Whether employees have millions in the bank or just a modest pension, planning makes all the difference when it comes to achieving a successful retirement, according to Warren Mackenzie, president of Second Opinion Investor Services Inc.
Speaking about retirement readiness at the Human Resources Professionals Association of Ontario’s (HRPAO) annual trade show and conference in Toronto, he said: “It doesn’t matter how much money you have. It’s about whether or not you have a plan.”
In order to aid employees in effectively preparing for retirement, Mackenzie stressed that one of the most fundamental things human resources professionals can do is to educate employees about financial planning. Once they have a better understanding of how to save for life after they leave the workforce, employees can begin taking necessary steps towards attaining their retirement goals.
One of these steps, according to Mackenzie, is to set realistic and achievable goals. Whether their retirement objectives include traveling, moving to a warmer climate or spending more time with family, employees should understand their options and the steps that need to be taken to achieve them. He pointed out that “with hundreds of baby boomers retiring over the next few years, there will be even more options for housing, travel and more.”
Another important step employees should take is to estimate the cost of their intended lifestyle after retirement. According to Mackenzie, because “most financial plans overstate the amount you’ll spend,” the majority of people don’t realize that spending decreases with age. Retirees may spend more in the first year or two of retirement, but after the “honeymoon period” is over, spending tends to drop off as people socialize less, eat less and travel less with age.
Mackenzie added that an educated employee will have a better understanding of future risks and uncertainties that can affect a retirement plan. Inflation, longer life, health issues and changes to public policy are just some of the factors that can affect even the best laid financial plan. To be safe, he advises that employees should always have a plan B.
However, said Mackenzie, the most important element in planning for retirement has nothing to do with money. The first priority in planning for retirement, even before financial preparation, should be good health. “Poor health is one of the main reasons for involuntary retirement,” he said. Employees should assume that they will experience some kind of health ailment with age and understand the impact health problems will have on living costs and the overall quality of life.
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