Getting Ready for Retirement Like an “Olympic Athlete”

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Are you approaching or have you recently begun investing for your retirement? Are you thinking about what your financial future might look like during your retirement years?

Considering we are living longer than any generation before us, financial planning for retirement requires careful attention and long-term commitment. As we navigate through life, our spending habits and priorities change year by year.

Adults in their late 20s to late 30s may share a common belief that retirement is far away. After people reach their mid- 40`s however, it can start to feel like it is quickly approaching. Because many are concerned with mortgage and car payments, there may not be much left for retirement savings. It is a positive practice at every stage of our lives to set realistic financial goals and build an effective retirement strategy in order to maintain our lifestyle after our working years.

Here are some strategies that have helped many people achieve their financial goals as they transition into retirement:

If You Are Just Getting Started:

Setting Goals and Creating Good Habits

  • Listing your retirement goals and making an action plan will help you to make a stronger connection to your retirement objectives.
  • Your goals can act as checkpoints throughout life, so you can see if your plans are on track. If not, reviewing your goals once a year will help you to
    tweak your financial strategies when you need to.

Live Within Your Means

  • We all enjoy rewarding our hard work with a dinner or a movie. But all those rewards, paired with regular monthly expenses, can add up. Creating a monthly budget and asking yourself “Do I need this?” can help you to live within your means.

Emergency Cash

  • As the saying goes, “Life happens.” You should be able to set aside a few months worth of expenses in case of emergency.
  • The TFSA (Tax-Free Savings Account) is a flexible source for an emergency fund for your early years. It offers tax-free withdrawals and is also an excellent tool for tax-free investment income.

Take Advantage of Your Group Retirement Plan

  • A group retirement plan can give you tax advantages and lower investment fees while helping you save more. In addition to this, if your employer will match your contributions, it’s like being given free money. Why say no?.

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If You Are Getting Serious:

Knowledge is Power

  • Planning ahead and drawing up a detailed budget of what you think your post-retirement expenses will be helping you to determine how much income you will need in retirement. However, we will need to keep in mind that economic conditions change constantly and so will your needs. It’s important to review your retirement plan and investment selections on a regular basis. This will allow you to select the right investments for your changing investment personality and maximize your savings.

Don`t Chase Quick Returns

  • Studies suggest investors who buy and hold — riding out the market ups and downs — will fare better in the long run than investors who jump in and out of the market.

The Risk of Living Longer

  • Medical advances help us to live longer and healthier lives. If you aren’t disciplined about saving, you run the risk of outliving your retirement nest egg. That’s why it’s important to try to accurately predict how long you will need to live off your retirement savings.

Learn about time-tested Investment Strategies

  • Your savings are likely to grow when you contribute to your retirement plan early and regularly. Regular contributions will allow you to diversify your investments so you can minimize the impact of a decline in any one asset.
  • Don’t forget to take advantage of registered savings plans. This will help you to minimize your income taxes during your
    work years.

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If You Are Getting Close:

Calculate how much retirement income could your savings generate and how long it will last

  • How much money you’ll need for retirement is primarily determined by how long you live – something that’s impossible to know with any certainty. Don’t forget that Canadians live much longer than they once did. You need to know how long that pool of retirement money will hold out if you start dipping into it each month.

Estimate your living expenses, re-evaluate your lifestyle and think about what kinds of things you’ll be doing in retirement?

  • Proper planning will allow you to make sure you’ll still meet all your retirement savings goals, and enjoy what you’ve worked for.
  • Track your current spending and list possible lifestyle changes such as downsizing to a new home.
  • If you are thinking of moving to another country, then consider things like taxes, the cost of living, and healthcare.

Try this online tool to find out
information about your current
savings plan(s) and view graphs
and charts of your results.

Review your beneficiaries

  • Look at who you’ve selected as beneficiaries for either savings or income plans, and make sure you’re still happy with your selection.

Convert your RRSPs to RRIF before you turn age 71

  • You won’t pay any taxes at the time you convert your savings. However, RRIF income (Registered Retirement Income Fund) is taxable in the year you receive it.

Convert your RRSPs to RRIF before you turn age 71

  • You won’t pay any taxes at the time you convert your savings. However, RRIF income (Registered Retirement Income Fund) is taxable in the year you receive it.

Understand government, company retirement and personal income sources and the facts about taxation

  • The tax-free savings account helps you to earn tax-free investment income and also withdraws without paying tax. It is a great tool to supplement your registered savings and shelter your excess retirement or pension income in a flexible account.

If you’re collecting income from a pension payments, annuity payments, interest from guaranteed investments, or making withdrawals from RRSPs, these will all be taxed as personal income. Dividends from Canadian corporations and capital gains generated in a non-registered savings plan will also be taxed, although at a lower rate than regular income. Income (interest and dividends) and capital gains are not taxable in a tax-free savings account (TFSA).

Final Words:

As you can see, there are different strategies depending on your age and financial concerns. For example, the actual income you’ll receive from your income sources can vary greatly depending on your retirement age, the type of retirement income vehicle you choose, and your investment returns. We should all understand the importance of creating a retirement income strategy to not only help meet our long-term savings goals, but to reduce the stress and anxiety surrounding retirement planning as well. Knowing your options as early as possible is always the best approach! And don’t forget to ask questions of investment professionals to help you along the way.

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