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​​Is it time to rethink your retirement plan?

Here are a few life-changing scenarios that call for reassessing your retirement plan.

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From social engagements to vacations, the COVID-19 pandemic has changed many of our plans over the past two years. Retirement is no exception, a new survey shows.

Forty-three per cent of working Canadians say COVID-19 has changed the way they expect to live after retirement, and 32 per cent say the pandemic has shifted their anticipated retirement age, the 2021 Fidelity Retirement Report revealed.

And it’s no wonder. A significant number of Canadians have seen changes to their earnings and spending habits over the past two years, the report also found. This, in turn, affects one’s financial path to retirement.

“A retirement plan is about understanding where you are today financially, where you want to be in the future, and how you’ll get there,” says Michelle Munro, director of tax and retirement research at Fidelity Investments Canada. It’s an important tool for achieving retirement goals and for reducing some of the stress of life changes, whether routine or influenced by COVID-19.

“Our data show that people who have a written retirement plan feel better financially prepared,” says Munro. “We’re also seeing that they feel better emotionally, socially and even physically.”

While that’s good news for those with a plan, Fidelity’s research shows 75 per cent of Canadians don’t have (or don’t know if they have) a written retirement plan. The most important first step is simply getting started, Munro says. “Start with a financial snapshot. What are your assets? What are your liabilities? What’s your goal for this time next year?”

Once you have a plan, you can adjust it when life throws major changes your way.

Career change/job loss

What to consider: Losing a job or changing careers can have both short- and long-term financial impacts. And a sudden change in earnings can be even more stressful when you’re already dealing with the emotional effects of job loss.

What to do next: Severance, making do without a salary temporarily, the earning potential of your next job – job changes affect both your current financial situation and your path to retirement.

“The priority in this situation would be your immediate needs,” Munro says. It’s also important not to let a change in employment derail your long-term goals. “A financial advisor can help create a plan that addresses both. During times of stress, people aren’t always capable of making the best decisions. A professional can take the emotion out of it and help you figure out the best plan with informed advice.”

Starting a family

What to consider: From diapers to education, raising kids costs money. And there are other financial implications too: housing and the impact on your career and earnings.

What to do next: “You need to adjust your immediate plan,” says Munro. “If you’re a two-income family, will you need to go down to one income for a time? If so, how long will that last, and how will you adjust? If you’re going back to work, how will you cover the cost of daycare? You also don’t want to lose track of your longer-term goals toward retirement.”

The good news? “With a new baby, you have nine months to plan. So you have more time to incorporate changes into your retirement goals,” says Munro.

Increased savings

What to consider: Spending less on things like travel and dining out has been a pandemic silver lining for some Canadians. The question is, what to do with those funds for greatest benefit in retirement.

What to do next: Like other financial scenarios, the best advice for someone who saved a lot of money during COVID-19 will depend on their individual circumstances. “Are we talking about someone who is younger or who is closer to retirement age?” Munro says.

If you’re nearing retirement, extra savings are a good prompt to take a closer look at your total savings to ensure your nest egg can meet your needs. If retirement is years away, consider all your financial goals, such as home ownership. “Look at your finances holistically,” Munro says. “Our research shows that people who have a home feel more positive about retirement. Those who are mortgage-free feel even more positive.”

Whatever the circumstances, Munro says the bottom line is this: Retirement plans are fluid – and they’re meant to adapt as your life changes. “An advisor can help you build something that follows you through your whole life.”

To read the Fidelity Retirement Report, click here.

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