Top 9 Questions Your Financial Plan Must Answer (2024)

Do you ever lie awake in bed worried about what your financial future looks like? Our concerns usually revolve around 2 questions: “Will I be okay?” and “Will my family be okay?”

It’s tough not knowing the answers to these questions.

A great financial plan is the answer, but it can really be overwhelming. In fact, it is a reason why most Canadians don’t have a financial plan. Most of us were never taught about financial planning. We are left to dig around on the internet finding information that doesn’t really answer our questions.

If we don’t get a clear picture of what our financial future looks like, we will continue to stay stuck.

By having clarity about what our future looks like, two important things happen:

• Confidence – we will have the resources to be okay.
• Answers and direction – if we need to do something to secure our future is it better to do it now, or before it is too late?

Click on each question below to learn more

1. Will I have enough money?
2. How long will my money last?
3. When can I retire?
4. When should I take my government benefits?
5. How much can I spend and not go broke?
6. In what order should I spend my assets?
7. Am I saving enough?
8. Will my family be okay if I get sick, hurt, or die?
9. How much will I pass on to my family?

Unfortunately, with so many puzzle pieces fitting into our financial plan, we are often left uncertain and overwhelmed. This stops us from pursuing our goals with confidence.

Imagine the peace of mind that comes with knowing the answers to the top financial questions that may be bothering you.

When we think of our long-term goals and financial futures, it is hard to not wonder “Will I have enough money?”

The answer is simple, but complicated: “it depends.” The reason we are unclear and distracted from answering this question is because there are so many moving parts to consider. To make matters worse, our situations are unique. A cookie cutter plan will not work for everyone.

To help with this overwhelm, it is important to have a framework:

1. Focus – You need a goal to work toward.
2. Clarity – You must clarify where you are now and what your goal looks like in the future.
3. Progress – We can now find solutions to help us achieve the goal.

This is a very basic approach to answering a complex question. We would recommend working with a professional to help you move toward the goals that matter to you. If you would like to have a conversation, please click here.

For a quick calculation click the button below to use our “Savings to reach a goal” calculator.

We all want our money to last. However, we often don’t know how long it will last, or what we can control to make it last longer.

Five factors determine how long our money will last:

1. When you will start drawing on your money – if you don’t need to start drawing from your savings for a while, there is more time for it to grow.
2. Inflation – inflation reduces the purchasing power of your savings. If you don’t keep up with inflation, your money will end up buying less in the future than it does now.
3. Rate of return on your investments – the greater the growth, the longer your investments will last.
4. How much you will be withdrawing – the more money you take out, the shorter the lifespan of your savings.
5. Volatility – If you need to draw money from your investments when they are down, their long-term growth potential will be heavily impacted. Through proper planning and asset allocation, you can set aside savings in safer vehicles to plan for these times.

We have a great calculator that speaks directly to this challenge. Please try out our “Will the Money Last” calculator by clicking below.

Wouldn’t it be great to know for sure if you are ready to retire?

This is a complex decision with both benefits and downsides.

We always think about the bright side of retiring earlier and there are clearly many benefits. For instance:

• You get to enjoy life while you are younger and healthier. This is especially attractive if you don’t particularly enjoy your current occupation or business!
• The moment you retire you also leave behind job-related stress and perhaps some safety concerns.
• You get to spend more time with family and friends.
• You can pursue your passions and perhaps discover new interests.
• You may be able to explore new business opportunities or even part-time work.

That all sounds wonderful, but there may be a few downsides as well:

1. Many people have a great sense of purpose in their businesses or occupations. Without a clear retirement plan, you run the risk of losing your purpose.
2. You may have many more years to spend your money and less time and ability for saving and investing.
3. Your medical and dental benefits may end, leading to greater health spending as you age.

There are several key financial planning considerations to consider, no matter what stage you are at in planning for retirement:

• Your retirement package – You’re not alone if your complicate retirement benefits package is a mystery. Key items to consider are the financial terms, tax implications and alternative health coverage options available.
• CPP – As addressed below, you may need to evaluate whether taking Canada Pension Plan early is an option.
• Lifestyle – You will need to know how your expenses will change in retirement. Now is a time to try a “Retirement Rehearsal” with you cash flow and track your spending over 3 – 6 months so that you can make an informed evaluation.
• Debt Management – It is not uncommon for retirees to carry some debt into their retirement years. This can be dangerous. If you can see that you may need to tap into your home equity, it is important to establish a home equity line of credit (HELOC) during your working years while you can still qualify.
• Asset Allocation – You may need to moderate your portfolio with enough fixed income to draw on during extended stock market downturns. At the same time, you will probably need to maintain an equity position in order to grow your portfolio as a hedge against inflation.

This is a big decision, and it is important to not plan for it by yourself. You will need to involve your family and lean on your financial advisor.

Click below to download our Retirement Readiness infographic.

You have been working hard your entire life, with the goal of a happy retirement. A key part of your retirement income includes finally being able to receive income from the Canada Pension Plan (CPP).

In many cases the decision of when to take CPP is a complicating factor. If you start early, the amount you receive is reduced, while if you wait the amount increases.

This decision can be confusing, especially when you start to account for the uniqueness of your life.

So, when is the ideal time for you to start your CPP?

This decision depends on 2 important things:

1. How long do you expect to live? We can think of CPP partially as longevity insurance. If you expect to live a long life, you should try to maximize your CPP payments as much as possible.
2. Do you need the cash flow? If you foresee needing the extra cash flow from CPP, you might need to start earlier. Especially if this helps to alleviate financial stress.

To see how this works in your life, click below to use our “CPP Benefits – Early or Later” calculator.

Have you ever found that there is more month left at the end of your money? Maybe you feel that you make a good living, but you do not know where your money has gone.

These are usually symptoms of a much bigger problem – Not having a cash flow plan. Not understanding and planning your cash flow often leads to overspending, under saving, and a general sense of not making progress toward the goals that matter in your life. This is frustrating.

If you do not know where your money is going, it is so easy to spend it away.

The first step of taking control of your cash flow is to understand where everything is going.

The next step is to create a plan to prioritize your goals. This often looks like:

1. Limiting spending in certain areas
2. Increasing savings in other areas

Click the button below to use our “Cash Flow Calculator.”

Virtually every retirement income choice involves both a blessing, and a curse. The answers are not always clear but knowing both sides of a decision is important in your planning.

There are so many different “buckets” of money to be drawn from and it is confusing where to start. There are RRSPs and LIRAs that must be eventually converted to RRIFs and LIFs. We must also TFSAs and non-registered accounts

We know that income requirements in the retirement years are not always predictable. You may decide to spend more during the early stages of retirement due to catching up on deferred home renovations, the expense of more active travel and because of more active hobbies and pastimes. Alternately, your later years may end up being more expensive due to higher medical costs and the possible expenses of long-term care services. Your retirement plan must be flexible to account for often unpredictable lifestyle changes and choices.

You may need to consider some or all of the following factors:

• Tax Planning – We cover the basics of tax planning quite well in our article “The 6D Tax Planning Approach.” It is an important factor and could be a major defining factor in the relative success (or failure) of your retirement plan. It makes sense to have a plan to navigate through your changing tax brackets and avoid any tax surprises.
• RRSPs and LIRAs – the longer you wait to convert your RRSP or LIRA into a RRIF or LIF, the more money you should have to draw from, but the higher your tax bracket will also be in retirement. If your retirement years begin before age 71 and you have some low-income years, it may make sense to take some income early. This may especially be the case if you have been contributing into a spousal RRSP and your spouse has little or no income and perhaps falls below the basic exemption.
• TFSAs – can be a great source of tax-free retirement income. However, you may also compromise the incredible tax-free compound growth as the TFSA grows. We often recommend that TFSAs are your last source of retirement income, as they may ultimately be used to provide a generous tax-free payment to your estate when you die.
• Non-Registered Investments – We contribute into these investments with after-tax money. That does not mean we avoid tax though. We will pay income tax on interest, dividend, and rental income as well as capital gains tax when we sell any of these assets at a gain in value. There is preferable tax treatment on Canadian qualified dividends as well as on capital gains. In your overall asset allocation, it may be wise to weight your tax-efficient equity portfolios into your non-registered investments to take advantage of this preferred tax treatment. Careful with those dividends though – the gross up calculation can increase the income that exposes you to the Olda Age Security (OAS) clawback! You can see the difference in these tax treatments by using our “Taxes and Investment Income” calculator.
• Corporate assets – If you have an active interest in your own corporate business or even if you have a holding company, there are endless possibilities in your retirement planning and especially in your estate planning. There are ongoing costs and perhaps liability issues as well and you must take these into consideration when deciding how long to hold onto your corporate interests.
• Longevity and health – One of the biggest risks we have in our retirement planning is outliving our money. It is for this purpose that you may want to take extended longevity into account when making pension decisions. You may also want to consider making creative use of life annuities to assure that your base lifestyle costs are matched to multiple guaranteed income sources. Increasing healthcare costs associated with long-term care services may also become a factor in your later years and you will need income sources to pay for that.
• Estate Considerations – People often joke that they plan to bounce the last cheque they write on the day of their death. That’s not only improbable and largely impossible to time – it is also irresponsible and no way to leave a strong legacy. The goal of a tax-efficient retirement plan is to minimize the impact of high taxation on deferred income tax in the year that you die by spreading out this taxation throughout your retirement.

This can all be so overwhelming, and few people are equipped to navigate this alone without totally stressing themselves out. Along with the right team of advisors, your financial plan should help you navigate these challenges.

With so much uncertainty in our futures, it is difficult to have confidence in our long-term financial goals. We need to know that we are on track for our financial goals and futures.

We often ask the question “Am I saving enough?” Not having an answer to this question makes us feel uncertain about our futures and the ability to achieve our goals.

Knowing the answer to this question can give us confidence that we are on track for our goals or help us to adjust ahead of time. Not knowing the answer to this question may cause us to worry about our futures. Worse still, if we avoid answering this question it may ultimately be too late.

Our “Savings to Reach a Goal” calculator will help. Here’s how to use this calculator:

1. Describe the goal that you want to achieve and how much it will cost in today’s dollars.
2. Ask yourself “In how many years do I want to achieve this goal?”
3. Fill in the information about your current savings and any future savings you will be making.

Imagine what it looks like when you build the wealth you need to achieve your goals!

Click here to use our “Savings to Reach a Goal” calculator.

Let’s deal with the elephant in the room: Not enough life insurance, disability insurance and critical illness coverage.

Manulife Financial did a survey several years ago with 1,000 Canadian homeowners between the ages of 30 to 50 and household incomes of $50,000 – $150,000. Almost 6 in 10 people said they worried about providing for their family if they died. 7 in 10 were concerned about losing income for a long period because of illness or injury.

Ironically, less than 60% said they have an individual life insurance plan, only 21% have individual disability insurance, and only 13% said that they have individual critical illness protection.

92% of surveyed Canadians do not have a plan that includes all three risks – disability, critical illness and death.

There is a huge gap between people’s concerns and the real risk. For example, the risk of critical illness, disability or death before age 65 for a 30-year-old non-smoking male is 62.6%. For a woman, it’s 58.2%.

Most people understand the value of proper planning, of having a will and the right amount of insurance. However, the statistics show that we do not act on that knowledge.

All it takes is a proper action plan. We developed a simple tool to take the mystery out of estate and insurance planning. It’s called The Dream Protector Checklist and it’s designed to help you identify the gaps in your plan and understand what to do about them. You can click below to download it.

Click here to download our Dream Protector Checklist.

How much will I pass on to my family?
A 2018 Angus Reid Institute poll finds that half of Canadians (51%) say they have no last will and testament in place, while only one-third (35%) say they have one that is up to date. In other words, half of Canadians are set to have no say in what happens to their assets should they die, and nearly one-in-six have wills, but haven’t kept them up to date.

Although a will is only part of an estate plan, it is the glue that pulls most pieces together.

That is shocking! There are a few reasons why:

1. Some people, especially the younger folks, feel it’s too far away to worry about it.
2. People feel they have too few assets to worry about.
3. Some are worried about the expense of having a will done.
4. People don’t like to think about dying.
5. Worry over the time it will take.

Rather than think too much about why NOT to get a will done, how about finding the reasons you should get your will done or updated?

Please click below to download “10 Reasons for an Estate Plan.”