A ‘Whole Life’ Financial Plan

You may wonder if you can retire confidently without compromising your current lifestyle. Entrepreneurs and high-income professionals often find this question challenging to answer. Running a business or managing sales and profit targets within an organization demands more than full-time attention, leaving personal finances as a lower priority.

your Financial vision

Collaborative Financial Planning connects your personal finances to the rest of your life. The resulting vision translates into a 25-40 year financial plan with real-dollar targets. The plan naturally adjusts over time to accommodate changes, but getting started is what truly matters.

Retirment Plans

You should have something to retire to, rather than from. Your retirement might focus more on travel, leisure sports, or perhaps on mentoring and giving back. We paint this picture clearly and link your financial plan to your future vision.

Determining “Enough”?

Planners typically assume you'll spend 80% of your annual pre-retirement expenses in retirement. This assumption may not accurately reflect your retirement goals. You should consider whether 80% of your historical spending comfortably covers your retirement aspirations once you have greater clarity about what those truly are.

Imagine you're mid-career and plan to work until your early sixties. If your total household spending is $250k per year after tax, $200k per year in retirement might seem reasonable based on the 80% rule. Your children will likely be independent by then. You might downsize your home or relocate to another country, or move closer to your grandkids. These factors could change your income need, helping to refine your plan. This analysis will reveal whether you're on track, need to earn and save more, or should spend less. Alternatively, you might consider taking carefully-increasing your investment risk to achieve a higher expected income level, assuming you remain within your investment-risk comfort zone.

The ImpacT of Inflation

Inflation plays a crucial role in retirement planning. At a 3% annual rate, a $200k income target in today's dollars translates to a required income of $418k in 25 years when you expect to retire. Using the conservative 4% rule, you'd multiply $418k by 25, resulting in a retirement savings target of $10.5M. The plan considers the offset from CPP and any company pension through your spouse. If total joint pension income covers $90k of your required $418k, your retirement savings target drops to $8.2M. The plan considers the savings rate and investment returns required to achieve your income goal.

How Much do I need to Save?

While the best time to start saving is always 'yesterday', you need to determine how much you actually need to begin saving now. Your plan should address how your savings relate to the necessary growth rate of your investment portfolio, given reasonable expectations for investment returns over the next several decades.

Corporate Assets

If you own a company, you should consider whether to retain profits and invest them inside the corporation. You need to strategize to use your personal TFSA and RRSP accounts for the best outcome. The decision to pay yourself a greater salary from your company (ensuring maximum inflation-protected CPP pension in retirement) or to defer tax inside the corporation and pay yourself dividends depends on the expected rate of investment returns and the mixture between annually-taxed dividend income and deferred capital gains. The plan optimizes for these tax-driven factors.

Invest

While many perceive choosing investments as the most challenging part, it's typically not. Once you've established the income required to realize your retirement vision, the most critical next step involves efficient investment. You should minimize fees, stick to your plan, cultivate patience, and ensure that you're holding the right funds in the optimal target accounts to minimize tax.

The Plan becomes a Progress Dashboard

You should review your plan at least once a year, with as-needed ongoing coaching around significant life events such as a newborn, house move, or career change. Prioritizing saving with reverse budgeting (save first and spend the rest) for the remainder of your primary income-earning years is crucial. If you find yourself meaningfully ahead of plan, you may be able to slow down and enjoy greater spending now. This underscores the importance of annual review and plan updates.

Taking the First Step

Starting represents the most important step in your financial planning journey. You'll experience relief once you have an easy-to-understand plan in your hands and feel confidently on-track to realize your long-term vision.