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When Planning for Your Retirement,
Mind the Gap!

January 2020

Nobody wants to discover upon reaching retirement age that they somehow failed to save enough to fund the lifestyle they were expecting.

A retirement gap analysis is a financial planning exercise you can undertake to determine if you're on track to meet your retirement income goal.

Even those who don’t anticipate a gap between their retirement income and expenses can benefit from this analysis.

If you've taken the initial retirement planning steps—setting some money aside and investing it—you're on the right path. A retirement gap exists if there is a negative difference between your estimated income from savings at retirement and your stated goal.

Identifying financial weakness
By performing a gap analysis, we can identify any shortfalls or points of weakness in your financial situation. When shortfalls are uncovered, this process points you to specific changes you would need to make now to still reach your goal at retirement.

As well, a gap analysis is an opportunity to reassess your retirement goal and decide whether it's realistic.
Conducting a gap analysis
A retirement analysis should consider all facets of your financial life, including your assets, how much you're saving, expected sources of retirement income (e.g., government pensions, RRSPs, TSFAs, workplace pension), and all anticipated expenses as you transition through the different stages of your retirement years.

Primary Anticipated Source of Revenue in Retirement
Among Those Not Preparing for Retirement
Step One
Estimate how much you would have to save to live the lifestyle you want. Let's say you hope to keep up the same standard of living in retirement as you enjoy today while you're earning a regular paycheque. A good rule of thumb is that you would need a retirement income that's 70% to 100% of your current income.
Step Two
Using your present savings rate and investment approach as a guide, figure out how much money you’re on track to save by retirement.
Step Three
If you discover a gap between your predicted savings and the amount you would need to save, determine what you can do to make up the difference. In general, there are two methods you can employ: increase your rate of savings or adopt a more aggressive investment strategy that's geared to reaching your goal. Often, the best solution involves doing both simultaneously.
Step Four
If the adjustments you're able to make are not sufficient, you may need to reconsider your retirement lifestyle expectations. Perhaps, you could put off retirement for a few years, continue working part-time for a few years after retirement or reduce your retirement living expenses to stay within your budget.

Simply saving for retirement is not enough. Creating a retirement plan and keeping it up to date is crucial. It's only after you've conducted a retirement gap analysis and fixed all the gaps that you can be confident in reaching your retirement goals.
Get Started

Your first step is to calculate how much you may need to retire comfortably. Then you can decide on the type of retirement products that are best for you.

Retirement Calculator

Read through the information and if you have any specific questions send us an email and we would be pleased to help.

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