By Erin Gendron, May 15, 2019
Polls consistently show that the vast majority of Canadians do not have a retirement plan in place to help them achieve the lifestyle they dream of in their golden years – and women are even less likely than their male counterparts to be retirement-ready.
We can all benefit both financially and emotionally from purposeful planning, but getting started can feel daunting. Here are a few things to keep in mind: consider both your short- and long-term goals; engage your family, as a financial plan needs to support everyone’s life goals; start by putting a plan in place to track where your money is going; follow a budget; pay off debt; and start saving. Even if it’s a minimal amount, never underestimate the long-term impact of small savings habits. Here’s an example of how saving a little today can pay off big tomorrow: If you set up an automatic investment of $50 per pay (bi-weekly), earning an annual average of 5%, it will grow to over $90,000 in 30 years.
A number of dynamics over the last few years have made it more challenging to save and plan for retirement. We’re seeing house prices escalate by double digits and debt levels rise higher than ever. Wage increases are crawling by single digits, savings rates are low and there’s a decline in company defined benefit pension plans. Not to mention, people are simply living longer.
Perhaps “retirement” needs to be redefined or re-imagined in less traditional terms. Instead of working towards a set date or age at which time you stop working and start receiving a pension in place of a salary, consider a staggered retirement, transitioning to something part-time and low stress, picking up an “encore career” or turning a hobby into a small income-producing venture.
Plan your retirement income
You work hard over many years to save up for retirement, making RRSP, TFSA and possibly non-registered or corporate account contributions. Now it’s time for those savings to live out their purpose. Creating an income stream involves taking a leap and shifting your mindset from one of accumulation to dispersal. This shift to begin drawing an income from those hard-earned investments can be emotionally difficult and financially complex.
The other piece of the puzzle is determining how much you will receive in government pensions. It may surprise you that, although the maximum Canada Pension Plan retirement benefit in 2019 is $1154.58 per month, the average amount received for new beneficiaries (as of October 2018) was only $664.41. So be sure you are up to date on how much pension money you will actually receive, as it may be lower than you anticipate. Find out how much you are entitled to.
Don’t forget the unpredictable
Individuals facing sudden retirement as a result of an unexpected life event, such as job loss, business failure, personal injury, family sickness or death, can usually manage the loss of income associated with some of these challenges through an insurance plan. But many financial risks associated with a serious illness or injury can only be addressed through a comprehensive retirement financial plan that includes critical illness and long-term care coverage. This is an important consideration when you take into account that with today’s medical advances you are far more likely to fall critically ill and survive than to die unexpectedly.
Although a detailed retirement plan won’t help you avoid what life has in store, it can help you successfully navigate any rocky financial challenge that comes your way.This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.