For of a series on financial planning. Advisers Theresa Tosh, left, and Halley Georgas of TD are photographed in Toronto Feb. 2, 2012. (Moe Doiron/The Globe and Mail)The Globe and Mail
Theresa Tosh confesses that there are two types of clients who can still shock her – those who carry a lot of debt and those who sit on their cash.
The first, she says, often tell her first about their assets before letting on that they also have tens of thousands of dollars in credit card or other debt. The latter have bank accounts stuffed with cash "and somehow believe those accounts are making them money, when they're not."
Ms. Tosh is a certified retirement strategist for TD Waterhouse, who with business partner Halley Georgas, an investment adviser, offers financial counsel to retirees.
Most of her clients have done well saving money but need her help in simplifying their investments and making their money last. Even in their 70s and 80s, they need a financial plan.
Tina DiVito, who leads BMO's Retirement Institute and wrote a book on financial bad habits – 52 Ways to Wreck Your Retirement – says having a solid financial plan means first and foremost making sure you save as much as possible and minimizing debt.
"Do everything you can so you don't go into retirement with debt," she warns.
Ms. DiVito believes a lot can be learned from people who are already retired and the unique concerns they have – everything from converting RRSPs into registered retirement income funds or annuities (a requirement at age 71) to dealing with chronic illness or entering long-term care.
Ms. DiVito says you can plan for everything retirement throws at you. And that starts by planning for longevity.
"A couple aged 65 today has a 50-per-cent chance that one of them will reach age 90," she says. "So we always plan to age 90, if not a few years beyond."
For most people, that means charting a course for 30 to 35 years of retirement, making sure your basic needs are met.
Ms. DiVito suggests setting up a separate Retirement Spending Fund for the extras. "What I find is that most retirees tend to spend more money early on, because they want to do the things they've waited for," she says. So rather than spend aggressively in your first five years of retirement, shrinking your nest egg immediately and putting a strain on your finances for later, she believes you should save separately for whatever you plan early on, such as big trips or expensive hobbies.
Planning for three decades of retirement, Ms. DiVito says, also means that making sure some of your money during your retirement is invested for the long-term, for higher rates of return. "For a portion of your money, you may not touch it for 30 years. You need your money to continue to grow. Keep up with inflation and more."
Ms. Tosh agrees. She cites the example of GICs, which are considered safe but will only earn 1.5 per cent "on a good day" – much less than the inflation rate.
Ms. Tosh says her niche is to create an income for clients with a minimum of volatility – which means a portfolio that may include a combination of annuities, bonds, preferred shares, mutual funds and dividend stocks. Preferred shares, she says, may not increase a lot in price but will produce a solid income, often with 5-per-cent returns.
"Clients show me their portfolios and I say, 'That's a very nice portfolio of evergreen trees. I'm not saying they're not going to grow … but you need apple trees. You need trees that produce fruit for you to live on.' "
Sandra Foster, a founder at Headspring Consulting Inc. and the author of a slew of books on retirement and estate planning, says financial planners also help to make sure that you are saving in a tax-effective way.
That's especially important in retirement when government pensions come into play, especially old-age security, which can be clawed back if your income is too high.
Planners can also help you decide the best time to begin taking Canadian Pension Plan benefits or to withdraw from your RRSPs . Later, at 71, when you are required to withdraw a minimum of 7.38 per cent a year from your RRIF, advisers can make sure couples income-split and receive the full tax benefit.
Retirement planning also means making sure you are ready for all the consequences of worsening health. Ms. DiVito says one of the biggest mistakes of people in their 40s and 50s is having a false sense of security: They are healthy and don't really believe that retirement is imminent, not to mention poor health.
Canadian women have a very high likelihood of spending much of their retirement single, Ms. DiVito says, with 56 being the average age for widowhood in Canada.
In many cases, widows have life insurance, but Ms. DiVito says "it is perhaps better to insure your longevity. Do you want life insurance so that when you die someone else gets a pot of money or do you want to use your funds to create something like lifetime income, buy buying annuities or other products?"
Ms. Tosh also suggests long-term care or critical-illness insurance for people, especially those who are single and fear not being able to afford care.
As for postponing retirement and working into your late 60s or early 70s, both Ms. Tosh and Ms. DiVito say many people enjoy the prospect of working later in life and often find ways to cut their work hours to make their life more balanced. But they add that you shouldn't rely on it as a plan to make ends meet, because you can't rely on remaining in excellent health.
"The worst is if you're physically unable to work and you have to," Ms. Tosh says. "That's a sad and agonizing situation."
For tips, stories, videos and live chats ahead of this year's RRSP contribution deadline, check the Globe Investor 2012 RRSP season section for daily updates.