMART Goals stands for Specific, Measurable, Attainable, Realistic and Time bound^[8]Example, by saving 100 dollars a month to put away for a vacation fund I can afford to go to Australia by next year. This example illustrates the SMART method because you have identified the specific goal to travel. The essence of the goal is the financial component, the attainment combines the specific and measurable which makes them realistic and finally by date completes the time bound component^[8].However, keep in mind that SMART goals are subjective and are interdependent on one another.

Short term verses long term goals

Short term goals are those that are done within a short time frame for example 6months from now I will volunteer 3 times a week for an hour ^[7].Whereas long term goals indicate a longer time period example in 5 years from now I want to have saved $6000 for my trip to Australia^[7].

Reminders to help you plan

• Stay positive
• You are not alone
• Plan ahead
• Utlize your resources

Helpful books and links and on goal setting and planning retirement

• What is your parachute for retirement. By John E Nelson and Richard. N Bolles

• The New Rules of Retirement: Strategies for a Secure Future By Robert.C Carlson
• The Bogleheads' Guide to Retirement Planning by Taylor Larimore, Mel Lindauer, Richard A. Ferri, Laura F. Dogu
• http://www.servicecanada.gc.ca/eng/lifeevents/retirement.shtml
• http://www.goalsettingstrategies.com/goal_se{ting_forms.html
• http://www.investopedia.com/articles/retirement/07/sixstages.asp

Financial Planning for Retirement

Before Retirement

Preparing to retire in today’s society requires thorough and complex planning. It is essential that those approaching retirement arrange a financial plan far before they leave the working world.^[9] There are a number of questions that should be answered well before an individual receives their last paycheque:

• How old do you want to be when you retire?
• How much accumulated income will you require at retirement?
• What kind of government support can you expect?
• How and when will you receive your pension?

The list of questions one can ask themselves before retiring could be endless. To make life easier, it is vital for individuals wanting to retire to implement a financial planning program.^[10] The purpose of financial planning is to review one’s present financial state, as well as to create short and long term goals. In addition to creating goals, financial planning generates an approach to achieve those goals ^[11]

Before one begins the planning process, it is a good idea to create an objective. Setting an objective helps one realize what they need to achieve before retirement ^[11].When establishing an objective it is important to be realistic and set attainable goals. An objective is something an individual must work towards over the years. For example, having money to do what they want in retirement ^[9]

After creating an objective, the next step in the planning process is determining the income amount one will need in the first year of retirement (reference)Normally, 70% of what an individual has earned over the past 3 years is what they need to remain at their current standard of living ^[12]

Question Retraite. (2011). [Table 3] how much will you need at retirement. Quebec: Question Retraite.^[12]

Reliable Sources of Income

Types of Government Pensions

Federal Old Age Security Program (OAS): This program provides individuals with three types of assistance : the OAS, the Guaranteed Income Supplement (GIS) and the Allowance. ^[13]

Old Age Security Pension: A basic pension for anyone who has been a legal resident of Canada for a minimum of 10 years, after age 18. OAS can be applied for at age 65, it is paid monthly, and the amount depends on current income. It is a taxable benefit ^[13]

Guaranteed Income Supplement: In order to receive the GIS pension, one must already be receiving the OAS pension. The GIS pension is calculated based on one’s marital status and income, together they must not surpass a certain fixed sum. This is a tax-free benefit. ^[13]

Allowance: If an individual is married to, or has a common law spouse who receives OAS pension, they may apply for the allowance. If the combined sum of annual income does not surpass a certain/fixed amount and they are between the age of 60 and 64, they may qualify for an allowance .The allowance for survivors is a benefit for low-income seniors whose spouse or partner has passed away. ^[13]

Service Canada. (2011).Old age security benefit payment rates. Ottawa, ON: Service Canada.^[13]

The Canadian Pension Plan (CPP): Is a retirement pension for individuals who have worked and contributed to the program. Individuals must be at least 60 years old in order to be eligible. The amount one receives varies depending on the amount the individual has contributed, in addition to the age at which they choose to retire. Presently, if one retires before 65, their pension is reduced by 0.5% per month, up to a maximum of 30%. However, if one retires after age 65, the pension is increased by 0.5% per month, up to a maximum of 30%. ^[13]

Personal Saving for Retirement

Types of Personal Savings

Registered Retirement Savings Plans (RRSPs): This is the most popular form of saving for retirement.^[11] An RRSP includes tax benefits that allow individuals’ savings to grow tax-free. Stocks, shares, bonds, and guaranteed investment certificates are all types of RRSP investments. The total sum deposited into an RRSP is deducted from an individual’s net income, which in turn lowers the applicable taxes.^[9] One’s earnings can be compounded until the individual wants to receive the funds as income, allowing the investment to mature to the largest possible amount. RRSP’s are only taxed once a withdrawal is made.^[14] A crucial aspect of RRSP’s is that the sooner an individual invests their money, the faster they can retire, as money can grow a vast amount over the years.^[9]

The Tax-Free Savings Account (TFSA): Is a program introduced Jan 1st, 2009. A TFSA is an investment opportunity for individuals who are at least 18 years old, who want to save for retirement. Investments in a TFSA are not tax deductible, and the TFSA account is not taxed, even when withdrawals are made. The maximum contribution limit for this account is $5,000 a year. The TFSA includes a carry-over feature where any unused area under the $5,000 cap is applied to future years.^[12]

Leisure Activities in Retirement

When entering into retirement, seniors inevitably find themselves with more time on their hands. This increase in free time is often filled with participation in leisure activities. Retirement is the point of a person’s life where they can finally achieve goals they otherwise did not have time for. Retirement can lead to exploration of many different types of leisure activities. Different categories of leisure activities may contain benefits to slow down the aging process and maintain a higher quality of life. Physical fitness, social engagement and cognitive leisure activities may have benefits that one may not realize exist. Socially engaged activities may help to prevent depression and improve overall health, perhaps by reducing stress. Cognitive leisure activities have been found to lower risk of Vascular Cognitive Impairment in old age. Physically stimulating activities can reduce depression, and prevent Alzheimer’s disease. Filling free time with participation in such activities can ease the transition into retirement and help individuals to live a longer and fuller life.

Socially Engaging Leisure Activities

Social interaction is an important aspect of life to keep engaged in throughout old age. In old age, an individual’s social situation can have major effects on psychological well being.^[15] High blood pressure is associated with cardiovascular disease.^[16] Therefore, having a enriched social environment may help to lower blood pressure and consequently reduce risk of other complications like cardiovascular disease.^[16] In addition, Golden, Conroy, Bruce, Denihan, Greene, Kirby and Lawlor found that 40% of the risk factors of depression can be attributed to a social network that is not stimulated. ^[15] Therefore, increasing prevalence of social interactions can help decrease the risk of depression.^[15] Consequently, quality of life in old age can be improved by maintaining social interactions, and staying involved with social activities.^[15] Social activities can help an individual in old age remain cognitively healthy.^[17] It has been found that elders who remained socially involved lived longer than those who did not. ^[17] In addition, elders who cannot remain physically active can acquire some of the same health benefits from regular social interaction. ^[17] During retirement, remaining socially engaged can help to fill the new time slot created when no longer working. Social engagement during retirement is an important factor to promote a healthy aging process and longer life.^[18] It has also been suggested that aerobic exercise in particular may assist with visuospatial processing in older adults.^[19]