For many us, it’s a long-held dream to retire early enough to be able to enjoy the fruits of our labour. But it’s one thing to say that you want to retire comfortably by a certain age, and another to actually do it. To do so, you need to set goals for yourself along the way, such as paying down your debt, saving a certain amount of money and possibly extending your working years in order to net the best pension possible. Here are five ways to help you make your retirement dream a reality.
1. Manage your mortgage
If you have a mortgage, consider ways to reduce the principal owing. These could include reducing the amortization period by increasing monthly payments or the frequency of payments. Your payment amount will go up but you’ll save a significant amount of money on interest by doing this. Or, you can take advantage of prepayment/accelerated payment options. Many institutions will let you pay down fifteen to twenty percent of the principal once or twice a year.
2. Take the free money!
This one seems like a no-brainer, yet many people do not take advantage of their company’s programs that match contributions to registered plans or company stock savings plans. This is free money that will boost your retirement fund over time.
3. Maximize your RRSPs
Maximize all registered plan contributions if you are able. If you don’t make enough money to contribute to both an RRSP and a TFSA, choose the one that will give you the best tax advantage both now and in the future. You might start off contributing to a TFSA when your income is low and then switching to an RRSP when you reach a higher tax bracket. You might also choose to use your income tax refund from your RRSP contribution to pay down your mortgage, make a contribution to your TFSA or to make next year’s RRSP contribution.
4. Know your retirement budget
Make a list of what your expenses will be in retirement. Will the income from your assets and other sources of income such as CPP and OAS be enough to cover these expenses? Is there a large gap or a small one? You may be able to cut certain expenses in retirement by travelling off season, taking advantage of seniors’ discounts, or joining a seniors’ association such as the Canadian Association of Retired Persons (CARP). Plan ahead and identify where you expect to find the money to cover any shortfalls. If there is a significant difference between your projected income and expenses in retirement, you may have to delay retirement or work part time.
5. Protect yourself in the event of an illness
If you’ll only have enough retirement income to cover your regular expenses, purchase long-term care insurance now while the premiums are cheaper. As people live longer in retirement, there is a greater chance that at some point you will need care either at your home or an assisted living facility. This can be a significant drain on your resources which may affect not only you financially, but your immediate and extended family as well.
For a more comprehensive review of how to achieve your retirement goals in a way that fits your unique financial situation, speak to your financial planner.
Marcy Ages is a passionate, detail-driven provider of financial planning services, including investment management and tax preparation. As founder of The Care Network, Marcy also works with other service professionals to support her high-net-worth clients with their estate planning and assisted living issues.