How to Create a Financial Freedom Plan

Financial freedom does not happen simply because you reach a certain savings balance. It happens when your income, spending, investments, pensions, government benefits, taxes, housing, and other financial resources work together to support the life you want.

That is why a financial freedom plan is much more useful than a single savings goal.

You need to understand where your money comes from, where it goes, how your investments may grow, when you want to retire, how taxes may affect your income, and what happens if your assumptions change.

This is exactly the type of planning that Retirementize is designed to help with.

Retirementize brings the major pieces of a retirement and financial freedom plan together in one place so you can build a plan, improve it, test different scenarios, confirm whether the results work for you, and repeat the process as your circumstances change.

In other words:

PLAN. IMPROVE. TEST. CONFIRM. REPEAT.

This article walks through how to build that plan step by step.

If you are new to financial freedom, start with Article #1: How to Achieve Financial Freedom. You can also review Article #4: How to Calculate Your Financial Freedom Number before building your detailed plan.

What Is a Financial Freedom Plan?

A financial freedom plan is a long-term financial model that shows how your money may support your desired lifestyle over time.

A good plan can help answer questions such as:

• When could I afford to retire?
• How much should I save?
• How much can I spend in retirement?
• Will my investments last?
• How much income will I have?
• When should I start government benefits?
• How will taxes affect my retirement income?
• What happens if I retire earlier?
• What happens if I live longer?
• What happens if markets perform poorly?
• Can I afford to spend more?
• Can I help my children or grandchildren?
• What happens if I downsize my home?
• What happens if my circumstances change?

A financial freedom plan is therefore much more than a retirement date or investment balance.

Why Use Retirementize to Build Your Financial Freedom Plan?

Many financial calculators focus on one part of the financial picture.

One calculator may estimate investment growth. Another may estimate retirement income. Another may calculate taxes. Another may estimate government benefits.

The problem is that retirement decisions do not happen independently.

Changing one assumption can affect several other parts of your financial life.

For example, retiring earlier can affect:

• How long your investments need to last
• How many years you contribute to savings
• When you begin government benefits
• How much income you need from investments
• Your lifetime taxes
• Your portfolio balance
• Your estate

Retirementize is built around this connected view of retirement planning.

Instead of treating every financial decision as a separate calculation, you can create a plan that combines your major financial resources and expenses into one long-term projection.

That makes it easier to see how individual decisions affect the overall plan.

Step 1: Define What Financial Freedom Means to You

Before entering numbers into a financial plan, define what you actually want.

Financial freedom might mean:

• Retiring completely
• Retiring early
• Working part time
• Changing careers
• Starting a business
• Spending more time with family
• Traveling more
• Having enough money to leave a stressful job
• Making employment optional

Your objective determines what the rest of your financial plan needs to accomplish.

For example, someone planning to retire at 50 needs a different plan from someone planning to work until 70.

Read Article #3: Financial Freedom vs Retirement for more on the difference between financial independence, early retirement, traditional retirement, and semi-retirement.

Step 2: Build Your Retirementize Plan

Once you understand your goal, the next step is to create your plan in Retirementize.

Start with the basic information that establishes your financial situation.

This can include:

• Your age
• Your spouse's age, if applicable
• Your desired retirement age
• Your expected planning horizon
• Your desired retirement spending
• Your current income
• Your savings
• Your investments
• Your pensions
• Your government benefits
• Your home
• Your other property
• Your financial assumptions

Once those pieces are in the plan, Retirementize can use them together to project your financial future.

This is important because the goal is not merely to enter information. The goal is to create a model that helps you understand the relationship between your financial decisions.

Step 3: Enter Your Income

Your financial freedom plan needs a realistic picture of your income before and during retirement.

This can include employment income, business income, rental income, pensions, and government benefits.

Income may also change over time.

You might earn a high salary today, reduce your hours later, retire completely, and then begin receiving additional retirement benefits.

Retirementize allows you to model these changing income sources as part of the broader retirement projection.

This helps you see the difference between your working years and your retirement years rather than assuming your income stays constant forever.

Step 4: Define Your Retirement Spending

One of the most important inputs in a financial freedom plan is spending.

Your investments cannot be evaluated properly without knowing how much money you expect to spend.

Consider:

• Housing
• Food
• Transportation
• Travel
• Entertainment
• Healthcare
• Insurance
• Taxes
• Home maintenance
• Gifts
• Major purchases
• Other lifestyle expenses

Your spending may also change as you move through retirement.

You may spend more during the first years of retirement while you are active and traveling, then spend less later.

Alternatively, healthcare or support costs could increase later in life.

A detailed financial freedom plan should allow you to explore these possibilities.

Step 5: Add Your Investment Accounts

Your investment portfolio is one of the most important components of your financial freedom plan.

But simply entering a total investment balance does not tell the whole story.

You may have several different types of accounts with different tax characteristics and withdrawal rules.

For example, you could have:

• Taxable investment accounts
• 401(k) accounts
• Traditional IRAs
• Roth IRAs
• RRSPs
• TFSAs
• Cash savings
• Other investment accounts

The type of account can matter just as much as the balance.

Retirementize lets you model multiple financial accounts so that your retirement plan can reflect the actual structure of your savings rather than treating everything as one generic investment account.

Step 6: Add Your Pensions

Pensions can dramatically change a retirement plan.

A household with reliable pension income may need significantly less portfolio income than a household that relies entirely on investments.

When building your Retirementize plan, include your expected pension income and consider when that income begins.

This can help show how your required investment withdrawals may change throughout retirement.

It can also help you evaluate whether delaying or starting certain income sources at different times changes the overall plan.

Step 7: Add Government Benefits

Government retirement benefits can be another significant source of retirement income.

Depending on your country and circumstances, this may include programs such as:

• Social Security
• CPP
• OAS
• Other government retirement benefits

The timing and amount of these benefits can influence your financial freedom plan.

For example, retiring before government benefits begin may create a temporary income gap that your investment portfolio needs to cover.

A connected retirement plan can make this transition easier to visualize.

Step 8: Include Taxes

Taxes are one of the biggest reasons a simple retirement calculator may not provide a complete answer.

Your gross retirement income is not necessarily the amount available for spending.

Your financial freedom plan should therefore consider the tax consequences of your income and withdrawals.

This is particularly important when you have multiple types of accounts.

The timing and source of withdrawals can influence your taxable income, which can then affect how much money remains available for spending.

Retirementize incorporates tax considerations into the broader retirement projection, allowing you to see your retirement plan as an after-tax financial picture rather than simply a collection of account balances.

For a deeper discussion of retirement taxes, see Article #13: How Taxes Affect Your Retirement Plan.

Step 9: Include Your Home and Housing

Your home can be one of the largest assets in your financial plan.

It can also be one of your largest expenses.

That makes housing important to financial independence.

You may plan to:

• Stay in your current home
• Pay off your mortgage
• Downsize
• Move to another location
• Rent
• Sell the property later

Retirementize can incorporate housing into the broader financial projection so you can explore how changes to your housing situation may affect your retirement plan.

This is especially useful when considering a future downsizing decision.

A home is not simply an investment account. It is also a major component of your lifestyle and spending.

Step 10: Set Your Retirement Age

Retirement age is one of the most powerful variables in your financial freedom plan.

Changing your retirement age can affect:

• How long you earn employment income
• How long you contribute to investments
• How long your portfolio can grow
• How many years your portfolio must support you
• When pensions begin
• When government benefits begin
• Your lifetime tax situation

Retirementize lets you explore different retirement timing assumptions so you can compare potential outcomes rather than simply guessing which retirement age is affordable.

Step 11: Establish Your Financial Assumptions

Every financial projection requires assumptions.

These may include:

• Investment growth
• Inflation
• Housing appreciation
• Retirement spending
• Longevity
• Income growth

It is important to remember that these are assumptions, not predictions.

No one knows exactly what investment returns or inflation will look like decades into the future.

That is why Retirementize is most useful when you use the assumptions to create a starting plan and then test the plan under different conditions.

Step 12: Review Your Retirement Projection

Once you have entered the major components of your financial life, review the projected results.

Look at:

• Income over time
• Spending over time
• Investment balances
• Withdrawals
• Taxes
• Pension income
• Government benefits
• Housing changes
• Estate or legacy outcomes

The purpose is not to predict exactly what will happen.

The purpose is to understand the financial path created by your current assumptions.

Retirementize Makes the Plan Interactive

This is where a dedicated retirement planning platform becomes particularly useful.

Instead of calculating your retirement plan once in a spreadsheet and then forgetting about it, you can adjust the assumptions and immediately see how the financial picture changes.

For example:

• Change your retirement age.
• Change your spending target.
• Change your savings rate.
• Change your investment assumptions.
• Change when benefits begin.
• Change your housing plans.
• Change your income.

Then compare the resulting plan.

This turns retirement planning into an interactive decision-making process.

PLAN. IMPROVE. TEST. CONFIRM. REPEAT.

This is the core philosophy behind building a useful financial freedom plan with Retirementize.

1. PLAN

Start by entering your current financial situation and your desired future.

Build the best reasonable version of your initial plan.

Include your income, spending, investments, pensions, government benefits, housing, retirement age, and other important assumptions.

2. IMPROVE

Once you see the initial results, identify opportunities to improve the plan.

You could:

• Save more
• Retire later
• Reduce spending
• Change your investment strategy
• Adjust income timing
• Change housing plans
• Improve tax efficiency

Retirementize makes these improvements easier to evaluate because you can change the underlying assumptions and see the resulting projection.

See Article #9: Ways to Improve Your Retirement Plan for additional ideas.

3. TEST

This is where your plan becomes much more valuable.

Do not test only the retirement scenario you hope will happen.

Test the scenarios that could realistically happen.

What if you retire early?

What if you live longer?

What if investment returns are lower?

What if inflation is higher?

What if spending increases?

What if you receive an inheritance?

What if you experience a major life event?

Retirementize's What-If functionality allows you to explore different financial decisions and scenarios without losing sight of your main plan.

Testing is one of the most important parts of retirement planning because the future will almost certainly be different from your original assumptions.

4. CONFIRM

After testing different scenarios, determine whether your plan provides an acceptable level of financial security and flexibility.

You may discover that your plan works under a wide range of reasonable conditions.

Or you may discover that it depends heavily on one particular assumption.

Either result is useful.

The purpose of confirmation is not to guarantee the future. It is to understand whether your plan is strong enough to give you confidence.

5. REPEAT

Your financial freedom plan should evolve as your life changes.

Review it periodically and update important assumptions.

Retirementize can become a planning tool you return to rather than a calculator you use once.

Use What-If Scenarios to Make Better Decisions

One of the most powerful aspects of Retirementize is the ability to explore What-If scenarios.

Instead of asking:

"Can I retire?"

You can ask more useful questions:

• What if I retire at 55 instead of 60?
• What if I work part time?
• What if I spend $10,000 more each year?
• What if I spend $10,000 less?
• What if investment returns are lower?
• What if I live to 100?
• What if I downsize my home?
• What if I receive an inheritance?
• What if I experience a divorce?
• What if one spouse dies earlier than expected?

These questions are much closer to the decisions people actually face.

A financial plan becomes much more useful when it can help you explore choices instead of simply producing one projected retirement date.

Use Monte Carlo Analysis to Test Uncertainty

Investment returns do not arrive in a predictable straight line.

Markets can rise sharply, fall sharply, and move through long periods of different conditions.

Retirementize can use Monte Carlo analysis to help explore how a retirement plan behaves under different investment and inflation outcomes.

This does not predict exactly what the market will do.

Instead, it provides another way to examine the resilience of your plan.

Learn more about this approach in Article #21: What Is a Monte Carlo Retirement Simulation?.

Track Whether Your Plan Is On Course

Building a financial freedom plan is not the end of the process.

You also need to know whether reality is tracking reasonably close to your assumptions.

Your:

• Savings
• Investment balances
• Income
• Spending
• Housing
• Retirement date
• Benefits
• Tax situation

can all change.

That is why it can be useful to periodically update your plan and see whether the projected outcome has changed.

See Article #27: How Do I Know If My Retirement Plan Is On Track? for more information.

Your Financial Freedom Plan Should Include More Than Investments

A common mistake is to think that financial planning is primarily investment planning.

Investments are important, but they are only one piece of the puzzle.

Your overall financial freedom plan may involve:

• Income
• Spending
• Savings
• Investments
• Pensions
• Government benefits
• Taxes
• Housing
• Insurance
• Debt
• Family goals
• Estate goals
• Retirement timing

Looking at these components together can provide a much more useful picture than looking at your investment portfolio alone.

Retirementize Can Help You See the Whole Picture

This is where Retirementize is different from a simple retirement savings calculator.

The goal is not simply to tell you how much money you may have at age 65.

The goal is to help you understand how the major components of your financial life interact over time.

With Retirementize, you can build a plan that incorporates:

• Multiple financial accounts
• Investment growth
• Retirement income
• Pensions
• Social Security
• CPP and OAS
• Taxes
• Income splitting considerations
• Housing
• Rental properties
• Changing spending
• Retirement timing
• What-If scenarios
• Monte Carlo analysis
• Legacy considerations

This connected approach is important because a change in one area can affect several others.

Use Retirementize Before Making Major Retirement Decisions

Imagine that you are considering retiring three years earlier.

It might seem like a simple decision.

But retiring earlier could mean three fewer years of employment income, three fewer years of contributions, three more years of portfolio withdrawals, and a longer period before certain benefits begin.

Instead of guessing whether the decision works, you can model it.

Create the original plan.

Create an alternative scenario.

Compare the results.

This approach can turn a major financial decision into something you can analyze rather than simply hope will work.

Retirementize Is Not About Predicting the Future

No retirement planning software can tell you exactly what will happen decades from now.

Your actual investment returns, inflation, spending, taxes, health, employment, housing, and family circumstances will almost certainly differ from your assumptions.

The purpose of Retirementize is not to eliminate uncertainty.

It is to help you understand the financial consequences of your decisions.

That distinction matters.

A financial plan is a model of the future, not a guarantee of the future.

The better your model and the more scenarios you test, the better prepared you may be to adapt when reality changes.

Working With a Financial Advisor?

Retirementize can also be useful if you already work with a financial advisor.

A financial advisor can provide valuable professional guidance, while a detailed financial model can help you understand the assumptions behind the recommendations.

You can use your plan to prepare questions, explore different retirement ages, compare spending assumptions, and better understand the potential effects of financial decisions.

If you are considering professional advice, see Article #40: Do I Need a Financial Advisor? and Article #42: How to Prepare for Your First Financial Advisor Meeting.

Retirementize Gives You a Place to Start

One of the biggest challenges with financial planning is simply getting started.

You may know that you need to save more.

You may know that you need to think about taxes.

You may know that you should estimate your retirement spending.

But these individual tasks can feel overwhelming when they are disconnected.

Retirementize provides a framework for bringing them together.

Instead of maintaining separate calculations for investments, retirement income, taxes, benefits, spending, and housing, you can build a connected retirement plan and then explore how the pieces interact.

Fun Facts About Financial Freedom Planning

Build Your Financial Freedom Plan With Retirementize

A financial freedom plan should answer more than one question.

It should help you understand:

• How much you can spend
• When you can retire
• How much you need to save
• How your investments may grow
• Where your retirement income will come from
• How taxes affect your plan
• How housing affects your finances
• What happens if your assumptions change
• Whether your plan remains viable under different scenarios

That is why Retirementize is designed around the entire retirement picture rather than a single retirement savings calculation.

Build your initial plan.

Improve it.

Test it.

Confirm the results.

Then repeat the process as your life changes.

PLAN. IMPROVE. TEST. CONFIRM. REPEAT.

Continue the Financial Freedom Series

Now that you understand how to build a financial freedom plan, continue with Article #6: Financial Planning Checklist.

You can also revisit Article #1: How to Achieve Financial Freedom, Article #2: How Much Money Do I Need to Retire?, and Article #4: How to Calculate Your Financial Freedom Number.

For more specialized planning topics, explore Article #7: The 4% Rule, Article #9: Ways to Improve Your Retirement Plan, Article #13: How Taxes Affect Your Retirement Plan, and Article #27: How Do I Know If My Retirement Plan Is On Track?.

If you are considering professional advice, see Article #40: Do I Need a Financial Advisor? and Article #42: How to Prepare for Your First Financial Advisor Meeting.

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