Market and Investment Insights

From the desk of Erin Gendron…

At the beginning of the year, over 1500 randomly selected Canadians were polled on their retirement goals and expectations. How do your retirement goals and savings stack up against these findings? Not quite sure if you’re on track? Read on and let us help!

4 Practical tips to help you answer this age-old question.

February, in the financial industry, is well known as ‘RRSP season’. A busy time for Canadians that are eager to make their final contributions before the looming deadline of March 1.

If retirement is a distant thought, the driving motivator for many is the immediate tax savings since any sum up to his or her yearly RRSP contribution limit will not count as taxable income. A diligent saver can sock away a fortune for retirement; as of 2017, any Canadian under 69 is free to contribute as much as 18% of his or her income, or $26,010 excluding pension amounts if applicable, whichever number is smaller.

Does ‘RRSP season’ have you thinking about your retirement’s goals – or possibly, lack thereof? Whichever end of the spectrum you find yourself on the topic of retirement goals – don’t worry! We are sharing 4 practical planning tips and retirement ideas for you to consider.

At the end, we will introduce you to a quick and easy retirement ‘income potential’ planning tool so you can see how you stack up next to the average Canadian.

1. Start saving now

An observation with which so many of us can relate: the older I get, the faster time goes by.

Don’t put off for later what you can do now. Even if it’s minimal, never underestimate the long term impact of small savings habits. Here’s an example:

Set up an automatic investment of $50 per paycheque (bi-weekly), earning an annual average of 5% and watch it grow to over $90,000 in 30 years.

Not sure where to find the money? Consider a familiar tip from the famous Warren Buffet, “do not save what’s left after spending, but spend what’s left after saving.”

Find more on setting up your budget here

“Pay yourself first,” says the Wealthy Barber You’ll be so glad you started when you did!

2. Is it time to redefine ‘retirement’?

Let’s face the facts; a number of factors have added up in recent years making it more challenging to save and plan for retirement. We’re seeing increases of house prices by double digits and debt levels higher than ever. Wage increases are crawling by way of single digits, savings rates are low and there’s a decline in company defined benefit pension plans. Not to mention that we’re simply living longer.

Perhaps ‘retirement’ needs to be re-defined or re-imagined in less traditional terms. Instead of working towards a set date or age at which time we stop working and start receiving a nice pension in the 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.

Going back to the observation of time passing more quickly as we get older, several studies suggest that this concept is all about perception. The findings argue that as we age, we fall into more routine and leave the years of learning new things or trying new experiences behind us. As time goes by, the days and memories blend together making it seem as if the years are flying by. The study suggests that to slow time down in later years your retirement goals should include things to keep your brain active and getting out of your comfort zone; learning new skills, having new experiences, and visiting new places.

It may be a reality for many of us that retirement and working will not be mutually exclusive but it seems as though this might be for the best after all.

3. Retirement income planning

There is no doubt that you work hard, over many years, to save up a retirement nest egg. Years of RRSP contributions, Spousal RRSP contributions, Tax-Free Savings Account contributions and possibly managing non-registered or corporate accounts.

Now it’s time for those savings to live out their purpose. Creating an income stream from them involves taking a leap and shifting your mindset from one of accumulation to that of dispersal. This shift to begin drawing an income from those hard-earned investments can be difficult emotionally and complex financially.

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 2018 is $1134.17 per month, the average amount received for new beneficiaries (as of Oct 2017) was only $641.93. The point here, although many Canadians rely heavily on this taxable income source, the amount you actually receive may be much lower than you anticipate. Find out how much you are entitled to here.

As of 2018, Old Age Security adds another $586.66 per month. One caveat to be aware of on this topic is if all your other sources of income are greater than $75,910, as of 2018, this amount begins to be ‘clawed back’. Wouldn’t you like to hold on to as much of this income as possible? With a bit of strategic planning you can.

4. Not knowing what our future has in store

Sudden retirees are those who find themselves in a retired state because of unexpected events – the merger or sale of a business, downsizing, injury, sickness, caregiving for a family member, or the death of a breadwinning spouse.

You can manage some of these risks with an insurance plan to compliment your retirement plan. Although many people have life insurance, far fewer are looking at critical illness or long-term care insurance as part of their financial plan – even though the chances of becoming seriously ill and surviving are far greater than sudden loss of life. With today’s medical advances you’re far more likely to fall critically ill and survive than to die suddenly.

Although a retirement plan won’t allow you to fully avoid what life may have in store, you will be able to navigate the rocky financial path it will create with greater confidence.

Ready to get started? Follow this link where you’ll be asked some basic information. In ten minutes, you will have a report showing your retirement income potential, and how you compare to the average Canadian in your demographic. Please share this with us! (Note: this link is secure and private and your information will not be saved or shared unless you agree) Our job is to then translate your personal goals into quantitative financial objectives. We’ll start the conversation and work together to help you feel confident you’re on the right track.