Investing at its most basic is a tangible act of hope that the future will be good. The difficulty in seeing it that way, of course, lies in the different, personal definitions we all have of what “future” and “good” mean.

For some, “future” and “good” mean only having enough money for their lifetime and possibly the lifetimes of their children. That’s understandable - in our culture of scarcity the first thing we’re trained to do when we’re scared (and who wouldn’t be scared right now?) is to huddle with people like ourselves around the resources we worked tremendously hard to gather. Investing for these people sometimes feels like an act of desperation, not of hope.

For you, the meanings of “future” and “good” might cast a wider net: good for entire communities, good for the earth and all its inhabitants, good for future generations. With such broad definitions, you might even have a broader understanding of investing, which could mean the creation of wealth that’s not limited to dollars, but encompasses the wealth of participating in a healthy community with thriving ecosystems and sustainable relationships. To invest this way, and to keep investing this way even when it feels like things are only getting worse, requires that you are deeply connected to your WHY.

Easy, Bad Answers and Harder, Less Bad Answers

More than any other tool in the financial planning kit, investing is the home of easy, one-size-fits-all answers, and it’s not necessarily because there’s a whole industry designed to lull you into buying their products by making them seem perfect for everyone (even though there is).

In part, investing is home to easy answers because the hard answers are...hard.

Your values are personal. They’re complex, and they’re unique. And so are the companies and causes you want to invest in. Matching your values fingerprint with someone else’s is hard work, especially if you haven’t actually examined your own fingerprint that closely.

Off-the-rack solutions, like relying on ETFs and mutual funds with ESG ( environmental, social, and governance criteria screens) branding aren’t all horrible. But just ask my friend and colleague Darryl Brown, CFA, about what you might find when you look closely at the companies you end up owning. He’s got plenty of examples of people wanting to invest in companies that advance social justice, diverse representation, and fair employment standards and finding out they now own Amazon, Google, and Tesla instead.

Bespoke solutions, just like suits, are more expensive, but are typically worth the cost. Working with a professional to articulate what you want (and don’t want) and tailor a portfolio around your unique values is a good way to avoid the easy, bad answers. It’s hard, because you still have to rely on someone else’s understanding of your values, and imperfect, because you will be relying on proxy characteristics (like board representation, or the CEO’s personality) to screen for a good match...and it won’t always work.

This leads to another hard truth: investing with more than just the growth of your own personal net worth in mind is harder to measure, and not because values-based investing generates lower returns (it doesn’t). Rather, it’s because a definition of success that includes the health of the entire planet, for example, requires more than the simple math of financial statements to measure. Not only do you have to examine and articulate your personal values, you have to design your own personal scorecard.

Trying to build a good future using only traditional investing tools is like trying to buy a tomato in The Good Place: there is simultaneously too much and too little information to make a perfect decision about the impact your dollars will have, and no tangible evidence that all that hard work to make the best decision had the impact you wanted anyway. But it’s worth doing anyway.

Hard Answers, and How to Live With Them

Yes, investing your time, labour, and money in creating a good future is hard work, just like most worthwhile pursuits. The sheer amount of work might feel daunting, so here’s how to get from wanting to invest according to your values to actually doing it:

Start With Why

As my friend Bonnie Foley-Wong writes in her book Integrated Investing:

The first thing people ask me when they are thinking about investing is, “What should I invest in?” But the first question they should be asking is, “Why am I investing?”

Articulate the kind of future you want. Discuss it with your family and the people you work with in your community, and be as specific as possible about what you mean by “good”, and what you mean by “future”. Describe the change you want to see in the world: is it a problem you’re participating in? Is it a solution you’re not participating in? (You may find that the Design Thinking framework is a helpful tool to use for this.)

And here’s a potential bonus: involving future generations in your investing decisions and teaching them how to carry on after you may also line up neatly with your values around education and family!

Practice Explaining Yourself

Imagine you’re explaining your values to someone who doesn’t know you from Adam but who will be responsible for executing your vision. You might know what you mean by “I’m against consumerism” but they probably don’t - so tell them: what companies or attitudes do you want to withhold your resources from? What endeavours would you feel comfortable supporting?

If you think a particular CEO is power-hungry and represents everything wrong with the world, would trying to band together with other shareholders to force them out be a good use of your resources? Or would avoiding them and everything they touch be a better use of your time? Be as clear as possible: what is the outcome you want to achieve, and how will you measure it?

Perfect is the Enemy of Good

No matter how bad it seems like things are getting, remember that nothing is inevitable (no, not even Thanos). The top five companies in the seventies are not the top five companies now. Corporate decision-makers who don’t believe a word of their own greenwashing campaigns are scared of the reputational fall-out from not at least appearing to care.

The old paradigms of “investing is only about money” and “corporations only exist to maximize shareholder values” are actually shifting. Not fast, mind you, and it will take hard, sustained work to create long-term, meaningful change...but part of that change is the belief that it can be done. People like you, who engage with their wealth of resources as a source of future good can make it happen, and the first step is simply believing it can be done and acting accordingly.

Planning your retirement is a waste of time and money if you don’t start with your values. Full stop.

Oh, you might put together a strategy that squeezes every last dollar out of Old Age Security or perfectly calculates when to convert your RRSP to a RRIF and even feel good about it for a minute...but unless your only measure of success is how correct you are, you aren’t going to feel great about your retirement strategy for very long.

As I’ve written before:

I have learned that there is no one set of values that fits everyone. Even where people share values, how each of us approaches and lives those values is unique to each one of us. I have also learned that, without connection to our specific set of personal values, our goals fall flat, our achievements feel unimportant, and we lose motivation.

I’ve found over my decades in this profession that prospective clients often show up with “how” questions, like:

• How should I draw down my assets in retirement?

• How should my portfolio be managed?

• How much can I spend?

They’ve been trained (by every bank ad ever) to believe that answering the “how” questions are what retirement planning is all about, and since it’s likely the first and only time they’re going to retire, they’re understandably nervous about getting the details wrong.

The problem with starting with the details of “how” is very similar to the problems you’d encounter if you started to build a house without stopping to design it first. Even if you somehow manage to get the foundation poured properly and the walls and roof attached to each other, starting with design first is the only way you’ll end up with a home worth living in.

Think for a minute about your own financial situation: you may have the exact same income as someone else. Your portfolios may be eerily similar, and you may have retired on the same day and have the same cost of living. Spooky. Your retirement strategy can’t be that different from theirs, can it?

If you’re only comparing your net worth and cash flow statements, you might be tempted to say “no”. But what about your values?

What if you have a passel of kids and grandkids, strong values around education, and a family cottage that you inherited from your parents and want to pass down as seamlessly as possible to the next generation? What if your doppelganger has a second home but no kids and no other close family, suffers from anxiety, and had parents and grandparents who all lived into their very late 90s?

Your retirement strategy might include:

• Facilitated family meetings to help you understand what the next generation wants (you might be surprised!)

• Planned gifts to each child’s RESP.

• Setting your portfolio up for growth since it will definitely outlive you.

• Money set aside in your Will for a trust that will cover annual cottage expenses even after you’re gone.

• Even more facilitated family meetings so that everyone is clear about your intentions and hurt feelings can be addressed with care or avoided altogether.

• Overfunded permanent life insurance policies so that your final tax bill is covered.

Your double’s retirement strategy should look completely different, even if both of you spend the same amount every year and have identical portfolios down to the penny. Their strategy might include:

• A large enough cash wedge to cover two years of spending, and enough money in fixed income to ride out five full years of horrible equity returns.

• Canada Pension Plan benefits deferred all the way to age 70, with strategic RRSP withdrawals in the years before CPP begins.

• An annuity that (along with their CPP benefit) creates enough guaranteed income after age 70 to cover their core lifestyle expenses even if they lost every cent in the market (an unlikely scenario that nevertheless wakes them up at 3AM most mornings).

• A professional trustee named as their substitute decision maker and executor.

Applying your strategies to their life and vice versa might not be disastrous for either of you..but it would almost certainly feel that way!

It’s easy to dismiss feelings as irrelevant to the dollars and cents of financial planning, but paying attention to them is the key to making sure your retirement strategies are congruent with—and ultimately supportive of—your values.

Wouldn’t it be great to figure out your retirement, set it… and forget it? As I mentioned in November’s Rebuilding Retirement case study, retirement isn’t a destination. It’s an ongoing process.

In my final case study of 2020, I thought I’d give you one last peek into retirement planning with Ben and Leslie, who were just about ready to retire… and then the pandemic made them wonder if the plan I’d created together made sense anymore.

Meet Leslie and Ben, Ready to Retire

Leslie and Ben are in their early 60s, with two grown children and a grandson. Leslie had already retired when I met her, and Ben was planning to retire in the spring of 2020.

Ben and Leslie had read some of the key books I read (and recommend!) and gave a lot of thought to their retirement finances. They’d considered their core expenses as well as their dream expenses and came up with a range. Since Leslie is a super math nerd and has had a little time on her hands now that she’s retired, she created her own spreadsheets to try and calculate their ability to retire successfully - she even contacted my friend Doug Runchey to get an expert calculation on their Canada Pension Plan benefits.

The math had been done and yet… both Ben and Leslie felt like they were missing some key information. Had they asked all the questions? Had they considered all their possibilities? Are there other factors that a professional planner might consider? Is there more to retirement planning than projections?

Isn’t Retirement Planning Just About the Math?

Initially, Leslie thought that the best way to go might be to provide me with her plan and have me try to poke holes in that. However, my experience in attempting this in the past told me that I’d end up simply telling them how to fix their process (or what was unfixable) and still not arrive at any helpful conclusions.

A large part of successful financial planning is knowing the right questions to ask, in order to truly shape, design, and define your future. The next step is determining what to pay attention to out of the endless amount of information available, and how that focus will get you the answers that you need. After that is the math and the strategy - where Leslie and Ben had reasonably started - considering the information that’s available about retirement planning.

Then, of course, there are contemplating potential risks such as fluctuating rates of return, longer than average lifespan, health costs, elder care, and who knows what else - and how to handle them. Finally, are all the right legal documents in place and the assets owned in a way that the legal documents work well in reality… and what’s left for the kids?

Leslie and Ben had done some work on the retirement math but they knew that they needed help with the rest of the puzzle. They spoke to me about their dreams and I agreed to help them assess their retirement strategies for risks, opportunities, income tax minimization (which hadn’t played into Leslie’s spreadsheets just yet).

Retirement Planning in Action

Before their Foundation Meeting, I sent over a brief video called Watch Me First that gave them a brief walkthrough of the report they would be reviewing together during their meeting. This video clarified that the purpose of the Foundation Meeting was really about data validation and goal shaping - but not yet about solutions.

During the Foundation Meeting, I had a lot of questions. First, I walked through the assumptions I would be making in their plan, regarding income and expenses, account values, inflation rates and more. From there, I clarified their goals around a cottage purchase they wanted to make in retirement. Was the number based on a specific idea? Had they thought about property transfer taxes? Where in priority did the cottage fit in relation to their other goals? Would they accept a smaller cottage if that meant more security for elder care? More questions were asked about replacing vehicles, gifting to children, the pension option Leslie had selected, the various options available for Ben’s pension, and more.

Ben and Leslie felt really confident at the end of this meeting that their financial plan would be based on goals they felt energized about, and a lifestyle that they really wanted in retirement. They understood how the projections would be created, and were excited about the outcome.

Now, I was ready to go to work, and here’s what I found:

Leslie and Ben’s reliable income - the guaranteed stuff from pensions - is projected to be enough to cover their “core expenses” - the basics of their lifestyle - all the way to their projected life expectancy. This is before even touching their investment portfolio, which could manage the costs of their “dream” expenses as well as potential health care costs, emergencies, and elder care. There would be lots of money left for their children and grandchildren, plus their home and their cottage.

Then, I ran some worst-case scenarios, because Ben and Leslie were concerned that there was even more risk than they knew. These scenarios, which tested their portfolio against some of the worst market returns in history, ate up a lot of their portfolio, but they still were able to cover costs (even with their dream expenses, emergencies, and potential costs) all the way to the end of their projected life expectancy, plus another decade. Their home and cottage were left for their kids, along with the equivalent of about $41,000 in today’s dollars in the bank.

If Ben and Leslie’s personal sequence of market returns and inflation ends up being just as bad but not worse as what’s gone on in the past century (a century that included two World Wars, multiple economic crises, and a global pandemic, to only briefly scratch the surface), they will be fine even if they live a very long, active life together.

If the future is worse for investors than anything experienced in the past century, then at some point in the next 30 years, Ben and Leslie will be faced with the choice of reducing some of their dream expenses in order to maintain their home and cottage for their kids, or sell one of their properties to maintain spending. Their core comfortable lifestyle would not be in jeopardy.

The plan was set: Ben would retire in May of 2020, and they would ride off into the retirement sunset with confidence. A happy, tidy ending.

Except successful retirement planning is - and always will be - planning. As in: never finished, always responding to circumstances, never tidy.

Along Came COVID...Does Everything Change?

Ben and Leslie were fortunate to have the resources they needed to stay safe at home, but seeing the devastation the pandemic was wreaking and looking ahead to how it might unfold over years created quite reasonable anxiety for them. Did it still make sense for Ben to retire? Wouldn’t the prudent choice be for him to continue working until all this uncertainty worked itself out of life and the markets?

To help think through this choice, I led them through the results of their plan again. With the stress-test results in front of them, I asked them to consider the following questions:

Do we think that the markets today are worse than the very worst of what has happened in recorded market history?

Understanding that we can’t actually know the significance of this decision today, what will you regret most looking back: deciding to retire now, and realizing later it was the wrong financial decision? Or deciding to delay retirement and realizing later you didn’t have to?

What guarantee would you prefer: always maintaining your core and dream spending, increasing regularly as inflation plays its tricks, for the rest of your lives? Or spending as much as you can (within reason) while you’re young and active, knowing that you may need to cut back later in life?

Are you focusing on Ben’s retirement date as the one thing you can control amidst so much uncertainty… and potentially elevating the importance of this decision beyond the impact we can reasonably expect it to have in the future?

The purpose of retirement planning - beyond the math - is to minimize regret in the face of an uncertain future. Although I couldn’t make this decision for them - as much as they may have wanted me to - I asked Ben and Leslie to follow the same retirement income planning process I recommend to everyone, which can be summarized as:

• Make the best choices for the future with the best information available today;

• Regularly review potential future outcomes based on actual portfolio values and spending to give lots of lead time for necessary adjustments; and

• Let it go for the rest of the time.

This is the work I love to do, and as you can see, it goes far beyond the math. I’d be delighted to do the same for you.

I’m delighted to present you with another financial planning case study as part of this year’s theme. This one was drawn from a mash-up of typical clients and scrubbed of identifying detail, because privacy.

Remember, I’m writing these case studies to illustrate the value of financial planning centred around the unique life story and personal values each person brings to the process. I also want to demonstrate how the decisions one person makes in light of those values might be very different than the decision you would make in the same circumstances. 

What follows isn’t meant to be universally applicable advice. The solutions articulated below were designed for the client, and while you may see yourself in some of the details, these are the recommendations that created success for her. You should seek professional advice before applying these solutions to your own situation.

Zoe Retires Alone

After Zoe’s husband, Wash died, she was worried. Suddenly becoming a widow at age 55, receiving a big lump sum from insurance, and not knowing what to do next left her feeling insecure, overwhelmed, and embarrassed. 

Although Zoe was the one who paid the bills and managed the budget, she felt like she hadn’t paid enough attention to their money over the years. She had “only” paid off their mortgage and contributed regularly to savings invested at the bank. 

After losing her husband and moving, Zoe’s lifestyle hadn’t quite settled into a predictable pattern of expenses. Her income was coming from a patchwork of survivor benefits and she was topping up her pensions from the insurance money. This money was still sitting in a savings account at the bank because she didn’t know what to do with it. Her uncertainty and lack of knowledge about her investments led her to believe that she was just bad at money! 

There are two things you need to know about Zoe, though: 

First, she’s a master of living within her means. For the 25 years leading up to this period of disruption, she kept her expenses safely below her (sometimes quite low) income. She had the bare minimum amount she could live on down cold. 

Second, she is an enthusiastic student. Although she had a dim (and incorrect) view of her own money management skills, she came to me keen to learn. She had already spent some time investigating how well her bank-managed mutual funds had performed over the years and how much she was paying in investment fees.

Zoe came to me with two questions, one very specific and one very broad: 

1. How much can I spend every month? 

2. My bank is offering me a discount to invest the insurance money with them. Is that the right choice for me?

I was keen to help Zoe realize just how well she had actually managed for all those years, and to build a simple plan that Zoe could follow with confidence. 

Testing her portfolio

The first thing I did once I received Zoe’s information was to figure out two things: 

1. If she was receiving value for the high investment management fees she was paying, and

2. If the amount she needed to withdraw from savings was likely to work, given the amount she was starting with and her asset allocation.

I found that Zoe was paying more than 2.5% for her mutual funds, and receiving no guidance beyond fund-picking in return. The fact that Zoe came to me to ask about investments was a pretty good indicator that the advice she was supposed to be getting in return for her fees was insufficient. 

The next step was to prepare a shortlist of investment managers that charge reasonable fees (including discounted fees for higher account balances, similar to what Zoe’s bank was offering) and consistently deliver valuable advice. I helped Zoe find a match for the kind of advice-relationship she wanted at a cost that made sense.

The difference between what Zoe would have paid at her bank and what she is paying to her new investment manager is $9,500 per year!

Next, I examined the amount of money Zoe had between her investments and the insurance proceeds. I tested how much she could withdraw from her portfolio under a variety of scenarios that included:

• Contributing more or less of the insurance proceeds to her investments and leaving the rest in cash

• Reducing the cost of her investment management in the future

• Changing the balance of stocks to bonds 

• Living much longer than the average life expectancy for women her age

• Facing spending shocks, like long term care

I found that Zoe had a good chance of making it through retirement without spending her whole portfolio if she simply stuck with her bank and added her insurance money to her current investments. However, this would only work if she didn’t live much longer than age 94 and didn’t have any increased healthcare or nursing costs as she aged. 

I also found that Zoe had a great chance of living comfortably through her whole retirement when her annual investment management costs were reduced by 1% and she withdrew 10% less from her portfolio each year.

Qualifying for Allowance for the Survivor

Knowing that Zoe is a widow with relatively low income, I looked to the Allowance for the Survivor program. I checked to see if there was any way to boost Zoe’s government benefits during the years between age 60 and 64, and reduce the amount she had to withdraw from her own savings over the same period. 

Zoe’s qualifying income was projected to be slightly too high to qualify for the Allowance, but fortunately she also had some unused RRSP room. Making contributions to her RRSP at age 59, 60, and 61 will reduce her qualifying income for those years and result in just over $35,000 in tax-free income she would have otherwise had to withdraw from her savings. 

Deferring Canada Pension Plan and Old Age Security

With a $35,000 boost from government benefits, Zoe had that much less to withdraw from her portfolio. The next thing I looked at was when Zoe should apply for her own Canada Pension Plan (CPP) and Old Age Security (OAS) benefits to see if that decision could reduce her portfolio withdrawals even more. 

Zoe’s income from her survivor benefits was too high for her to qualify for the Guaranteed Income Supplement, and she only had enough RRSP room to qualify for the Allowance. This means that the common strategy of applying for CPP and OAS as early as possible to keep taxable income down and increase income-tested benefits wasn’t going to produce much of a result. 

Deferring benefits as late as they could go, however, did produce a result! Zoe would:

• Wait until age 70 to start collecting CPP and OAS benefits

• Withdraw from her RRSP while she waited 

Resulting in:

• A 45% increase in OAS benefits

• A 36% increase in CPP benefits from age 70 on

This scenario would ultimately reduce the total amount she would have to withdraw from her portfolio over her retirement. 

And - bonus! - these higher benefits at age 70 were actually more than the amount she estimated to be her minimum comfortable standard of living. She could leave the rest of her portfolio alone after age 70, and let it act as a reserve that she will be able to draw against to protect her from spending shocks. 

I tested this scenario in more detail, and found that with lower investment fees and increased government benefits (resulting in the same amount of spending but lower portfolio withdrawals), Zoe’s plan was likely to work. I drafted an annual review strategy to check in with Zoe’s income, spending, and portfolio each year. 

Building Confidence

Zoe’s reaction? She’s delighted with a concrete monthly income that’s substantially more than she thought she’d have. She’s happy to have found an investment manager that communicates regularly and provides the simplest, clearest statements and client education we’ve ever seen... All for less than half of the cost she used to pay each year. And she’s grateful that I planned from the start to review her progress regularly.

She’s not quite as confident as I think she’ll become, though. From my work with similar clients in the past, I think it will still take a few years yet before Zoe truly understands that she didn’t mess up for all those years and is really, actually going to be okay in the future. 

It’s unfortunately common that single women in their 50s come to me doubting their own competence, even in the face of evidence that they’ve done extraordinarily well for themselves despite often very tough circumstances. 

Building these women up is one of my favourite things to do as a planner, and I’d love the opportunity to do the same for you!

Retirement income planning is a H-U-G-E topic, which is why I’m breaking it down in my Design Thinking Meets Financial Planning series over three posts. 

First, I want you to actively design answers to the question, who are you, really? What do you need to be happy and fulfilled in the next stage of life? Today’s post will help you use design thinking to plan your income in retirement well ahead of time, and in a future post we’ll design our way through what retirement income planning should look like--for you--once you’ve clocked out for the last time and the paycheque has stopped.

For those of you who are just joining me, remember that Design Thinking is a tool I’ve been using all year to turn hard, general topics like cash flow, taxes, investing, and emergency preparedness into you-focused primers on creating solutions for your unique set of values, constraints, and goals.

Empathize

Set aside your own assumptions about the world and gain real insight into alternate perspectives.

Normally at this stage I’d send you out for fieldwork, that part of the design process that includes gathering ideas and information that you might not have thought about before. 

In this case, that step comes later. The field of retirement income planning--or, rather writing about retirement income planning--tends to jump right into solutions, which isn’t ideal. The number of clients who come to me confused after doing all the background reading and coming out the other end asking “yeah, but what about ME?” tells the tale. Forget about the 4% rule, the bucket strategy, and the pension gap. Those are retirement income bricks, and we haven’t even drawn the blueprint yet! 

Your first job is to figure out who you want to be once your career no longer defines you (even if it didn’t), and if you haven’t done that work yet, bookmark this and come back after you have. There’s no sense in designing the money part of your retirement if you haven’t figured out the living part. 

The next step is still to gather information...but all of it is about you. If you like, you can think of step one (empathize) as laying the papers out in front of you, and step two (define) as actually reading and sorting them. 

• How does money flow into and out of your hands? How involved are you in that flow of cash? Is there a structure at work that you can use to tell you how much your life costs? Do you owe money to anyone?

• When’s a good time to retire? Do you have projects you want to complete first? An event you want to be fully retired for? A big expense you want to pay for first? 

• What do you know about your pension, if you have one? Are you stuck with just the information on the statement, or has your employer made tools to help understand them available?

• Do you know how to find out how much you’ve contributed to the Canada Pension Plan over the years and what you’ll receive in return? Do you have years of contributions to another country’s plan that could count towards your benefit here? Do you understand how your retirement date and the date your benefits start impact your payment?

• Do you know how benefits like Old Age Security and the Guaranteed Income Supplement are affected by your net income, or what goes into the calculation of your net income? Have you been resident in Canada long enough to qualify for a full OAS benefit?

• What are your savings doing, if you have them? Where are they, and how are they invested? Do you have a set of rules for how decisions about your investments are made? Who makes the rules, and who makes the decisions?

• What are you worried about? Do you have family experience with retirement homes and/or nursing homes? Do you have strong feelings about your own cognitive ability and care as you age? Have you authorized anyone to make decisions for you if you can’t anymore? How much of your wishes are written down?

• Are you retiring with someone? Are you working from the same set of resources, or will you each fund your lives separately? Have you compared your hopes and dreams to theirs? 

• What do you want to leave behind after you’re gone? Do you have a Will and/or any written instructions?

You might find that the result of all this empathizing is that you end up more confused than you started, and you may even be feeling guilty about that confusion. 

I hear some variation of “I can’t believe I don’t know this stuff” all the time, and it’s OKAY. You’re likely an expert on all kinds of things, and if sorting out what CPP means for you is overwhelming, well...I have a plan for that! Talk to your friendly neighbourhood financial planner about the overwhelm. 

Define

Use the information you gathered in step one to define the core problems you’ve identified.

I like to think of this step in the process as the ingredients list for a delicious retirement, and after all this squishy, but who are you really? work, it’s finally time for numbers! Fellow spreadsheet nerds, rejoice! (Editor’s note: Ignore her. There’s no need for spreadsheets unless you really, really like them.)

What we’re doing here is drawing the outlines that you’ll colour inside in later steps, using the questions and information from step one to piece a picture of your retirement income together. 

• Cash Flow: How much does it cost to live the life you want to live, after tax? If you have debt, when will it be paid off at your current rate?

• Timing: How much time do you have to prepare? If you live as long as you’re expected to, how long will your retirement be? 

• Income: If you have a pension, how much will you receive and when from the various components (bridge benefit, lifetime benefit, supplementary benefit)? How will a survivor benefit for your spouse (if you have one) change the amount you receive while you’re alive? How much will you receive from CPP if you apply at age 60? Age 70?

• Benefits: Will your income be low enough to qualify for income-tested benefits in some years? Will your income be high enough that your OAS will be reduced?

• Savings: How much are you adding to your savings regularly, and to which accounts? How will your withdrawals from the various accounts you own be taxed? How much would you have to withdraw from savings to top up your pension/CPP/OAS/other income, pay tax, and cover your lifestyle? What’s the best growth you can hope for between now and retirement? What’s the worst? 

• Worries: What is non-negotiable for you in retirement? What steps would you have to take now to make sure that happens? What are the costs associated with staying in your home, accessing in-home care, moving to a retirement home, and/or securing privacy and dignity in a nursing or long-term care facility? What are your representatives or family members actually authorized to do for you? What have you written down for them, and what's in your head?

• Partner: Will your partner need all or part of your income to live comfortably in their own retirement? Do you need all or part of theirs? What will happen to your income when one of you dies? What do you want to happen?

• Estate: What does your Will actually say about how your assets will be handled when you die? If you don’t have a Will, what happens? 

I’ve learned from many years of experience that it’s helpful to record the answers to these questions instead of keeping them in your head. Even we professional financial planners need to record not only what we know, but how we know it; without a set of facts to refer back to, it’s uncomfortably easy to make big mistakes when the time comes to try a bunch of different solutions.

Ideate

Brainstorm solutions, without editing or limiting yourself.

By this step in the design-thinking process, you’re ready to fly a bit. Start with what makes the most sense to you: maybe it’s starting CPP as soon as you retire, waiting to withdraw from your RRSP until you’re required to, and buying long-term care insurance. Maybe it’s buying an annuity as soon as you retire and never thinking about your portfolio again. 

Write down all the ways you’ve thought about as you gathered information. Draw out the different streams of income, if you have an artistic bent, or write yourself in as a character in a series of retirement income narratives if creative writing speaks to you more than spreadsheets do. 

The more ideas you record, the more you’ll realize that there’s an almost infinite set of permutations. Take the time to capture as many as you can think of.

Prototype

Investigate solutions.

If this process is starting to sound like a long one...you’re getting the picture. It IS! Partly, it’s because there are so many ways to fund retirement and so many choices to make. Mostly it’s because I want you to understand that there’s no single right way to do this...there’s only the right way for you, and finding it takes time and a certain amount of reflective intelligence. 

At this prototyping stage, you’ll be narrowing down the results of your ideation spree by examining what’s actually possible, so knowing what the rules are is important. For example, you might have brainstormed an idea to withdraw everything from your Locked-In Retirement Account before starting CPP...but that would exceed the maximum withdrawal limit for those kinds of accounts. Cross that one off the list. 

Or you might have written out a plan where you retire at age 55, wait to withdraw from your RRSP until after age 71 and deferred CPP and OAS to age 70, but have no other savings to fill in the gap and not enough time to build them. Strike that one too. 

Test

Practice those solutions.

This is where a bit of spreadsheet skills or experienced access to financial planning software can be really useful. Why? Because you can’t test your retirement income plan in real life! Oh, you can test parts of it--by artificially living on only the amount you think you’ll have to spend, or taking a self-funded sabbatical--but as useful as those exercises are they’re just not the same as the real thing, and most of us only get one of those. 

So the test we’re looking for here is more like a stress test than a dress rehearsal. We’re looking for all the different ways retirement can go horribly wrong and how combining the various ingredients of your plan in new ways can give you a better chance of avoiding catastrophe. 

Will you be able to protect yourself against everything? Nope. The goal here is to find a balance between the uncertainty you can live with and the uncertainty you can’t. This is where the retirement income researchers like Dirk Cotton and Mike Kitces in the US and Fred Vettese, Moshe Milevsky, and Alexandra MacQueen here at home are worth consulting, since they’ve spent entire careers thinking up new and terrible ways that your retirement security might possibly be threatened, and new (or old) ways to put the retirement income ingredients together to duck those threats.

Because you started with specifics of you, rather than the generalities of the research, this testing, re-calibrating, and testing again shouldn’t leave you overwhelmed. You-focused planning always results in clarity...if it doesn’t, ask for help! That’s what I’m here for.