Outline for investors in early retirement

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

You have reached retirement age. Hopefully you have prepared yourself already and taken a serious look at retirement income planning and replacing most of your lost income from employment. The first part of retirement is the active one, during which you can hopefully enjoy the fruits of your labor.

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
Investors in early retirement are starting the decumulation phase of the financial life cycle.



Lifestyle and housing-related choices

 * Read about non-financial aspects of retirement to answer questions such as "where will you live" and "what will you do"
 * Specifically, review your housing situation: have your needs changed?
 * Think about the pros and cons of owning versus renting a dwelling

Retirement income planning

 * Review Canada's retirement income system
 * Are you using the conventional retirement planning approach or the safety-first approach?
 * Review your overall decumulation strategy:
 * Decide when to start claiming Canada Pension Plan, Québec Pension Plan, Old Age Security and the Guaranteed Income Supplement (if eligible)
 * Draw on employer pension plans or group retirement plans
 * Should you unlock locked-in accounts?
 * Among your various investment accounts (non-registered, Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA)), which one will you draw on first, and why?
 * Which withdrawal method will you use for your portfolio: constant amount, variable percentage, conversion to annuities, a combination... Is your strategy sustainable?
 * If this seems too complicated, now may be a good time to consult a financial planner
 * Convert your RRSP into a Registered Retirement Income Fund (RRIF) no later than the year you turn 71

Investing

 * Refresh your knowledge on portfolio design and construction and see if you should revise your portfolio, now that you are retired
 * In particular, review your asset allocation, taking into account risk and return; is it time to get more conservative?
 * Do you now need an allocation to cash, in addition to fixed income and equities?
 * Look at simple index portfolios or asset allocation ETFs if you want to simplify your affairs
 * Rebalance your portfolio regularly
 * Update your investment policy statement
 * If you don't want to do DIY investing, consult a financial advisor

Tax planning

 * Look at Income splitting opportunities
 * Think about the tax efficiency of your investments
 * Utilize unused and new TFSA contribution room to shelter investments from tax

Estate planning

 * Update your will
 * Update your power of attorney document(s)
 * Once your estate plan is ready, communicate it to your loved ones

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
 * Are you a candidate for long term care insurance?
 * If your employer was supplying extended health insurance before retirement, which part(s) do you need to replace?

Banking, budgeting and emergency fund

 * Investigate low-cost banking packages for seniors, if applicable
 * You may still need a budget to manage your spending, especially since your spending habits will change
 * Check that your emergency fund is sufficiently large

Credit and managing debt

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

What's next
The next phase in the financial life cycle is late retirement.