For most Canadians, retirement is a major financial goal that needs substantial financial planning and commitment. Half of Canadians desire to retire before the age of 60.* Whether you can do that or not may depend on if you have already established a Retirement Savings Plan. Even if you haven’t yet, or have just started, it is never too late to begin saving.
Retirement Planning: Seven SECRETS to Success
1. Determine Your Retirement Income Needs
A main financial goal for most Canadians is retirement planning. It doesn’t usually matter if you don’t yet have a savings program in place. The first step is to determine how much will be needed by you when you retire.
If you live in or around Thornhill, contact our office for THOROUGH ANALYSIS of your retirement income requirements and the opportunities that might be present.
We all begin preparing for our retirement at different stages in our lives. The strategy that works the best is to start saving in your 20s or 30s with the establishment of your first Registered Retirement Savings Plan (RRSP) or Tax Free Savings Account (TFSA).
While may be difficult to estimate how much money you will need to retire with in 30 or 40 years, it is important to start preparing for it today. By setting up and contributing to a RRSP/TFSA while you're young, you can watch your savings grow tax-free over a longer term.
2. Remember THE Three "S"s
Save now, Start now and Stay invested.
Begin by devoting what you can comfortably contribute now and try to increase it as time goes on. Many people find using a pre-authorized deposit allows them to make consistent deposits to their retirement savings plan. Keep in mind that even small amounts can grow significantly over time. No matter when you start saving for retirement, the key is to stay invested for as long as you can. The longer you hold your investments, the more you will benefit from compound growth.
3. The Importance of Diversification
Diversification is the financial opposite of putting all your eggs in one basket. You spread your risk by capitalizing on several different investment options, this has the effect of reducing the potentially negative impact of one poor performer in your portfolio. Experts agree that the asset mix of your investments – that is the safety, income and growth of the investments - should account for more than 80% of your portfolio's return.
4. Start Early
It doesn't take a lot of money to get started building your nest egg if you begin early enough and let time help do the work with you. When you make your first contributions as early as possible in your working career you will reap the reward of compound interest.
Retirement planning involves saving enough money during one's working years, through savings and investments, to provide an adequate income during retirement. While it seems like a simple concept, it can actually be a complicated activity once you start considering the different investment choices and their tax implications. This is where sound retirement planning from an experienced financial advisor can help.
5. Contribute Regularly
Taking a slow and steady approach to building your RRSP/TFSA, setting aside small amounts regularly is the best way to ensure your success.
It is usually much easier than trying to free up a large lump sum payment at year-end. Large one-time payments not being made are the most common reason people fail to maximize or sometimes even make their annual RRSP/TFSA contribution.
6. Contribute THE Maximum
Make a point to supply your maximum RRSP/TFSA amount whenever you can. Make sure to research whether an RRSP, TFSA or both are your best solution to help build your nest-egg.
7. Consider Your RRSP/TFSA Untouchable
While it can be a very tempting safety net in times of financial stress, don't withdraw from your RRSP/TFSA unless you absolutely must, unless it is part your overall strategy. Any money you take out today will not be there when you need it the most - at your retirement.
In the end, remember that a good strategy will carry you right through retirement - confident in the understanding that your funds will last you for the rest of your life. Regardless of your age, the key to a financially secure retirement through effective retirement planning is to start now!
Contact our office if you have any questions about Retirement Planning in Thornhill.
Links to more info:
* Statistics Canada, Summer 2014 Perspectives and Labour Force Survey.