Some clients hold unrealistic views about retirement, which can leave them sorely unprepared for the future. By dispelling some of the following misconceptions, you can help your clients make achievable plans and look forward to a secure retirement:

1. "Debt will work itself out"
Public perceptions about debt must shift. Many clients have grown accustomed to low interest rates, which has made it appear normal to carry enormous debt — even into retirement, says Noel D'Souza, financial planner at Money Coaches Canada in Toronto.

"We need to get around to hating debt again, being averse to debt, because we aren't feeling the pressure to get out of debt," D'Souza says.

To help clients retire debt-free, he suggests developing a debt-elimination plan that's tied to the client's retirement plan. For such clients, D'Souza sets a "debt-free date," which can be adjusted over time.  

2. "Downsizing will free up enough money"
Many clients figure they will either downsize to a condo or move to a smaller town to free up money to fund their retirement, D'Souza says. But they don't consider all the implications.

Those clients who plan to trade their house for a condo may not be aware of all the costs involved, including condo maintenance fees, which can rise at any time without warning.

Those who plan to move away may have difficulty leaving familiar surroundings or living far from their children or grandchildren.

3. "I can work into retirement"
Some clients who expect to be financially unprepared for retirement at age 65 might assume that they can continue working past retirement age, D'Souza says. But that kind of thinking discounts what the future might actually entail.

Poor health and economic conditions, he adds, could force them to retire before they're financially set. You can work with clients to come up with a plan that accounts for unforeseen circumstances.

4. "Everyone collects CPP at the same age"
Clients who qualify for Canada Pension Plan (CPP) benefits can begin receiving payments as early as age 60 and as late as age 70, with benefits increasing the later they begin. Calculating the best age at which to claim CPP benefits isn't an exact science. There are a host of factors particular to each client that should be considered before you can determine what works best for your client, D'Souza says.

You have to consider each client's cash-flow needs, sources of income, tax situation, overall retirement plan and life expectancy.

5. "Funds should remain in an RRSP for as long as possible"
Many clients think they should avoid dipping into their RRSP, D'Souza says, in an effort to stretch it well into their 80s and 90s. But because the average life expectancy in Canada is 81, most won't need that much of a cushion.

If they pass away leaving a hefty RRSP or registered retirement income fund, D'Souza says, their heirs could have a substantial tax bill. Instead, he advises clients to draw down registered plans in a tax-efficient manner.

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