PTBOCanada Featured Post: Cash Flow in Retirement with Matthews + Associates

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Stop and ask yourself right now: “What day of the week do you generally spend the most money?”

If your answer is the same as most, it’s Saturday. In retirement and cash flow planning, it’s important to think of every day as Saturday and strategize accordingly. The knowledgable team at Matthews + Associates is there to help you with this step in your retirement process.

The two major parts of cash flow planning in retirement are: Establishing a baseline after careful evaluation of your monthly and annual cash flow and once this has been established, adding in your retirement goals (like travel or hobbies).

This will give you a strong financial goal allowing you to establish a solid cash flow plan.

Establish a Baseline

The first part of cash flow planning is to establish a baseline by breaking down your cash flow needs after tax.

The first (and easiest) step is to look at your bank and credit card statements for the last month and add up what you’ve spent. Then do the same for a full year. Keep in mind any monies you’ve moved between accounts to make sure you’re not double-counting expenses.

Figuring out what you spend for the year will give you an idea of how much it costs to maintain your lifestyle and how this will translate into retirement. For example, if you’re currently putting money into an RRSP, TFSA, or non-registered account for retirement, you’ll more than likely stop these contributions after retirement. Other expenses you probably won’t have to consider are pension contributions, group RSP contributions, health insurance deductions, and term life insurance.

Don’t Forget your Retirement Goals

The second part of cash flow planning is adding in your retirement goals, whether that be travel or a new hobby. If you’re thinking about traveling, it makes sense to speak with a travel agent to price out the potential costs of your upcoming adventures, including travel insurance. If it’s a hobby, price out the materials to create a full picture of the costs. This way you’ll have real numbers to work with.

Have I Planned a Successful Cash Flow?

Best practices dictate starting a cash flow planning process at least three years from retirement and then doing a test run one to two years out. This will let you know if your plan is going to work for you, or if you will need to adjust. Those adjustments might include figuring out how to spend a little bit less money to save more for your retirement.

An easy way to do a dry run in anticipation of your retirement is to have all your income come into one account. Then from this primary bank account, you will send yourself a pay cheque to a secondary bank account where all your regular expenses for retirement will come out. You will then be able to see if what you’re budgeting will cover your retirement costs.

In Retirement every day is Saturday

When planning cash flow for retirement, keep that weekend mindset firmly in view. As you move forward with your retirement planning don’t forget to dream big and that in retirement, with careful planning, it is possible that you can live every day like it’s Saturday.

Building to retirement is a project; and like any great project, it begins with a good plan. In our podcast “Cash Flow in Retirement”, available on Apple Podcasts, Spotify, Stitcher, Google Podcasts, or by RSS, we answer those burning questions about retirement. We help you learn how to optimize your investments, reduce your retirement risks, lower taxes and build true wealth, in an easy and accessible way.

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