As many of you know, one of my specialties is retirement planning.

It is my strong assertion that all investors should have a retirement plan. After all, why are most of us investing if not to someday retire, relying on our savings and investments to maintain our lifestyles?

In retirement planning, just like in planning to accomplish any goal (e.g. losing weight, getting in shape, learning how to play an instrument), the assumptions used in developing the plan matter a great deal with respect to how successful we’ll be in achieving our goals and monitoring progress along the way.

In retirement planning, there are four key assumptions that can have a dramatic effect on results:

1. The rate of inflation. Simply put, the rate of inflation measures how much more expensive goods and services used today will be in the next year.
2. The rate of growth of your investment portfolio. For example, do you expect to earn 5%, 10%, or 20% annually on your money? Why? What’s realistic?
3. The amount of income you’ll require at retirement to maintain your desired lifestyle. Do you want to retire with a retirement income of $50K per year? $100K? More? Less?
4. How your retirement investment income will be achieved. Will that income be derived from interest payments, dividends, or capital gains?

You may think that all retirement planning specialists use the same assumptions. Not true.

You don’t want to use a generic formula for most of the above assumptions that are based on retirement models that apply to the overall population. While “correct” from a macro point-of-view, these models may fail to take into consideration your specific and unique goals and needs.

I provide an individualized retirement plan for each client. The assumptions used are consistent with a conservative approach. Together, we will create a plan that is realistic and achievable. This ensures that your portfolio performance goals can be achieved and a comfortable retirement is in view.

Key to this planning process is an understanding that you will want to maintain your investment capital through your retirement years. If you plan to spend your retirement capital, then you may face potential financial difficulties in your retirement years. What if you live longer than expected? What if an unforeseen cash need comes up in your later years? When planning for retirement, it is best to assume that your desired investment income will be achieved while maintaining your retirement capital indefinitely. This makes for improved estate planning, security and peace of mind.

Properly plan to retire comfortably using good assumptions and the right advice, and you will.

Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, [name], and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection