Retirement planning is about managing your money so you can make the most of your retirement years. Your retirement plan should balance your needs, wants and the reality of your finances. Below are a few tips about what to know before you retire.
How Much You Need to Save Depends on 3 Things
Age: When you start saving makes a big difference in how much you need to put away. The younger you are when you start, the less money you have to put aside, thanks to the power of compounding.
Lifestyle: Do you plan to stay home or travel the world? The amount you’ll need to save will depend on the life you plan to lead when you retire. Not sure what your retirement lifestyle will cost?
Federal Government Benefits: You could be entitled to government retirement benefits like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). If you’re eligible for income from these government programs, you might not have to save as much.
7 Tips for Last Minute Savers
Take advantage of any unused RRSP contribution room – The government allows you to carry forward unused contributions each year. If you have unused contribution room, try to use it as soon as you can.
Invest in a TFSA – As of January 2013, you can invest $5,500 each year. Your money grows tax-free and you don’t pay tax on the money you withdraw.
Look for small ways to save – Consider cutting back on your spending for items like lottery tickets, magazines or fancy coffees. It may be better to live on a little less now, so you’ll have more when you really need it. Here are more ways to save.
Take advantage of workplace pension or savings plans – Especially if your employer offers matching contributions.
Save your bonuses & raises – Next time you get a bonus or raise, don’t spend it all. Try to put some of it toward your retirement savings.
Consider saving less for your children’s education – If you have to choose between saving for retirement and your children’s education, put money in your RRSP first. Let your children get jobs or borrow to help pay for their education.
Revisit your investment strategy – Look for ways to get a little more growth without more risk. If you choose only the most conservative investments, your savings may not grow fast enough to give you the income you need after you retire.