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Employment provides a flow of paycheques. Cash flow management may be minimal while you’re employed because when you spend one paycheque, you know that another one is on the way. Not only that, the right amount of income tax is often already withheld from your pay, so that come Tax Day, there is no more income tax owing.
Retirement requires a lot more cash flow management. For example, it is most likely that income tax withheld from a pension cheque (if any) will fall short of the total income tax owing come Tax Day. That calls for planning.
Needing to find extra cash on Tax Day is minor compared to the devastation that can happen if your retirement pension comes solely from savings (like an RRSP, or a company lump-sum retirement amount) and there’s been no planning. I know of a couple who received a large payout when the husband retired. They were not used to any kind of money management and saw the payout as a windfall for big-ticket spending. They spent it all within a few short years. The wife, who eventually became widowed, lived a long time, with government pension as her only income.
If you are not used to hands-on cash flow management (tracking money in and money out), don’t wait until retirement and risk the hard lessons. Get to know your personal cash flow while you’re still employed and determine what the difference will be when those employment paycheques stop, and the pension pay begins.
Hazel Fluke, Financially Speaking 