Is retirement planning a waste of time?

Around a year ago, I wrote a column, The New Retirement Season on why the retirement planning process should begin immediately following the mad rush of RRSP season and continue year-round. I recently re-read those words and I think the points raised continue to make sense. Don’t worry, I’m not going to repeat those arguments here, but you should consider this column as a companion piece.

An obvious takeaway from last year’s missive is that planning for retirement is an intense and time-consuming process. At least it should be if done properly. It’s clear from Fidelity’s research that only a fraction of people planning for or living in retirement have written retirement income plans, and I’m guessing that the process is part of the reason why.

I think there are a couple of other reasons that are worth mentioning. One is that this process forces people to face realities and make decisions they would rather avoid. The other is that when a person’s circumstances change, their retirement income plan appears to become less relevant when viewed from their current situation.

Read: How much retirement income do you really need?

The fact is most of us are lousy at planning. There is a disconnect for people because planning involves the future, yet we don’t know what the future holds – the best efforts of people like myself who regularly forecast notwithstanding! I’m reminded of some of my economist colleagues over the years that were superb at analysis but lousy at forecasting. Some even refused to do it at all. Those who refused to try always used the same excuse as the people who don’t like planning for their futures – they don’t know what was going to happen in the future.

We need to make some well-educated guesses about the future in order to plan for retirement. A major component of the ‘educated’ part comes from investors educating themselves, about themselves. Most of us avoid this type of activity like the plague. We all have ideas of who we want to be and the circumstances – financial and otherwise – we’d like to be in. For many, there is a big gap between who they are and where they want to be.

We don’t receive as much enjoyment thinking about our circumstance when compared to where we wish we were, but think of the upside of getting to the core of who we are and what we want to be. Think of the few people we know who have done the exercise. They tend to be much happier.

The practical side of this exercise is that we’ll understand that some of the dreams we have are just that. If we actually achieved them, we wouldn’t necessarily achieve the satisfaction we expected. And, if we can achieve a realistic view of what we want to do when we reach retirement, we are much more likely to actually achieve it.

Read: Five risks to retirement income

Investors have the choice of ignoring the realistic possibilities and hanging on to impossible dreams, or planning for something enjoyable that they have a good chance of achieving. A last warning on this topic, if you attempt to go through this exercise with your clients, you have to accept that you won’t be successful with all of them. There are some people who simply won’t face the reality of their situation no matter what.

Retirement planning should take place, not in the hope or expectation that things won’t change in the future, but in the secure knowledge that they will. The benefit of having a dynamic retirement plan is that it is much easier to adapt to a new set of circumstances.

So, what can change in a retirement plan? Almost anything and everything. Career paths change sometimes for the better and sometimes they go off the rails. Family circumstances change, whether through expansion or contraction. Personal interests change. Markets change. Housing costs change. The prices of retirement activities change. If you have a plan which makes assumptions about these variables, it is easier to adjust than if you don’t.

So where does this leave us? Planning for the future is difficult in part because it’s hard to visualize and things change. It certainly doesn’t help that most of us are lousy at it either. Yet in the end planning pays off in a very real way. As with many things in life it’s not just about the end, it’s also about the journey.

Read: Know your client’s retirement needs

While the information provided may be intended to highlight various financial planning issues, it is general in nature. This information should not be relied upon or construed as financial advice. Readers should consult with their own advisors, lawyers and financial planning professionals for advice before employing any specific tax or investing strategy.

Views expressed regarding a particular company, security, industry or market sector are the views only of that individual as of the time expressed and do not necessarily represent the views of Fidelity or any other person in the Fidelity organization. Such views are subject to change at any time based upon markets and other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice.

Peter Drake is vice-president, retirement & economic research, for Fidelity Investments Canada. With over 35 years of experience as an economist, he leads Fidelity’s research efforts in examining retirement in Canada today.