The Liberal Government has recently unveiled plans to make major changes to the Canada Pension Program, intending to help provide additional financial support to Canadians for their retirement savings plan.
In a recent speech to the House of Commons Finance Committee, Bill Morneau, Member of Parliament said:
- More than one million Canadians will be forced to retire with a lower standard of living than when they were working
- One in four Canadians nearing retirement do not have enough retirement savings
“While there is financial support available to Canadians in their retirement, by no means should they rely on government programs to generate their entire retirement income,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“With a lack of savings, people either have to put off retirement and continue working; adjust their standard of living or turn to debt to help cover expenses- and retirement is no time in your life to be racking up debt,” says Schwartz.
If you haven’t already started saving for retirement, you need to get on it sooner rather than later. Here are some tips to make your saving for retirement successful.
How much do you need?
It’s common sense. How can you set a goal if you’re not sure what you’ll need? And if you don’t have a goal how can you expect to achieve it? Here is the Canadian Retirement Income Calculator which is a great resource to help you pinpoint what you need.
Set up a plan and timeline depending on where you are in your life stage. It can be effective to break your goal down into smaller increments rather than years (e.g. months or weeks).
Split your goals
If you are saving to buy a home, fund your children’s education or are trying to aggressively pay down debt, you may feel like you are better served to achieve one of these goals before going on to the next. While it is true to get rid of high-interest debts, if you wait until you are debt-free to get going with retirement savings, you may be too late.
You might be surprised to learn that a number of these goals can work hand in hand. For instance, you are able to withdraw funds from your RRSP to use for your down payment, with the requirement that you pay them back over 15 years. You can save for retirement and reduce the amount of debt needed to buy your home at the same time.
I don’t need savings. I’ll just sell my house
It’s very common for people to assume that they can just sell their home and take the equity out to fund their retirement. However, this plan is risky and can make you financially vulnerable. The value of your home is volatile and if you happen to be forced to sell when the market is down, you’ll be short.
Furthermore, if you carry high mortgage debt, that will erode your bottom line even more.
Make sure that you have cash savings and other lower-risk investments in your savings mix to guard against these kinds of risks.
Do you feel like your debt is limiting your options now and later in life? Act now to reduce your debt load and take control. Call one of our trained credit counsellors at 1-888-294-3130 or visit our free online debt analysis.