Article content

Q. Will you review the financial plan prepared for me by a certified financial planner? I am 65, single and have a good income, but I’m scared I don’t have enough money to retire even though the plan says I do. —Kate

Article content

FP Answers: Hi Kate. Reading your question started me wondering about two things. One, will I see the cause of your worry in your financial plan? And two, how does someone know if their financial plan is plausible?

Article content

Article content

Article content

In lieu of publishing your financial plan, I will provide some background details and comment on specific areas of your plan.

Article content

Article content

You earn about $200,000 annually and are planning to stop working at the end of this year. Investments are made up of $700,000 in registered retirement savings plans (RRSPs), $125,000 in a tax-free savings account (TFSA), $300,000 in a non-registered investment account, and two rental properties (you are living in one unit) worth $2.3 million with mortgages of $1.2 million. You also have a private corporation with investments worth $1.5 million and a $1 million rental property with a $675,000 mortgage. You are a self-confessed Chicken Little and feel you need about $50,000 annually after tax and mortgage payments.

Article content

There is lots of money in your net worth and income so what is causing your worry? My guess is you are not connected to the plan, which is leading to a lack of confidence. That leads to the question, “How can a financial plan inspire confidence?”

Article content

After examining your plan, I see four things you and your planner can do that should inspire the confidence you need to retire now and get on with enjoying your retirement. Those four things are: work collaboratively; don’t skimp on the details; use realistic assumptions and repeat these steps every year at a minimum.

Article content

Article content

Have you heard the expression, “Plans are useless, but planning is priceless?” I think this perfectly describes your situation. Your planner gathered information, prepared the plan and presented it to you. I found the plan you showed me hard to understand, and I am a financial planner!

Article content

Article content

You need to be in the room, providing input and learning. Your planner inputs financial advice and you input variations of your vision of life. Both sets of inputs are entered into financial planning software so you can run different what-if simulations. Running different simulations provides immediate feedback to different ideas and choices, leading to accelerated learning. Learning leads to believing and building confidence.

Article content

Next, don’t skimp on the details. Take the time to itemize your cashflow: money coming in and money going out. These are your numbers, which you understand, and they will help connect you to the planning process. Plus, your numbers help you and your planner understand your current lifestyle and help you to think about the things you may like to do in the future.