Planning for your golden years will ensure your retirement is as bright as possible
If you don’t plan ahead for your retirement years, you will face the risks of retiring late, or potentially, not retiring at all. It’s therefore essential to plan early so you can make your golden years count.
With the right planning, you can come closer to achieving your goals of what your retirement should look like.. Whether it’s traveling the world, or just settling down in a new quiet place where you can enjoy your hobbies, you will have an easier time relaxing knowing what’s coming next after you stop working.
How much should I save for retirement?
There is no “magic number” that a person needs to save to be successful in their transition to the retirement world because everyone’s personal financial situation is different.
A big savings hurdle for everyone; however, is retiring their outstanding debt. If you carry debt into your retirement, this may become even more difficult to manage at your post retirement income level. That’s why it is so important to make a plan that will eliminate your debt prior to the day you stop working.
Think of the last road trip you took, did you know where you were going? It’s the same with retirement planning, a better understanding of what you want your retirement to look like will help you determine your financial needs.. Do you want to travel to Europe once a year? Buy a beach house in Miami? Provide an inheritance for your grandchildren? For your children? Fund your grandchildren’s college education?
Think about where you stand now, and how much money you would ideally need to reach your goals and live comfortably for the rest of your life. While we don’t expect you to be able to look into the future, starting with an idea will get you closer to what you want. How much would you need to save each month to reach this goal? The answers largely on your lifestyle in your senior years and your lifetime goals.
Here are some retirement costs you should consider:
- Mortgage – In most families, your mortgage is typically your largest debt with your largest monthly payment. Paying off your mortgage, or downsizing so that you can live mortgage free is an excellent step towards reducing your expenses after you retire. Eliminating your monthly mortgage payment will provide additional resources that can be used for other expenses or goals you have during your retirement years.
- Credit Card Debt – Canadians are more indebted than ever. Much of this debt is linked to credit cards. Reducing credit card debt prior to retirement gets in the way of saving for your golden years. Allowing this debt to linger results in greater interest payments, and money being wasted. Pay more than the minimum to eliminate this debt quickly so that you don’t carry it into retirement.
- Inflation – When you are saving for retirement, keep inflation in mind. Inflation is the rate at which prices increase over time. For example, $100,000 today will likely be worth much less in 25 years as inflation is applied. You may want to diversify your retirement savings into funds that keep up with inflation rates, invest in inflation-adjusted annuities offered by insurance companies, or pay off your mortgage as soon as possible to avoid fluctuations in prices. This strategy will allow your retirement nest egg to keep up with prices and expenses when you need it most.
- Setbacks – If you haven’t been on track with your savings plan, it’s never too late. Revise your budget to work towards your savings plan. Maximize your contributions at work, and take advantage of any matching funds offered by your employer. Remember, when it comes to your retirement start now and invest often.
Golden years savings rule of thumb
One way to approach retirement planning is to determine what your income will be during retirement. Everyone’s situation is different; however, in most cases you can expect that your income at retirement may drop by 20%-35%. Here’s the tough part, if that is your expected income, how long do you expect to live? While we don’t have crystal ball allowing us to look into the future, we can make an educated guess. Use this number alongside your expected income to determine whether or not your money will out live you.
Start planning so you can get ahead
It’s never too soon to start planning for your retirement. The longer your funds are invested the more time they have to grow. Investing $100,000 today and letting it grow for 25 years, is better than if you make the same investment and it can only grow for 5 years. If you don’t have the luxury of time, you should still make plans for saving so that you can pay off any debt you may have to avoid carrying it into retirement.
Consolidated Credit can help you get out of debt so you can start saving. Call us today at 1-888-294-3130, to speak with a trained credit counsellor, or request a Free Debt Analysis online and a counsellor will get back to you shortly.