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Retirement – From supersized to downsized

The old adage “bigger is better” is particularly evident in North American life compared to other cultures. Everything is supersized – from fast food, to vehicles, to homes. But it does not have to be that way. Retirement is the perfect opportunity to downsize and make your life easier. From simplifying your wardrobe, to your home, to your finances, now’s the perfect time for a fresh start.


The first stage of downsizing is all in your head. With retirement comes change, and sometimes adjusting to a new way of life can be a challenge. So when you’re ready to tackle downsizing, it’s important to alter your frame of mind.

Think about your possessions. Do you really need two cars? How about all those business suits that will just hang in your closet once you’ve left the working world behind? What about your house? If you have children, chances are they’ve moved out on their own, and you don’t really need a four-bedroom home anymore.

Downsizing can be a daunting task. It’s always hard to let go of the past, but just remember, retirement is a time for new dreams and a new lease on life.

Now it’s time to take action. If you’re like most people, you’ve collected a myriad of possessions over the years. Instead of holding on to all your keepsakes, consider giving your family some valued heirlooms and pass on belongings that you won’t need in your new lifestyle.

Sell your extra vehicle or give it to a relative. Give the clothes you won’t need in your retirement to charity. Also, a garage sale is a terrific way to get rid of unnecessary clutter. You’ll likely find that most items won’t even be missed. The goal is to simplify your life, so be firm with yourself – but if there are some things you just can’t bear to part with, don’t worry. Remember, you’re in control.


If you’re withdrawing money from retirement accounts to pay a mortgage each month, this additional “income” could trigger additional taxes – on top of the hefty property tax you already pay. You may love your home and be reluctant to say goodbye, but the best choice could be to pull up stakes. Your home can be an important source of income or capital, and when you downsize, that creates equity for your retirement income.

Be proactive and choose a new housing option – like a condo, perhaps – that better suits your needs now and later on down the road. Some Canadians opt to become snowbirds and spend their winters in a warmer southern climate. Although there are many things to consider if you go this route, such as becoming a resident of another country, obtaining health care, and perhaps buying foreign property, downsizing can make it possible.

Consider Dominic and Anna. Ten years ago they bought a new home, but now their children have gone away to university and only visit a few times a year. Dominic and Anna found that they weren’t using most of their rooms. Cleaning and maintaining the house and the yard was becoming a real chore. To top it off, many of their friends had sold their homes in favour of smaller condos and were spending winters down south.

Soon Dominic and Anna realized that their mortgage was an added expense that really wasn’t necessary. They spoke to their financial advisor and decided that downsizing could make it possible to own or rent another property. So they sold their home and moved into a condo that was just the right size for the two of them. Now they spend their winters in a rented beach house on the Florida coast, thanks to smart and strategic downsizing.

After you’ve downsized your home and done away with the clutter in your life, it’s time to get rid of the financial clutter you may have accumulated over the years. Having too many investment accounts can be a waste of your time and, more importantly, your money. With multiple fees and so much paperwork to deal with, having too many accounts can be a real hassle.

Before retirement, most people have a number of different investments and providers. But upon retirement, you may find it much easier to consolidate your assets. Consolidating your investments will make it easy for you and your financial advisor to assess your financial situation and your progress towards your goals. You can reduce paperwork and eliminate multiple fees.

Listing different beneficiaries is also sometimes a reason to maintain different investments. But with segregated funds, you can designate a number of beneficiaries and specify the allocation, all in one contract. With these types of investments, you not only get the benefits of consolidated reporting and a guarantee of the principal at death or maturity, but also the ability to bypass probate and gain potential creditor protection1.

But remember, consolidating your investments does not mean you reduce your investments. Diversifying your assets adequately is still important. Consolidating doesn’t always mean you have to trim down to just one investment – the goal is to lighten your load and keep your investments manageable.

When Juan Diaz retired, he decided to consolidate his assets. When he started looking through his records, he realized he’d forgotten about some RRSPs that he had contributed to at an old job. He found he was holding a number of the same investments and, as a result, wasn’t as diversified as he thought. Seeing everything together can often result in new insight. By doing this, you and your advisor can get the complete picture and potentially reevaluate the portfolio to ensure it’s still meeting your needs.

1 In Saskatchewan insurance policies with a named beneficiary are included in the application for probate but are not subject to probate fees.

Today, Juan has a diversified portfolio that will help him reach his savings goals. And by downsizing the number of investments, he now receives only one statement and pays much less in fees. Juan couldn’t be happier now that he doesn’t have to pore over paperwork every month trying to figure out his financial picture.

Consolidating assets has many benefits, from giving you a more accurate financial picture, to simply having less paperwork.

* Consolidating investments helps avoid portfolio overlap, as well as gaps
* Consolidated assets may result in larger balances, offering the potential to invest in separately managed or asset allocation “portfolios” that might require a larger initial investment
* It’s easier to track your investment progress and get a better idea of how your money is invested, and reduces the amount of paperwork
* You may save on paying multiple fees for administration and account maintenance
* Consolidating assets into an RRSP or RRIF may offer greater flexibility for payouts and beneficiaries.

In the event of your death, both can be rolled over tax-free to your spouse, or a dependent child or grandchild if they are named as beneficiary

Until you start looking at all your financial holdings, you probably won’t even realize where all your money is. Here are some areas that can be simplified:

1. Retirement assets – Your retirement assets may be spread out over several plans, like a past employer’s pension, and be held by different providers and institutions. You may not even be sure exactly how much your assets are worth or whether they’re being invested in a way that will benefit your retirement lifestyle. Consolidating your retirement assets can give you a keener perspective on your finances.

2. Credit cards – Chances are, your wallet has some credit cards in it that you hardly ever use. So instead of getting bogged down every month with endless account statements, cut up the cards that you don’t need anymore and cancel your accounts. It’s really only essential to have one or two major cards that are widely accepted.

3. Bank accounts – If you have multiple bank accounts, you’re probably paying far too many service charges every month and not making as much interest on your money as you could be. Decide which bank you prefer and arrange to transfer your other accounts there. Look for banks that offer high-interest savings accounts. With these types of accounts, you can still access money and get the benefit of a much higher interest rate.

4. Mutual funds – Investing in any single fund could leave you with big returns one year and losses the next, while spreading your money around too much could leave you with a heap of account statements and a tangle of holdings that don’t add up to a coherent investment plan.

Consider asset allocation or wrap programs. They offer diversification through targeted portfolios and usually offer consolidated and enhanced reporting. These types of plans offer the simplicity of single-statement account balances and consolidated tax-record-keeping. Remember not to sacrifice diversification. Ensure your provider has a wide range of options available for you.

5. GICs – Consolidating the number of GIC investments also makes a lot of sense. However, some might prefer to have multiple GICs to take advantage of varying maturity and payout terms. The trick is to keep it simple. A laddering strategy might help you achieve the flexibility you are looking for and the ease and convenience you need.

With a laddering strategy, you can build a fixed income portfolio with a diversified maturity structure – all in one consolidated investment. By equally dividing your initial investment over multiple terms, you can create a rolling maturity cycle so that part of your investment comes due each year. This allows for an automatic annual re-investment of that portion at attractive long-term rates. It also reduces interest rate risk – if rates are falling, only one portion of your investment is immediately affected; if rates are rising, you’ll be able to capture that increase as you reinvest.

6. Debts – If you have several loans or debt from different sources, it’s likely that you’re paying high interest rates. You may want to consolidate by using a debt consolidation or debt management program. Debt consolidation can reduce the interest rate you’re paying and also significantly reduce your monthly debt obligation while consolidating all of your debt payments into one monthly payment. You can even use the equity in your home to get a lower rate. Consolidating debts allows you to make only a single payment and track your repayment progress more easily.

Downsizing and simplifying your life requires that you first prepare mentally and get into a new mindset. Then, you can physically downsize your belongings and home before moving on to consolidating your assets.

Going from supersized to downsized can be a challenging adjustment, but with the right strategy, you’ll be well on your way to a worry-free retirement. Speak with your financial advisor about which downsizing and consolidating strategies are right for you.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments and with the use of an asset allocation service. Please read the prospectus in which the investment may be made under the asset allocation service before investing. Investment returns are not guaranteed, their values change frequently and past performance may not be repeated.

Content provided courtesy of Manulife Investments

© Copyright of this article is held by The Manufacturers Life Insurance Company (Manulife Financial). You are free to make copies of this article and to distribute it, either in paper form or electronically, as long as you do not change or remove any part of this work. All other uses are prohibited.

Manulife Investments is the brand name identifying the personal wealth management lines of business offered by Manulife Financial and its subsidiaries in Canada. As one of Canada’s largest integrated financial services providers, Manulife Investments offers a variety of products and services including segregated funds, mutual funds, principal protected notes, annuities and guaranteed interest contracts.

WealthStyles, Manulife and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation.

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Mark Huber is a certified financial planner, author, speaker, coach and successful online entrepreneur. Marks philosophy: "The best way to predict your future is to create it...." Marks top requested titles: "The 8 Top Simple Ways To Get More Leads & Sales For Your Business On LinkedIn" "How To Blog To Make Money" "How To Get Rid Of Credit Card Debt Fast" "How To Get Rid Of Your Mortgage And Create Wealth - The UnCanadian Way" Marks mission: "To teach, support and empower people as they transform their lives!"