No matter your age, it’s never too soon to start planning for retirement. After all, the sooner you start saving, the more money you have to enjoy in your later years.
Millennials aren’t always great about saving for long term goals, because the economic turmoil of the early-2000s made for a very uncertain view of the future. But no matter how your savings habits were formed or how well you’ve saved in the past, with a little bit of knowledge and some determination you can create a future for yourself that is both financially secure and worth looking forward to.
Before we outline some best practices in retirement preparation, let’s take a look at what you actually need to know about retirement in Canada.
Basic Retirement Plans
Generally, you have three options available to you; an employer pension plan, government retirement benefits or your own savings account that accumulates over time. Canada offers several retirement plans. You may be familiar with some but look at the following and you may see some you didn’t know were available:
- Registered Retirement Savings Plan (RRSP)
- Canadian Pension Plan (CPP)
- Quebec Pension Plan (QPP)
- Old Age Security Pension (OAS)
- Guaranteed Income Supplement (GIS)
- Employer Pension Plans
- Tax-Free Savings Account (TFSA)
So which plan is best as a retirement income source? Let’s take a closer look at the options.
An RRSP is what’s called a tax-advantaged account. These accounts provide tax breaks to those who invest money in RRSPs. Now there’s a way to be motivated to put away money for your retirement!
With some options such as the CPP and QPP plans you pay into the plan for your entire income-earning life then cash out after you reach the age of 60. The benefit of OAS is that it is available to anyone living in Canada over the age of 65. Employment is not a qualifying factor and payments are based on how long you have lived in Canada.
GIS plans are supplemental retirement plans to OAS plans for lower-income individuals. Employer Pension Plans offer the added benefit of your employer matching contributions which can lead to a more comfortable retirement. It’s always a good idea to take advantage of the perk of an employer contributing to your retirement savings.
If your employer does not offer any kind of pension plan, you still have the option of an investment plan. TFSAs work like regular savings accounts. Your money accrues tax-free interest and there is no penalty or tax-fee for withdrawing funds early as with an Employer Pension Plan.
Basic Retirement Needs
A 2018 survey showed that most Canadians believe they need around $750,000 saved in order to retire comfortably. However, the truth of the matter is that “comfortable” is a relative term, and how much you’ll need depends on a number of factors, including how much you make now, whether you have a mortgage to pay off, and at what age you intend to retire.
As a general rule, you’ll want to have 70-100% of the income you were getting before retiring to support yourself during retirement. This will ensure you can meet all your basic needs and still have something leftover so you can enjoy retirement. To get a more accurate assessment, have a financial advisor look over your finances and help you determine a reasonable retirement goal for your situation.
Set A Goal
Speaking of which, setting goals is your first key step in planning for retirement.
But don’t just consider how much you want to have sitting in the bank when you retire. Factor in your living expenses, mortgage payments, and any recreational or travel costs; because who doesn’t want to spend at least some of their retirement reaping the benefits of their hard work?
But don’t just consider how much you want to have sitting in the bank when you retire. Factor in your living expenses, mortgage payments, and any recreational or travel costs; because who doesn’t want to spend at least some of their retirement reaping the benefits of their hard work?
Here are a few items to consider as you create your long-term retirement goal:
- When you want to retire
- What benefits you’ll need during retirement
- Where to save your money
- How much money you need to save each month to meet your overall goal
When you plan out all these facets, you’ll essentially have a roadmap showing you where you’ll be when you retire and what you need to do to get there.
Save, Save, Save
Once your plan is in place, it’s time to take action; start saving.
Put at least 10% of every paycheque into your retirement account. If you’re starting the saving process later in life, you’ll want to increase that percentage to help you get caught up. Although this can be a tough habit to get into, the long-term benefits are substantial. If you need help remembering to save, consider setting up a monthly automatic transfer from your bank account straight into your retirement fund. You’ll never have to worry about forgetting to save!
Pay Off Debt
One of the best ways to ensure a comfortable retirement is to pay off debt. Paying off all your debt prior to retirement helps in two ways: first, it frees up more money that can go directly into your retirement fund, and second, it means you won’t have pesky monthly payments to worry about when you should be kicking back and savouring your retirement.
In addition to your monthly savings, create a debt payoff plan that eliminates your major debts such as credit cards, vehicle payments, mortgages, etc. This may mean trimming the fat on your monthly budget for a while, but once your debts are paid off you’ll have far more freedom to save or spend your money as you see fit.
How Speedy Cash Can Help
Sometimes even our best-laid plans can be overturned by unforeseen circumstances. Don’t let unexpected expenses derail your savings and retirement plan.
If you’re struggling to make ends meet between paycheques, get caught up with a payday loan from Speedy Cash. With easy online applications and fast approvals, Speedy Cash can provide you with the cash you need to help keep your budget on track and your stress in check.
Serving customers across Canada since 1998, Speedy Cash is a reliable and convenient source for quick online loans. No credit? No worries! Speedy Cash offers loans without even checking your credit score, so even if your credit is less than perfect you can still get the cash you need. Apply online today or visit a location near you!
