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Money Advisor Wealth Management

Money Advisor Wealth Management

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Taking on Debt in Retirement

It seems as though debt and the debt load being carried by Canadians is becoming an ongoing issue discussed in our media. Recent poll numbers suggest that many Canadians are retiring with some form of debt. Carrying debt means you will have principal and interest payments to make. But the question I’m often asked, “Is all debt bad?” To which I generally reply, “No, not all debt is bad. However, it is important to understand how the debt is being managed, especially entering into or during retirement.”
Debt can come in many forms: mortgages, lines of credit, car loan, consumer debt. Some Canadian retirees are finding themselves faced with additional mortgage payments brought on by vacation properties. Others are fully financing post-secondary, new home purchases or a variety of other large expenses for their children and grandchildren. High interest payments and the transition into fixed retirement income, can have an adverse effect on some of your retirement plans. Debt is something Canadians have grown accustomed to living with. Your retirement, however, is a period during which you are often not accumulating capital. We want to ensure your retirement income can withstand the debt you will be carrying with you. So, if you let your debt get out of control, yes, living the retirement of your dreams can become extremely difficult, if not impossible.
So how do we address debt in planning for and entering into retirement? We develop a financial plan and begin evaluating how to reduce your debt to ensure your retirement goals are not sacrificed. We look at your revenue streams in retirement: are you drawing from a registered savings plan, pension or other investment vehicles. From there, we examine your cost of living and debt obligations. In reducing your debt load some options may be more transparent than others. If you own multiple properties, cars or recreational vehicles, we discuss downsizing or creating supporting revenue streams. If your children are your financial Achilles, perhaps it is necessary to guide them in embarking upon their own financial journeys. Credit card debt is readily obtainable and can have enormous interest rate implications. Prioritize paying off those credit cards with the highest interest rates and evaluate your current spending habits. Other debt restructuring ideas may be less transparent and require the services of a financial professional. We work to structure your debt to minimize interest costs, discuss payment options and help you budget your retirement savings.
Just as planning for your retirement does not happen overnight neither does reducing your debt load. Being in control of your financial situation and setting a course to allow you to pay down your debt, will also assist you in living out the retirement of your dreams.
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Mapping out Your Retirement Goals

Have you found yourself thinking about retirement lately?
Your retirement is an incredibly exciting stage of your life. While it is easy to get caught up in the excitement, it is hard to conceptualize that retirement will be 52 weeks a year. When beginning to consider your retirement goals, creating a retirement map can be an invaluable tool to help guide you to a financially stress-free retirement.
To begin your retirement map, you must ask several questions: (1) what do you want to accomplish in retirement, (2) how much will your retirement cost, and (3) how will you pay for your retirement?
Everyone has a different idea of the ‘dream retirement’. Will you use your retirement to travel the world? Will you write a book or take up a new sport? Will you become a fixture on the golf course, the beach or the ski hill? Will you start a new business venture? Or perhaps you are not entirely sure. A common theme that surfaces when I ask clients what they want out of their retirement, is travel. Travel can include visiting your children 3 times a year, touring Europe or living on a beach in Maui for a month. Giving thought to your retirement beyond these short-term travel plans is important. These discussion points can allow you and your partner to discuss both your personal and joint goals. Reflecting upon what is important to you and your family can help outline the true costs associated with retirement.
Your map is not set in stone but rather guides the decisions you make today to meet your financial needs in retirement. At Money Advisor Wealth Management, we consider your day-to-day expenses as well as funds you require to meet your retirement goals. This inquiry can pose numerous questions such as: Will you still have children living with you and needing your financial assistance? Will you have university education to pay for your children or grandchildren? Will you be investing in a new business venture? Working through multiple options will assist in developing a realistic plan for your retirement.
The next step towards mapping out your retirement goals is to identify your sources of income. Paying for your retirement can take many forms. Some may retire on a full pension, some may continue to work part-time. Others may have invested in their retirement savings plan since their teenage years, others may have entered the retirement savings game later in life. Having a realistic idea of your expenses and sources of revenue can assist in creating a retirement wealth plan. We work with you to create dependable revenue streams that will lead you through the retirement of your dreams. This map integrates into your overall financial plan.
Retirement is an exciting journey. Ensuring you have a financial plan in place will help guide your way to a successful and fulfilling retirement.
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Transitioning into Retirement

Preparing for retirement can be one of the most exciting times of your life. Dreams of coffee on the porch, long days on the links and vacations in paradise. During this time of transition, you may also wonder how you can ease your transition into the retirement lifestyle.
One of the first steps you can take is to consider phasing into retirement. There is no hard-fast rule that you must quit working entirely. Consider phasing into retirement by cutting back on your daily/weekly work hours or through part-time work. Not only may this approach benefit you, it may also benefit your employer through succession planning and easing the burden your departure may have on the company. You may choose to consult in your industry of expertise or consider getting a new job. Is there something you have always wanted to do? Do you have some unique skills or abilities that may be useful in another profession? You may not need the additional income, but enjoy keeping your mind and body active.
Begin planning for your retirement in advance. A year or two before your scheduled retirement date start making a list of the things you have always wanted to do but just never had time for. Have you always wanted to travel? Learn a new hobby? Take up a fitness class? Your retirement is a great time to delve into the things you haven’t had a chance to do.
One of the big benefits of working is the social aspect. Retirement may seem like you are entering social isolation, but it doesn’t have to! Work on replacing your social network through classes, social groups, volunteer opportunities and other gatherings.
Practice living on your retirement income prior to retiring to see if it is reasonable. A good plan has built your lifestyle wants and needs into your post retirement spending. If this has been done well, you won’t be adjusting your lifestyle much at all.
Your Financial Plan leading up to retirement is an integral part in your overall retirement strategy. Working with your financial advisor to develop your plan generally happens years, even decades, prior to your retirement date. However, retirement is more than just financial planning and isn’t just some “off” switch you push one day. Retirement is a process. Taking the time to consider how you plan to enter into retirement and what you can look forward to will ensure your transition is successful and that you can focus on what matters most: enjoying your time.
Do you have questions on this article or about wealth management in general?
Contact Money Advisor Wealth Management today and we’ll help answer any inquiries you may have.

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