No two retirement plans look the same, and yet we are bombarded with pictures of people quietly spending their retirement reading paperbacks on rocking chairs.
Canadians are living to 81 on average, which means you'll have plenty of time to sit in a rocking chair — if that’s what you want. But your retirement is just that: YOURS. We’ve got some ideas to help you embrace change and make the most for a brighter post-work life.
What does your retirement look like?
Everyone's retirement is unique. Most of us know we want to retire, but we’re not always sure what retirement looks like. That's why it's smart to sit down and plan your future so you can support your life and financial goals.
Some questions to consider:
- Your current age and the age you would like to retire
- Your current level of debt (consumer and housing)
- How long it will take you to pay off that debt
- Your current savings and your yearly contribution to your savings
- Your current hobbies, if you plan on continuing them after retirement
- New hobbies after retirement (travel, golf, courses, second career etc.)
- Your health and history of family illness
- Dependents in your retirement years (live-in children or elderly parents)
- An emergency fund for home repairs, medical expenses, etc.
There isn't one magic number, just a number that's right for you.
Where's the money coming from?
Now that you have an idea of what you want your retirement to look like, it's time to figure out how to fund it. There isn't one magic number, just a number that's right for you. Your plan can be costed out so you have an idea of how much you need to save. Once you have that, you can break down your annual and monthly contribution to a retirement savings plan whether it's an RRSP, a TFSA or both. An advisor can suggest which option is better based on your level of pre- and post-retirement income.
Other sources of revenue include your employer's pension plan if available (if you aren't contributing, start now), the Canadian Pension Plan (CPP) and Old Age Security (OAS). Most Canadians are eligible for CPP and OAS and the Government of Canada website provides information on how to apply and how much you may receive.
If you have additional revenue sources such as dividends, an inheritance, or income from being a landlord, factor all of that into your retirement income.
Retirement planning doesn’t start once you reach your retirement age. It starts now. One smart move is to start (and stick to) a budget. It's difficult to know how much annual income you'll need in retirement if you don't know how much you spend now. Once you have your annual spending, you can budget your retirement income, an average of 50-70 % of your current income. Budget programs like Mint or even a simple Excel file can help you see how and where you're spending your money.
Planning for retirement can seem intimidating for some, but there are tools available and an advisor can help you develop a personalized retirement plan. Planning now means you have choices – whether it’s travelling, spending time with friends or, even sitting in a rocking chair reading a paperback.