Your Retirement Readiness Checklist

Your Retirement Readiness Checklist

A good portion of my financial planning clients are in what I’d call the retirement readiness zone, meaning they are 1-5 years away from retirement. They want a check-up on their financial situation and answers to big burning questions like, when can I retire, how much money can I spend, how long will my money last, and how to withdraw from my savings and investments to create the retirement income I need.

Here is a checklist of things to consider when you find yourself in the retirement readiness zone:

How much do I spend?

I get that many people are turned off by budgeting and tracking expenses, but it’s important to understand what it costs to live your life.

Instead of relying on rules of thumb, like you’ll spend 70% of your final salary in retirement, I find that most of my clients want to maintain their current standard of living, if not enhance it with additional spending on travel and hobbies.

Determine your true after-tax spending, including items like property taxes and home & auto insurance that will be with you for life. Add in your desired annual spending on travel and hobbies, and build in a buffer for small unplanned expenses such as replacing an appliance or doing modest home improvements or repairs.

This spending amount is what will drive the decisions around how much to withdraw from your investments, when to take CPP & OAS, and how long your money will last at that spending rate.

Plan your one-time expenses

Besides your regular after-tax spending, you should also factor one-time expenses into your plan. In my experience, the majority of these expenses will include vehicle replacement, travel beyond the ordinary (ex. bucket list trip to Europe), home renovations, and monetary gifts to adult children or grandchildren.

It’s not practical to assume your spending will stay static every single year. Build these one-time expenses into your plan over the next 10-20 years so you have a better and more realistic understanding of what you can afford and how to access these funds. 

What you’ll find is that instead of static spending of, say, $65,000 per year, you’ll have several years of spending $75,000 to $85,000 (or more) to cover these one-time costs.

Estate planning

Make sure to update your will and estate planning documents, including the beneficiaries on your insurance and investment accounts. 

Consider giving with a warm hand (otherwise known as give while you live) to your children or favourite charity. What I mean is rather than leaving hundreds of thousands, or even millions, in your estate at 90 years old, consider making smaller gifts to your beneficiaries throughout your lifetime.

Some examples include a gift towards a downpayment, help funding the grandkids’ RESPs, and footing the bill for a family vacation with adult kids and grandkids.

In case I die file

It’s common for one spouse to take the lead on financial matters for the household. But this can be problematic if something happens to the chief financial officer of the house – if they predecease their spouse or become cognitively impaired and can no longer manage the finances or investments.

The biggest risk is when the household CFO is an older, male spouse who self-manages the entire portfolio of investments. Men are statistically more likely to die earlier than women. If the surviving spouse has never been involved in the finances or investments, they could be left with an unwieldy mess. 

Make an “in case I die” file that includes a checklist of items like notifying Service Canada of your death (for CPP and OAS), transferring registered accounts to the surviving spouse’s name, cancelling credit cards, removing your name from joint accounts and other bills, to name a few. 

One recommendation for DIY investors to consider is if their non-financial spouse would be able to manage the investments on their own. Often there are several accounts to manage and certain “systems” in place that the DIY investor has managed for years but may not be easily picked up by the non-financial spouse. This is doubly true for retired clients who are drawing down their portfolios in a particular order.

If the non-financial spouse would just as soon take everything and hand it over to the friendly banker, then the years of careful investing and monitoring may be quickly undone.

In this case I strongly recommend using a robo advisor in your later retirement years. The robo advisor will assign you a risk appropriate, low cost, globally diversified portfolio. They’ll automatically rebalance the portfolio and set up automatic withdrawals linked directly to your bank account to meet your monthly income needs. Best of all, you do have access to human advice to make changes and ask questions about your investments. It’s really a hidden gem of an investment management service for retirees.

Psychologically switching from saving to spending

If you’ve been a diligent saver throughout your career you may find it difficult to turn off the savings taps and turn on the spending taps in retirement. 

I’ve helped build retirement plans for clients with reasonable after-tax spending assumptions. Several years later and they’ve never come close to those spending projections, instead continuing to squirrel away money in their TFSA and non-registered savings.

More than just the numbers, retirement is about designing the lifestyle you want to live. It would be a shame not to use the resources you’ve saved over many years to build your ideal retirement. Yet many retirees who have more than enough resources will agonize over buying an RV or small vacation home, renovating their home, or travelling abroad.

What you’ll end up with is the Scrooge McDuck retirement plan, swimming in money in your 80s and 90s instead of spending a sensible amount to build your desired lifestyle.

When to take CPP and OAS

There’s good evidence that shows how deferring CPP to age 70 leads to more lifetime income. Yet the most common ages to take CPP are at 60 and at 65

If you have sufficient access to other financial resources (pension, RRSP, non-registered savings) you should strongly consider deferring CPP to lock in a 42% increase in your benefits (more like 50% when you factor in inflation adjustments). 

It’s at the very least worth understanding your options. I’d recommend using to get an accurate estimate of your CPP benefits at different ages, and reaching out to Doug Runchey at the same website if you have a more complicated CPP scenario to calculate.

There’s less of an incentive to delay your OAS benefits, so taking it at the earliest age of 65 is perfectly reasonable. However, this depends on when you plan to retire, how large of an RRSP/RRIF you have, whether you plan to sell a rental property or have large unrealized capital gains. It makes sense to defer OAS if your income will push you into OAS clawback territory.

Being tax aware

One comment I hear a lot from prospective clients is how they want to pay as little tax as possible in retirement. While we should all be tax aware and strive to be as tax efficient as possible, we shouldn’t let the tax tail wag all of our financial decisions.

For one, the vast majority of us will pay much less tax in retirement than we did during our working years. Retirees are able to split eligible pension income with their spouse (defined benefit pension income, or RRIF withdrawals starting at age 65). They’ll also qualify for the pension income tax credit.

We also spend from already taxed non-registered savings, and capital gains are taxed favourably. TFSA withdrawals are tax-free, which can be handy for larger one-time expenses throughout retirement. We also get that contribution room added back to our TFSAs the following calendar year.

It’s quite common for me to see average tax rates below 5% for early retirees (before 65), and around 10-12% once they start collecting government benefits and withdrawing more from their RRIFs. And that’s for clients who were paying average tax rates of between 18-25% during their working years.

Final Thoughts

As you can see, there’s a lot to think about when it comes to planning your retirement. When you are 1-5 years away from retiring, a checklist like this can be helpful to get yourself into the retirement readiness zone. 

One important decision I didn’t address is how to decide on an actual retirement date. By going through a checklist like this early enough, and potentially getting help from a financial planner, you’ll find out how prepared you are both psychologically and financially for retirement.

You might find you need to delay your retirement by a year or two to shore up your finances. Or, you might find that you can meet all of your retirement goals and can retire much earlier.

The danger in not going through a retirement readiness checklist is falling into the “one-more-year” trap and continuing to work when you don’t have to, or being fixed on an early retirement date even though you won’t have enough resources to sustain your needs in retirement.

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  1. Alan J. on January 16, 2022 at 1:52 pm

    What a fantastic article, Robb!

    • Robb Engen on January 17, 2022 at 10:49 am

      Hi Alan, thank you for the kind words!

  2. Mary McDaid on January 16, 2022 at 2:07 pm

    Thanks. You have included plenty of important considerations. As we have both recently migrated from career to retirement, I would like to make a few more points. As you noted, few people actually spend less in retirement. For most, the costs stay the same or, in some cases, some expenses migrate to another. For example, we both had cell phones through our employers and had never needed a personal phone. We also had very good health and dental plans that were not transferable to our retirement years. (That is a topic for a whole column). After paying outrageous premiums for a year, we set aside a monthly number in our budget for these costs and thus “self insure”. If you plan to travel, this cost must also be budgeted. Finally, we find our food costs are higher as we are both home together, and tend to entertain more as well.

    As to migrating from saving to spending, one must be aware of pension credits and what happens if you retire prior to age 65. Withdrawals from RRSP’s do not qualify as pension income but there are strategies to address this. The establishment of RRIF’s and LIF’s also takes some time and knowledge. Online brokers and Robo Advisors are often very poorly equipped to guide you through this process, so you must have some good general understanding of how this all works before proceeding. As an example, a former colleague called me to discuss her next steps. She didn’t understand that the “locked in” portion of our DC pension would have quite restrictive annual maximums (we had worked for a federally regulated business). Nor did she know that she could “unlock” half of the funds (with the other half going into a type of RIF), but there was a defined window during which this could take place

    Finally, we find many of our friends have decided their home is part of their pension plan. This is fine if you have alternate housing, but we know many who have chosen to do so, and, as a result, live further away from major urban centres, and their support systems (in many cases). We find that the older we get, the more important it is to be close to services, including healthcare.

    • Denis on January 17, 2022 at 8:59 am

      Mary (& Robb).

      “but there was a defined window during which this could take place”

      I thought you could do this (50% to a RRSP) during the time you convert LIRA to a LIF. I was planning to do this (LIF) to replace QPP until I’m 70.


      • Mary on January 17, 2022 at 9:18 am

        Denis, please note I made a typo in my comments as this is a DC (not DB) pension in a federally regulated environment, I had a specific window to “unlock” 50% of my RPP (60 days). This was specific to my plan and may be different for others. This timeframe was never explained to any of us during pension sessions. This was important as the RRIF portion offers far greater flexibility than the other half, a RLFPB with annual maximums set by the federal government. I would check with the organization that manages your specific pension plan. Please note, this was a private defined contribution pension plan through a telecom company, a federally regulated business.

        • Robb Engen on January 17, 2022 at 11:07 am

          Hi Denis & Mary, the LIF unlocking provision depends on the jurisdiction in which the plan is held. Most provinces, plus federally regulated pensions, allow you to unlock 50% of your LIRA and move it into an RRSP or RRIF at age 55.

          But BC does not allow this type of unlocking. Saskatchewan allows 100% unlocking, and Manitoba recently announced changes that would allow 100% unlocking for those aged 65 or older. It’s a bit of a mine field.

          PS – Mary, I will edit your comment above to say “DC” instead of “DB” as you intended.

          • Denis on January 17, 2022 at 12:20 pm


            It’s hard to find a straight answer on this one but I thought the rule (federal sicne CN) was after 55 , not AT 55. Hope my understanding is true as limiting it to 55 sound odd, illogical and arbirary.

      • Robb Engen on January 17, 2022 at 1:24 pm

        Hi Denis, it’s at age 55 or older. It doesn’t have to be done at age 55.

        If a person:

        A:) will be 55 years of age or older within the calendar year; and,
        B:) exercises the option within 60 days of when the funds are initially deposited in the RLIF;

        they may transfer 50% of the funds in their RLIF into an RRSP or an RRIF. Cash can then be withdrawn, from either of these vehicles, subject to any applicable income tax rules. The funds cannot be taken directly in cash from an RLIF.

    • Robb Engen on January 17, 2022 at 10:56 am

      Hi Mary, thank you for adding your perspective and personal experience on this important topic. Good point on the spending categories changing but often cancelling each other out. If your employer was paying / reimbursing some expenses those now need to be paid for personally. On the other hand, your daily commute and the corresponding fuel costs will most likely go down.

      My experience with Robo advisors (Wealthsimple in particular) is that they are quite well versed in many aspects of decumulation, like converting from RRSP to RRIF, LIRA to LIF (including the 50% unlocking provision if it is available), capital gains taxes on non-registered withdrawals, and determining the appropriate withdrawal from each account.

      • Mary on January 17, 2022 at 11:35 am

        Thanks. I really enjoy your newsletters.

  3. Kathryn on January 16, 2022 at 2:16 pm

    Thanks Robb,
    I’m having serious trouble changing from saving mode to drawdown mode. We have enough to retire on now, but have failed to start shrinking the RRSP for two years in a row. Not the worst problem to have, but still, it’s very difficult. I don’t think it’s sunk in that we only have a finite number of years to enjoy before the No-go stage.

    • Denis on January 17, 2022 at 9:01 am

      My similar, good problem to have is I did take down 45K from my RRSP but my RRSP nevertheless went up 70K in 2021 as I have too much RRSP and LIRA for my daughter (she will pay a lot of tax currently if I were to exit).

    • Robb Engen on January 17, 2022 at 11:20 am

      Hi Kathryn, it takes an adjustment for sure. And we also can’t count on such strong investment returns each year.

      I mean, I’m not suggesting retirees mindlessly increase their spending. You should build a budget around the lifestyle you want to live, make sure to incorporate one-time larger expenses throughout your retirement, and invest in a risk appropriate way to meet those needs. For some, their withdrawals and other income do exceed their spending needs and that’s okay. Tuck money away into your TFSAs each year and build up that tax-free nest egg for your estate.

      One suggestion is to decide on an amount – say $10k or $20k – that you will spend this year to increase your happiness. That could be a bucket list trip, a kitchen reno, a hot tub, whatever gets you excited. It’s not an amount that will ruin your long-term retirement outcome, but something that will bring you joy now. Then see what kind of impact that had on your finances at the end of the year. You’re not committing to increase your spending by that much every single year. You can easily go back to living on your normal spending amount. But maybe you find the spending didn’t really impact your finances all that much and you can increase it after all.

  4. Anonymous on January 16, 2022 at 2:25 pm

    Great article, a must read for every aspiring retiree and retiree.
    We have close friends that fall into the Scrooge McDuck retirement plan and unfortunately it is impacting our friendship, aside from their own lifestyle.
    They are very well off with multiple paid off properties and handsome savings with no children to pass anything along to. Just one example, when the tires on their single 20+ year old, run down car were so dangerously worn and they needed urgent replacement, they decided to rather take the bus and wait until they could get their tires replaced on sale. What ends up happening is that there is a certain imposition with friends where some will offer them a ride, which they love to accept. My husband would be the first to help out in the case of need, like a breakdown, but refuses to offer them free rides when it is a choice motivated for them to squirrel away a few more dollars.
    I do wonder how many more Scrooge McDuck’s are out there and if they realize their actions do have an impact on people around them. I am less committed to the friendship as a result.

    • Robb Engen on January 17, 2022 at 11:35 am

      Hi Anonymous, thanks for sharing this. It’s a shame that some people end up living that way. You bring up an excellent point that this type of behaviour can easily drive away friends and family.

      We often teach people the good habits of saving and living within their means. But we never teach people how to spend to create the life they want to live. This leads to a scarcity mindset, that we’ll never have enough to do “those” things. I highly recommend listening to Ramit Sethi’s I Will Teach You To Be Rich podcast. He interviews couples, often very high earners, who have all of these invisible money scripts ingrained in them since childhood that still affects their relationship with money today.

  5. Dustin on January 16, 2022 at 2:27 pm

    Hey Robb. Great article! Just a heads up your CCP Calculator links to .com and I believe it should be .ca.

    • Robb Engen on January 17, 2022 at 11:36 am

      Hi Dustin, thanks – this has been updated.

  6. Steve O on January 16, 2022 at 3:29 pm

    Hi Robb,

    Good post. O n taxes you are bang on. My wife and I paid about 5% before age 65 and CPP/OAS. Now that we began collecting CPP/OAS this year and last, we have moved up to 10- 15% range of taxes. The next part is not good news. Once we are forced to convert the RRSPs to RRIF and withdraw at age 72, we will be paying about 30%. If we elect to take capital gains in the non reg account before that time we will pay more as well.

    If we take too much of our capital gains now, we lose our OAS! In fact, I took a bit of gains this year and we are already going through some Clawback. So OAS is not something to hang onto consistently to age 71 either , at least not for us.

    • Denis on January 17, 2022 at 9:05 am

      For me, I decided to take QPP and OAS at 70, just to have that sizeable buffer. I’ll replace that with turning my LIRA to an LIF (50%) and also that 2000 pension deduction at 65 helps too.

  7. Wayne Bahlieda on January 16, 2022 at 4:06 pm

    Robb, what a great and timely article. You have raised some thought provoking points, that I believe are crucial in planning the next chapter in your life. I also appreciate the additional points raised by your readers.

  8. Barb on January 17, 2022 at 3:38 am

    Excellent article as usual.
    I felt I was the “odd man out” finding it challenging to spend and not save. This is particularly challenging given the travel restrictions at present. I find myself saving for my TFSA maximum each year and attempting to do maintenance jobs myself and have a friend help and teach me instead of spending time on other pursuits(justifying that I like learning things and working on projects.)

    My robo advisor suggested transferring 50% of my LIRA to RRSP because withdrawals were less restrictive even though I have a yearly withdrawal plan set up by you based on my financial needs and tax efficiency. I thought it was odd since in 4 years the money needs to go into a restrictive fund anyway.

    I actually have a question. I’d like to contribute to my TFSA but use registered money instead of unregistered to get as much money as possible out of RRSP before I start collecting benefits. In this case would it be reasonable to withdraw more than suggested in the plan. Is there a way to see cut off amount to avoid going into higher tax bracket? My tax bracket is higher when benefits start. Maybe this strategy would reduce taxes when benefits start but not affect my maximum money taken out per year as money is still invested and all accounts are at same risk level as recommended.

    Thank you Robb

  9. Brenda on January 17, 2022 at 10:37 am

    Great article and some very interesting reader comments as well.

    For the tax awareness checklist item, I wonder if this is due to behaviourial biases. During the accumulation years, most people work as employees where their taxes are withheld at the source as they go and so they don’t “have” that money to begin with. In decumulation, they start with the gross amount and then taxes are deducted (sometimes much later, when personal taxes are filed and a tax bill is due). This could trigger loss aversion and the endowment effect.

    Not only do people go from a lifetime of working and savings to a sudden switchover in spending, now they also go from a lifetime of an employer managing their tax bill to now having to figure these things out for themselves. I can see this as an area where having an ongoing advisor would help. I think reframing our thinking to be from the perspective of trying to maximize the spend amount, rather than minimizing the taxes paid, would be more abundance-centric rather than scarcity-centric.

    • Robb Engen on January 17, 2022 at 11:43 am

      Hi Brenda, thanks for your thoughtful comment. You’re exactly right, we’re used to thinking in terms of our net income after deductions.

      I also loved your comment about reframing our thinking to maximize spending (to live our rich life) rather than to minimize taxes.

    • Mary on January 17, 2022 at 11:51 am

      I keep a spreadsheet and project our annual income at the beginning of each year. With some simple calculations, I can then determine how much we need to tax “at source”. Then, when working with our various sources of income to establish our payments for the year, I make the appropriate tax adjustments. CPP and OAS tax deductions can be changed online. This little bit of planning up front enables us to avoid any balance owed to the CRA. And, the detailed record keeping also insures we don’t reach critical thresholds such as the OAS clawback.

  10. Diane on January 17, 2022 at 12:22 pm

    I too am having issues on the spending side. Saving has been a life-long habit and not easily broken. We purchased properties about 6 years ago with the thought that if we paid off the mortgages, the income would cover our day to day needs and also effectively be indexed to inflation. Mortgages are paid and we are on target. But doing a rough calculation, due to this extra income, any money we take out of our RRSP’s needs to be taxed at 50% to ensure that we do not owe in April. This makes it, mentally, more challenging, but it has to be done.

  11. Robert timu on January 21, 2022 at 10:57 am

    Enjoyed this im 61 years old and am planning my “road map to retirement” plàn some excellent advice to follow here

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