The four steps to developing a retirement income plan

Now that you’ve determined what you want your retirement to look like, you need to ensure that your goals are realistic and achievable within the context of your finances.

Whatever goals you decide on, Fidelity recommends developing a written retirement income plan with the help of your financial advisor. A well-written plan should act as a bridge between your finances and your goals.

What follows are four simple steps to creating a retirement income plan. Your financial advisor can guide you through the process while discussing the types of investment strategies available to you in order to meet your goals.

Step 1: Estimate anticipated expenses in retirement.
The first step begins by dividing your anticipated or living expenses into those that are deemed essential (must-haves) and discretionary (nice-to-haves). This is often easier said than done and can take careful consideration. Remember that what is essential to one person may not necessarily be essential to someone else.

Step 2: Determine income sources for your essential expenses.
Match guaranteed or lifetime sources of income to your essential expenses. These can be payments from the Canada Pension Plan or Quebec Pension Plan, Old Age Security or a company-sponsored defined benefit pension plan. Any gaps between your essential expenses and lifetime sources of income can then be filled by drawing down on savings. This can be done either by creating a conservative pool of income-generating assets or by purchasing an annuity.

Step 3: Determine coverage for your discretionary expenses.
Create a plan to fund discretionary expenses from your savings. A financial advisor can provide guidance on tax-efficient strategies that can help maximize the income from your savings while still generating growth in your portfolio for future years.

Step 4: Conduct an annual review with your financial advisor.
Consider how a child’s wedding, an illness in the family or market fluctuations can affect your overall finances and future. Getting in the habit of reviewing your retirement plan at least annually, or whenever there’s a change in your situation, can be the most important step to keeping you on track.

To get you started, Fidelity has created an easy-to-use investor worksheet to go through with your financial advisor. Use it as a guide when building a comprehensive retirement income plan to help ensure a satisfying and financially secure retirement.


Determine anticipated retirement expenses PDF document

Envision your life in retirement, and think about the expenses you will – or might – incur. Determine which expenses are must-haves (essential) and which are nice-to-haves (discretionary).

Take into consideration your own lifestyle and goals.

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