When it comes to retirement planning, the number one question I am asked is, “How will I know if I will have enough money to last throughout my retirement?”   

It is a reasonable question given all the wildcards you could experience during a retirement that could span decades and could involve higher medical costs and long-term care. Canadians have watched their savings fluctuate due to market volatility, while facing increasing interest rates and the rising cost of goods and services. In addition, many people are concerned about longevity risk, which is the worry that a person’s retirement could last longer than their retirement savings as result of longer life expectancies and advancements in healthcare.  

Any one of these unexpected events could compromise the retirement you had hoped for.   

Given these concerns, Canadians are desperately seeking an element of predictability and stability to help them reduce their financial fears during retirement. Members of HOOPP have a leg up on that front as many people do not have the opportunity to participate in what I would call one of the best defined benefit pension plans.   

"I believe not taking advantage of a defined benefit pension plan can be a very short-sighted decision."

But I get it, some part-time employees may choose not to enroll. The challenge we face early in our careers is that thoughts of retirement are usually on the distant horizon. Retirement is not an immediate need compared to financially challenging priorities like buying your first home, funding your child’s education or putting food on the table. It takes a savvy planner to understand that tucking a little aside today can make a huge difference in your life tomorrow.   

For the record, I’m a fan of HOOPP, as in my opinion, it is one of the best-run pension plans around the globe. I have witnessed far too many Canadians in retirement who crave a stable and predictable monthly pension and the opportunity for inflation protection. In addition, survivor benefits, flexibility for early retirement options and a pension that is portable to any HOOPP employer make the plan even more attractive. A HOOPP pension enables you to contribute today and enjoy retirement benefits tomorrow. In many ways, people who participate in this plan are the envy of the retirement community.   

However, even with a HOOPP pension, it is important to take time to understand how much money you will need and how much money you will have to sustain the lifestyle you want during retirement. 

A good place to start uncovering that information is by estimating the value of your retirement savings which includes your pension, government benefits and any additional savings from your TFSAs, RRSPs and non-registered accounts. After you have a clear understanding of where your money is coming from, the next step is to subtract your lifestyle costs which will include fixed and discretionary costs.  

• Fixed costs are mandatory payments such as mortgage or rent payments, property taxes, utility fees and money you owe after you sign a contract. These costs are generally predictable and are paid on a regular basis. 
  
  
• Discretionary costs are expenditures on non-essential items such as dining out, travel and theatre tickets. The costs of these items varies and as “luxury” items, you can choose to delay, purchase or not buy these items.   

If there is a shortfall between your retirement savings and your fixed and discretionary costs, you may need to set a savings goal to make up the difference or scale back your lifestyle expectations. You are in control and the ultimate decision-maker.   

A final thought on strategy

If you are a member of HOOPP, you have the luxury of a stable and predictable retirement income stream. You can retire and begin collecting your pension as early as age 55.   

Yes, there are plenty of unexpected events that can occur during retirement that you can’t control such as market volatility, rising interest rates and inflation. That said, by participating in a defined benefit pension plan like HOOPP that provides a secure pension for life, you can increase your opportunity for financial security and obtain the lifestyle you want in retirement.