Outline for pre-retirement investors

The following outline is provided as an overview of and topical guide for pre-retirement investors.

Pre-retirement investors, for the purpose of this article, are perhaps about 50 to 70 years old. They are envisioning retirement from the workforce within the next few years, or are quickly approaching it. This is also known as the late accumulation stage of the financial life cycle, where your net worth is supposed to reach a maximum. Pre-retirement investors are focused on finishing the buildup of financial assets in pension plans and portfolios, having already depleted most of their human capital. They also concentrate on clearing any remaining liabilities (including mortgages) to enter retirement debt-free. They may also be supporting post-secondary education for their children and/or caring for aging parents. Finally, they are making more specific financial and non-financial plans for their retirement.

This article is intended to help a reader learn about a subject quickly, by showing what topics it includes, and how those topics are related to each other.

The financial life cyle
Pre-retirement investors are in the third stage of the financial life cycle, within the last part of the accumulation phase.



Retirement planning

 * Review Canada's retirement income system
 * Consider your future sources of retirement income, such as Government retirement benefits, your employer's pension plan or group retirement plan, as well as your personal portfolio in the form of Registered Retirement Savings Plans, Tax-Free Savings Accounts, non-registered accounts and the like
 * Engage in financial planning calculations for retirement, either using the conventional approach or the safety-first approach
 * If this seems too complicated, now may be a good time to consult a financial planner
 * There are also non-financial aspects to start thinking about, like "where will you live" and "what will you do" during retirement

Work-related financial choices

 * Continue to contribute to employer pension plans and group retirement plans and check the effect of different retirement ages
 * Stay up to date on your employee benefits and start investigating which benefits will continue during retirement, if any

Investing: the basics

 * If also paying back loans, consider paying down loans versus investing
 * If not already done, create a financial plan and get started on investing
 * If you are able to place your investments in several different kinds of accounts, see prioritizing investments
 * Think about your savings rate: are you saving enough? This is your last chance to top up your nest egg...

DIY investing

 * Refresh your knowledge on portfolio design and construction and see if you should revise your portfolio
 * Review your asset allocation, taking into account risk and return; is it time to get more conservative?
 * Look at simple index portfolios or asset allocation ETFs for the simplest do-it-yourself (DIY) options
 * Rebalance your portfolio regularly
 * Update your investment policy statement
 * If you have determined that you won't succeed at DIY investing, consult a financial advisor

Credit and managing debt

 * Continue to make smart credit choices
 * Check your credit report regularly, if only to protect yourself from fraud
 * Eliminate any remaining debt including mortgages, lines of credit and car loans
 * Manage your credit card(s)

Estate planning

 * Update your will, and designate guardians for any minor children
 * Draft or update your power of attorney document

Insurance

 * Review the types and general principles of insurance
 * Home owners need home insurance and possibly title insurance
 * Renters need tenant insurance
 * Evaluate if your life insurance needs have changed and if your disability insurance coverage is adequate

Banking, budgeting and emergency fund

 * Make sure you are not spending too much on banking fees
 * You may still need a budget to manage your spending
 * Check that your emergency fund is sufficiently large, perhaps one year of expenses if not holding a permanent job

Housing-related choices

 * Review your housing situation: have your needs changed?
 * Review the pros and cons of owning versus renting a dwelling

What's next?
The next stage is retirement!