Clark Wealth Management Group - ScotiaMcLeod Fredericton

For Alfred, using rules of thumb was a way of life. He even guided his and wife Elizabeth’s savings plans using the rule of thumb that says that people need seventy percent of their working income to maintain their lifestyle in retirement.

Their married life together was traditional in many ways. Financially speaking he was the main breadwinner and he looked after all major financial decisions. He saw it as his role to provide for his family and enjoyed the control that came with being in charge of the money. He was good at it too. For Elizabeth things had never been any different. She enjoyed her role and appreciated not having to be concerned about finances.

Before they knew it, Alfred & Elizabeth were near retirement. It was around that time that they bumped into friends of theirs who had recently been through a pre-retirement planning process with their advisor. Their friends told them that they had spent more time thinking and talking about their plans for retirement than they ever had before. They had looked at the financial side of their retirement based on their very own retirement and estate goals, their planned retirement activities and even some “what if” scenarios. They couldn’t eliminate bad things from happening but they could get a sense of the impact of a couple, such as an early death or illness. They found that the process had been very enlightening and was one they suggested Alfred & Elizabeth would enjoy and benefit from.

After making the arrangements to meet their friend’s advisor and going through the exploratory part of the exercise, it turned out that Alfred & Elizabeth stumbled upon some really important issues. Today we’ll look at just three of them. 

First, they learned that Alfred’s pension plan benefits would be cut in half when he died. Given that he was older than her and the fact that men typically predecease their wives, they took a closer look at this. After doing the math, they found that she would have been left with too little income if he died before she did. Using low cost, permanent insurance they were able to buy a policy that would fill that gap and eliminate the problem.

The second significant item that came to light was the fact that Elizabeth was not at all comfortable managing the household finances. The advisor told them that this was critically important because almost all women will eventually be left in charge of running their household finances. While it was tough for Alfred to relinquish some control and take the time to show her how he handled things, he understood it was important.

The third important thing they learned through this process was that Elizabeth was more comfortable knowing the details when it came to how long their money would last in retirement. She wanted to know for sure that they could take the winter trips to Florida they had planned while still making sure there was enough money left for their later years. By using detailed forecasting she found out that travelling south for a few months each year was perfectly fine for the first five years of retirement, perhaps longer.

While real world planning takes longer and is more complicated than relying on rules of thumb, it is superior in every way. If you haven’t done this yet, find an advisor who can help guide you through the process. The peace of mind you’ll gain is worth an absolute fortune.

Keir Clark, is a senior wealth advisor, with Clark Wealth Management Group and branch manager at ScotiaMcLeod in Fredericton, NB. He can be reached online at www.keirclark.ca or by telephone at 506-450-6465.

Information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, expressed or implied, is made as to the accuracy or completeness.