It's never too early to start planning for your retirement.
Are you wondering what life will be like for you when you're 75?
Work with a G&F advisor so that when the time comes to retire, you are financially ready.
Your 20s: A smart time to start
If you are in your 20s, saving for retirement is probably the farthest thing from your mind. Buying a home seems a million years away, let alone retiring. While you probably still have a student loan, now is typically the time when you start a salaried position and begin to earn regular paychecks. If you have any debt, paying that down should be your first priority, especially if you have anything owing on your credit card.
However, your 20s are also a smart time to start contributing to RRSPs because time is on your side. The power of compound interest means that your hard earned money can grow exponentially. And contributing isn’t as daunting as it sounds. If you can afford to buy a $5 latte a few times a week or spend $40 on a night out, you can afford to contribute to a Registered Retirement Savings Plan (RRSP). Every little bit counts!
A Tax-Free Savings Plan (TFSA) is also an option. There are pros and cons to both RRSPs and TFSAs. Your G&F advisor can help you decide what best fits your needs and your retirement planning goals.
30s: Settling into a plan
In your 30s, you probably have a steady income, but you might also have more expenses—transportation costs, rent or maybe a mortgage, or even a baby.
If you don’t already have a financial plan, it would be a great idea to create one. If you made a financial plan in your 20s, now’s the time to revisit and revise your plan to ensure it's still serving your needs.
While you might have more pressing expenses, don’t let that be an excuse not to contribute to your retirement plan. Pay yourself first by setting up automatic deductions from your paycheque and you will hardly notice a difference at the end of the day. Now is also a good time to assess your overall investment risk tolerance and think about incorporating higher return investment vehicles. You have plenty of years until retirement so you don’t have to worry about short-term market fluctuations.
40s: Halfway there
If you are in your 40s but don’t have a retirement plan, don’t panic or give up. It's not too late; you still have over two decades left to save and invest.
That said, now is not the time to hit the snooze button. You should now have a clear idea of how much you can reasonably expect to contribute every year, and how much you will need in retirement to maintain the lifestyle you desire. If you act now and invest wisely, you should be able to contribute enough to live your retirement years in comfort.
When it comes to RRSPs, always take advantage of an employer-matching RRSP plan (that’s free money!) and reinvest any tax returns back into your RRSP.
50s: Crunch time
Finally, your expenses are starting to decrease, and you’re entering your peak earning years. For these reasons, your 50s are an excellent time to ramp up your retirement contributions.
It’s also time to pay closer attention to your Return on Investment (ROI) to make sure your investments are accumulating as they should. It is also wise to diversify your assets—don’t place all your eggs in one basket. Do you need to rebalance your investment allocation? Real estate, your RRSP, and other investments should all come together to create a balanced portfolio, thereby reducing your risk.
60s+: Home stretch
Your 60s typically mark your final working decade. This is the time to seriously assess your retirement plan. How close are you to reaching your goals? Do you want to retire early? Do you have enough to retire comfortably in the next few years? Will you be retiring at 65, 67, or older?
Once you are close to retirement, it is important to meet with a financial expert to come up with a withdrawal plan. Any amount that you have in an RRSP must be transferred into a Registered Retirement Income Fund (RRIF) at 71 years of age. Remember that any money you withdraw from your RRIF will be taxed based on your overall income, so it’s important to take it out incrementally to reduce your total tax amount.