Does the word “retirement” scare you? Is it a far-off goal or just around the corner?
No matter where you are in your career path, you should be thinking about retirement, because it's really about realizing dreams and goals. It's not about ending something, but starting the next phase of life, and having the right tools to achieve your savings goals.
So take the first step and determine what it is you want. Do you want to travel the world? Try a new career? Or spend time with your children and grandchildren?
Whatever your heart desires now, with the help of a Retirement Savings Calculator, it's easier than you think to take steps to plan for retirement. Pick a retirement age, desired monthly income and monthly contributions and see how to adjust contributions to meet your goals on your timeline.
After checking out the Retirement Saving Calculator, it's time to put a plan into action. Here are a few key points to consider:
How do you create a retirement picture?: After thinking about your goals for retirement, it's also important to think about how that path will happen. If you're married, discuss your collective goals with your better half to help plan for the future. For some, retirement means ending your career phase and exclusively focusing on spending time travelling or with family and friends. For others, retirement is an opportunity to do something new - whether it's continuing to work part-time for a slower transition into this new phase in life, launching a new career or focusing on volunteer work. Make a decision and start the plan to achieve your retirement vision.
Funding the vision: So how do you make sure you have enough funds for retirement? The key is to draft a realistic financial plan that considers your current financial situation. This includes considering things such as each spouse’s tax situation, company pension plans, and risk tolerance while also keeping in mind possible life changes and each of your respective expectations and goals. Once you know what you want to achieve and where you are today, it's easier to make a plan and discuss with a financial advisor how to close any financial gaps that exist to help achieve your retirement goals.
Early career years: Retirement may seem very far away when you're at the beginning of your career in your 20's and 30's. With the cost of daily living, paying off education loans, saving for a house or preparing for a child at the top of your list, it's hard to think about putting money aside for retirement. Focus on reducing high interest debt, such as credit card debt or personal loans and you can also tackle mortgage debt and retirement savings at the same time by using your tax refund from your RRSP (Registered Retirement Savings Plan) contribution to pay down the mortgage. For those in a lower tax bracket, consider investing in a TFSA (Tax Free Savings Account) and transferring the money to an RRSP when earnings increase to take advantage of the deduction at that time.
Approaching retirement: For those in their 40's and 50's, although retirement may seem much closer, there may still be many financial concerns - mortgage payments, post-secondary education for the kids and caring for elderly parents. You're probably in a higher tax bracket now, so this is the time to take advantage of RRSP deductions, reduce investment risk as you get closer to retiring and consider a spousal RRSP if your retirement income is projected to be much higher than that of your spouse. Consult a financial advisor for guidance on the investment strategy that maximizes your returns and retirement savings.
Retirement years: Your CPP/QPP (Canada Pension Plan/Quebec Pension Plan) benefits can begin anytime between age 60 and 70, and, the earlier your benefits begin, the smaller the monthly payment you will receive. As you will be drawing on money from an RRSP, TFSA and/or non-registered accounts, confirm which should be withdrawn first and by which spouse to maximize your combined after-tax retirement income. Take time to revisit your retirement plan regularly and ask questions about what effects the economy and any additional part-time income may have on your nest egg.
Meeting with a financial planner can help guide you through any stage of retirement planning - and it's a good idea to revisit your plan on a regular, preferably yearly, basis, to ensure your financial plan evolves to reflect any changes in your life, expectations, financial situation and goals.