Retirement causes many aspects of a financial plan to change. What remains the same – and perhaps becomes even more critical – is the need for smart cash-flow planning.

“The message I keep telling clients is [retirement] is not a one-time event,” says Kelly Ho, an advisor with DLD Financial Group Ltd. in Vancouver. “It’s a lifelong event, and now your new occupation as a retiree is to make sure you don’t run out of money.”

She positions retirement income as a regular “paycheque” and sets up automatic deposits at a frequency that works for each client. She also goes line item by line item through their expenses to ensure everything is accounted for. That includes a buffer for the unexpected.

It also involves projecting likely changes in behaviour (and therefore expenses) as people age. Clients tend to travel more earlier in retirement because they’re usually in better health, she says, while rising costs often come later for therapies that aren’t covered by government health plans.

Marlene Buxton, principal fee-only financial planner of Buxton Financial For Retirement in Toronto, has created a cash-flow system to help keep all clients, including retired clients, on track.

Every month, income, often from multiple sources, arrives in a chequing account primarily to cover fixed expenses such as property taxes, insurance and utilities. Every Monday, some of that money is transferred automatically into a second chequing account for variable expenses such as groceries, entertainment and clothing. Ms. Buxton doesn’t distinguish between needs and wants as she considers both necessary for quality of life.

There’s also a separate “buffer” account – money to be spent on infrequent, larger expenses such as travel and gifts. It’s distinct from an emergency fund, although it can be used to pay emergency costs. She generally recommends the buffer be housed in a separate online-only bank account so it’s out of sight and out of mind, but transferable with a few days’ notice when needed.

Planning based on monthly income and weekly expenses has several advantages. It smooths out the effect of “lumpy” expenses throughout the year. It puts a fence around variable spending and provides quick feedback when people stray off track. And, if that happens, there are easy solutions – for example, decreasing the buffer and increasing funds for variable expenses, or trimming next month’s variable spending. Perhaps, most important, “it feels more fun living in that structure,” Ms. Buxton says.

“When they’re planning trips, they know exactly where that money is. Gifts are covered. It’s not this big expense at the end of the year and then credit card bills in January. It’s already planned out.”

Without structure, she adds, it’s more likely clients will have to draw from investments in an unplanned way, potentially disrupting long-term plans. That’s especially so if clients opt for an annual lump-sum deposit of retirement income that they have to manage without feedback throughout the year.

From Ms. Buxton’s perspective, spending too much and too little are equally harmful to well-being – the first because people can run out of money, and the second because they’re denying themselves enjoyment they can afford.

“You want to know that you have this money and the only purpose for this money is for your day-to-day life … Once people get there, it feels better [and] they feel in control of their life,” she says.

Willis Langford, co-founder and retirement income planner with Langford Financial Inc. in Calgary, says almost none of his clients has experienced a true “emergency.” In general, his clients start retirement having finished renovations on their homes and with a relatively new car that’s paid off.

However, they may not have considered another potentially big cost: providing financial support to adult children.

“Ninety per cent of the time, when clients are looking for an extra $20,000 out of their portfolio all of a sudden that wasn’t planned for, it’s to help out their kids – or, I would say, to bail out their kids,” Mr. Langford says.

“Most parents will sacrifice their own well-being, their own retirement, their own trips, their own fun money to help their kids. … It’s become a huge issue that I didn’t see, say, five years ago.”

So, as an element of cash-flow management, Mr. Langford prepares clients for the possibility their children will ask for money. He also reminds them it may be okay to allow the consequences of children’s choices to play out. At the same time, he knows where extra funds can come from if needed – often, from a personal line of credit or, for homeowners, a home equity line of credit. TFSAs can be a good source of emergency cash as well.

“You don’t want to be drawing too much from an RRSP or RRIF because that immediately becomes taxable income and it’s going to reduce other tax benefits and other tax credits available to you,” he says.

ALISON MACALPINE –  THE GLOBE AND MAIL
PUBLISHED MARCH 10, 2025