5 Retirement Pitfalls and How to Avoid Them

Posted on: December 18, 2019

By Karin Mizgala, Co-Founder and CEO Money Coaches Canada

Over the years I’ve transitioned many clients through retirement and while each story is unique, there are some commonalities in their experiences. One story that sticks with me is the reaction that my client Margaret (name has been changed) had when we went through the retirement projections which gave her the green light for retirement. Instead of jumping for joy, she burst into tears!

Initially, we were both surprised by her reaction, but it really isn’t that surprising at all. Retirement is a major life change, and what major life change comes without a mixture of excitement and fear? Margaret was elated that she had achieved her goal of a comfortable retirement, but overwhelmed by the implications of what this freedom actually meant for her and the new set of decisions she now had to make.

While we may gripe about our jobs and dream of the day when we can kick up our feet and relax, the side of us that is fulfilled by the structure and purpose of our work may feel overwhelmed by the responsibility of deciding what comes next. The cage is open, yet we may be afraid to fly out into the unknown.

Not all my clients have displayed such strong emotions, but there is no way to escape the reality that the life and financial changes that come with retirement, full or partial, are significant.

I also have some personal experience with the changes that come with retirement. Not for me yet, but for my husband who is 12 years my senior. Sure I could do the number crunching and figure out his retirement math to the penny, but it was all the other considerations that filled our conversations for over two years before he finally pulled the plug on his career as a history professor.

What would it be like for us to spend more time together? Would I resent that he wasn’t bringing in a paycheck anymore? What would he do all day (and what if there were dishes in the sink while I was working like a fiend!) How might retirement change the dynamics of our relationship?

Going through the transition with my husband gave me an even deeper understanding of the complex set of decisions and unknowns that need to be navigated along with the numbers.

Here are the five big pitfalls that I’ve seen along the way, personally and with my work as a retirement planning coach, and how to smooth what can be a bumpy ride into retirement:

1. Going into Retirement Without a Life Plan

When we leave work, we leave behind a paycheck, so we all understand the importance of entering retirement with a financial plan that will replace that income. But as we also leave behind structure, purpose and social connections, it’s very important that we consider how we will replace those elements as well.

Social connection in particular is a big contributor to happiness and longevity. Isolation has been shown to contribute to mental and physical health concerns such as depression, cancer, diabetes and dementia.

You don’t need to know exactly how retirement will unfold, but think about which activities will help keep you challenged, socially connected, and active.

2. Not Knowing What Your Cash Flow Needs Will Be

During the years of saving and investing for retirement, the focus is often on how big we can grow our nest egg. But once you enter retirement it’s crucial that you have a clear understanding of your cash flow needs, and a system to stay within your retirement budget.

While some of your expenses may go down (no mortgage, no kids) some may go up (health, travel). You can use the Money Coaches Canada Spending and Savings Plan and our On Track Money Management System to ensure you have a handle on your cash flow.

3. Retiring Too Soon

Start by crunching the numbers. Is the lifestyle you are hoping for really sustainable? You may live to age 95 and you don’t want to outlive your money. But even if the numbers are in your favour, retirement is a very personal matter. Don’t let other people’s decisions influence your own. Retiring before you’re ready can lead to stress and depression.

Take your time.  Ideally, transition slowly if you can. Work part-time, start a business before you retire, engage in new hobbies before you quit your job.

Consider working with a retirement planner, coach or therapist to deal with the financial, emotional and psychological implications of your unique transition.

4. Waiting Too Long to Retire

While some folks are chomping at the bit to retire, others want to make the change, but let their worries and what if scenarios hold them back.

My clients Fred and Sam (names have been changed), were afraid to get the ball rolling on retirement.  They asked me to crunch the numbers over and over again, and while I kept reassuring them that the numbers said they could retire, they just didn’t feel they had quite enough. Sadly, when they did finally retire, Sam passed away within two years.

There is no way to avoid the fact that retirement is a leap. Change is inherently difficult, disruptive and requires planning and trusting in equal measure. While proper financial and life planning is critical, there is no way to avoid the risks of being human. Sometimes you just have to take the plunge.

5. Thinking That Planning is Done

Many of my clients have retired, and one of the biggest surprises to them (and to me initially), was just how much financial planning is still required throughout retirement. Retirement may be the end of one phase of life, but it’s also the beginning of a new one. It’s a new chapter that has many fresh decisions and choices for you to make.

Some of the most complex financial and tax planning choices need to be made between the ages of 60 to 72. For example;

  • When to take government pensions (CPP and OAS)
  • How and when to draw monies from your investments in the most tax efficient way
  • Balancing cash flow needs now
  • Long-term cash management strategies
  • Housing and real estate issues
  • Health care insurance decisions
  • Estate/legacy planning

The good news is that in retirement you have more time to plan and stay on top of your finances and time to think about what makes you happy and fulfilled.

Of course, retirement is not a one size fits all.  You may not ever retire fully from some type of paid work but there will inevitably be changes in your relationship to work, health and life as you age. The more prepared, positive and engaged you are, the more fulfilled you will likely be.

By the way, my husband has now been retired for two years. We’re still happily married and he only occasionally leaves dishes in the sink!


Category(s): Money Coaching

6 Responses to 5 Retirement Pitfalls and How to Avoid Them

  1. Karin, firstly I want to wish you and your husband the very very best of the season. I imagine you in your beautiful house on Salt Spring Island even though I’ve never seen it. This is an excellent article that I may send to my friend financial advisor. You have managed to end with humour and I had a chuckle while having my morning tea. I’d love to have a coffee at some time that is not so busy for you. I have some more insights. But in essence you have hit everything that I’ve gone through on the nose, and you are a terrific writer! Warmly, Brenda

  2. Karin Mizgala says:

    Thanks so much Brenda for your kind comments! I would love to hear more about your personal retirement transition experiences. Sharing stories is such a great way to help each other navigate these exciting and challenging life experiences!

    I’ll be in touch in the new year to reconnect. All the best for a relaxing and joyful holiday season!


  3. Hi Karin
    I’m planning on retiring this year at the age of 63. I have a defined benefit pension. My question is twofold.
    1) Can I defer CPP til I’m 65
    2) Retiring at 63 do I still have to pay into CPP if I’m retired and do not work ?
    I’m looking forward to retiring and hope to hear from you soon.


    • Karin Mizgala says:

      Thanks for your question, Diane, and congratulations on your upcoming retirement! You can choose to start receiving CPP benefits anytime between the ages of 60 and 70, so yes, you could defer until 65 (or even to 70) to increase your payment. Your contributions to CPP will stop once you are no longer receiving employment income.

  4. Plant based senior in Ottawa says:

    I haven’t come across this question anywhere. If i retire before before I hit 64 but have made maximum cpp contributions for the year and I delay to 65 to collect, do i still get near what my estimated amount at 65 will be (on my statement) even though I will not be contributing for the year before I turn 65? I was hoping to make it to 65,but the pandemic has made me change my mind.

    • Karin Mizgala says:

      Yes, you will likely receive an amount close to the estimate on your statement. You could try using this great CPP Calculator created by Papyrus Planning for an estimate specific to your circumstances. We wish you a wonderful retirement!

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