Real Estate Blog for Buyers & Sellers

Planning for retirement?

  November 24, 2017   Melissa Berrigan

Seven smart tips will help you plan for a financially healthy retirement


Perhaps you are nearing retirement age, or simply looking into the future. When retirement age arrives, will you spend your days travelling the world, pursuing passions, spending time with loved ones, or worrying about your bank account?


Retirement planning will help you avoid financial worry so that you can enjoy life after work. Planning for retirement requires looking ahead to make it as predictable as possible. It requires looking at where you are today, where you want to be, and then finding the best way to get from here to there.


When it comes to planning for a financially secure retirement, it’s important to seek the advice of financial advisors. They can help guide you through your currents finances, how to best approach your future finances, and everything in between.


In the meantime, these seven tips will help you get started clearing a healthy financial path to retirement...



Have a strong savings game


A little belt tightening here and there won’t cut it if you’re planning to have ample savings for your retirement years. It’s best to try and live far below your means now, so that you can funnel a large portion of your income into savings.


The best way to achieve this is to make savings a nonnegotiable item in your budget. You should also put all tax refunds, employment bonuses, and other financial extras into your savings account, rather than spending them.


When it comes to retirement savings—or any savings—it’s smart to make use of pension plans, Registered Retirement Savings Plans (RRSP), tax-free savings accounts, and other investments.


Crush that debt


When it comes to planning for retirement, the goal is to make those savings grow so that you can live the retirement life you want. You can’t do that if you’re buried in debt.


To alleviate your debt burden, you are going to have to restructure your debt to reach a more attractive interest rate and free up some monthly cash flow. The money you save in interest can be used to aggressively shrink your debt. Creating a budget that helps you decrease spending and get your finances under control.


Avoid lifestyle creep


There is a natural tendency to increase your spending as your income increases. When planning for retirement the aim should be to spend your dollars carefully while enjoying what you value in life. By all means, celebrate that promotion or raise. Just be smart with your decisions and keep your retirement goals in the spotlight.


Directing at least half of those additional dollars to savings is an excellent way to pad your retirement savings. It’s possible to do this without much notice if you increase the amount of taxes deducted from your pay cheque, or have money automatically transferred to your savings account every pay day. If you don’t notice it’s missing, it’s not going to hurt!


Do your research


This is the time to know exactly where your money is, how much you have, and how you will be able to access it down the road. Get familiar with Canada Pension Plan (CPP) and Old Age Security. It’s important to know contribution limits and how much income these will generate.  


The same goes for knowing how much income you can generate from your RRSPs. It may bay useful to look into converting your RRSPs into Registered Retirement Income Funds (RRIFs), and figure out the best ways to remain as tax-free as possible.


It’s also a good time to take a look at your home equity and see where you stand. Is your home paid for? If so, perhaps it’s time to look into the option of a reverse mortgage. Or perhaps it’s time to downsize and have more financial freedom with less housing costs overall?


Put a price on your dreams


Think about the retirement lifestyle you want and add up how much it will cost to live that way. This includes specific figures on where you will live and how you will spend your time. Many people mistakenly think their expenses will go down when they stop working, but they forget that they have the time to take trips and pursue hobbies that cost money.


Also take note that some items in your budget may increase at a higher rate than overall inflation. Health care expenses are an excellent example if you were previously covered by your employer.


Tracking your expected spending is an excellent way to see if you will need to boost your savings, scale back lifestyle expectations, or push your retirement back a few years.


Find retirement income


The more sources of income that you have after retirement, the more money you will have to play with—or continue saving. Once you have a handle on what you want your retirement life to look like, you will have a good idea about how much income you will need.


If you have plenty of income (after tax) from CCP, OAS, RRIFs, pension plans, and other fixed sources to live comfortably each month, you should be in a good position to retire fully. If not, it’s time to consider alternative sources of income such as contract or part-time employment.


Work with a financial planner


Managing investments can be precarious. People who work with a professional do better financially and have much less anxiety about their ability to sustain themselves during the retirement years. It’s important to find someone you trust and who will keep you informed and educated.