June is Seniors’ Month and we think there’s no better time to break down exactly what you need to plan for a financially secure retirement. After years of working hard, don’t leave your golden years to chance.
Here are some things to think about:
1. Age doesn’t matter
With a topic like retirement, you’d think it would. But the harsh truth is, no matter how old you are now, one day you’ll likely want to retire. What’s the number one thing our clients mention? “I wish I started saving sooner”.
Think of it like this: you are gearing up for the marathon of your life. It requires a certain degree of physical ability, but also a dedicated fitness routine that takes practice, determination and will. Your financial fitness similarly needs a degree of dedication in order to achieve your goals and finish the race. Or, in this case, retire well.
Stretch yourself to meet your goals. Perhaps that means giving up one luxury each month. You’ll see the savings accumulate over the years. See how this family saved nearly $1,500 a year by practicing better grocery shopping habits. That adds up to over $45,000 in savings over 30 years.
2. Embrace the acronyms
A RRSP and TFSA account, as well as a workplace pension savings plan (if applicable) are the three greatest ways for you to save, rather effortlessly, for your golden years.
RRSP contributions let you reduce your taxable income. Your savings grow tax-free as long as your money stays in the plan and you get to choose how to invest your savings. Learn morehere.
TFSAs are great for letting you save tax free for any goal. You can save up to $5,500 a year and withdraw whenever you want without paying any tax. Learn more here.
Pension plans, group RRSPs and other savings plans can be a convenient way to save because the savings come off your pay rather seamlessly. If your employer matches your contributions, your savings power is instantly doubled. Learn more here.
3. Think outside the box
Saving for retirement is not as easy today as it once was. It’s not enough to just put aside a portion of your annual salary and expect it to stretch as far as it once did.
If you think your Starbucks latte is expensive today, what do you think it will cost 10, 20 or 30 years from now? The further away you are from your retirement, the more impact inflation will have.
Consult with an experienced advisor and they will help you consider the effect of inflation for your retirement savings.
4. Consider other sources of income to bring in savings
We get it; it’s really difficult to find the extra money to put away after bills, payments, groceries…etc. Consider using your skills to make some extra money that you can allocate to either a savings account or for your leisure spending.
Think about what you’re good at and look for an avenue that lets you explore it. Working extra will let you augment your income. Broad-spectrum websites like Kijiji or Workopolis are always sharing job postings that serve as opportunities for you to make some extra money; many of them even let you make this extra money from home using professional skills. Even an extra $50 each week means an augmented income of $200 each month, which you can use to spend on leisure or to add to your TFSA for additional savings. The bottom line: if you find saving to be very challenging with your current income, it’s time to think about augmenting it. Get creative!
5. Considerations for the future
What you should take away from this blog is not to listen to typical widespread notions that 75% of your annual salary is an appropriate retirement savings benchmark. It’s not. This retirement calculator will give you a general idea of just how much of today’s money you’ll need to save up until the year 2048.
The problem with general retirement formulas is that they do not consider societal inflations. They also fail to recognize that every person’s dream retirement is completely different. While your retirement might look like a trip around the world, your neighbour’s retirement may include downsizing and relaxing by the cottage with little spending.
Your best bet? Consult a trustworthy advisor with experience in retirement planning and take the guesswork out of planning for the rest of your life.
Take the first step to planning your golden years today.