Financial: What to Consider when Preparing for Retirement
Planning for your retirement is an important process that doesn’t happen overnight. Many years of carefully filing away a small percentage of each paycheck is something you will be grateful for well into the future.
SAVING: To RRSP or not to RRSP?
Registered Retirement Savings Plans (RRSPs) are available through most major banks and other financial institutions and they are an optimum means to invest and grow your retirement savings. If having an RRSP is in your plan, you can receive your income in a number of ways.
1. Transfer your RRSPs into a Registered Retirement Income Fund (RRIF):
• RRIF’s allot a sum of money each year, determined by the RRIF value and your age.
2. Purchase an Annuity with your RRSPs:
• Annuities provide a guaranteed income for the remainder or your life or for a predetermined period.
• Withdraw your RRSP Funds:
3. Beware of this approach, however as taxes will be deducted from this transaction
How much is enough?
When trying to accurately determine the amount of money you’ll need to live a comfortable retirement, there are a few things to consider.
The Income Gap
Your income gap is calculated by tallying the income you will receive from RRSPs, pensions, and annuities, minus living expenses. The gap between these two amounts is the amount you will have to cover with your own savings.
Here are a few additional things to consider, alongside your monthly living allowance, when estimating how much savings to plan for:
Where will you live?
Deciding where you will live in your retirement years will greatly influence the amount of savings required. Staying in the family home will save you money down the road, but the income from renting or selling this property could finance a fresh start or a much needed change.
Don’t forget your hobbies!
Setting money aside to travel or perform activities you enjoy such as golfing or fishing is important as these types of leisure activities will greatly enhance your quality of life. And remember to account for these activities when you are estimating your monthly budget.
Remember Health Care Expenses
We’ve all seen the commercials; setting aside money for funeral expenses or medical costs at the final stage of life is an important step that should not be discounted, regardless of how uncomfortable it may make you feel. Having peace of mind that these details are taken care of for you and your family will be its own reward.
When planning for your retirement savings, remember that it is just as important to decide where the money will be going as where it will be coming from. Proactively making choices about where you will live and your lifestyle factors will allow you to accurately determine which retirement options are the most important and appropriate for you to ensure your retirement money lives as long as you do.