Retirement is a time when people can finally relax and enjoy their lives. Unfortunately, many Canadians are running out of money in retirement and are worried about the future.
It is important that Canadians take steps now to ensure they have the proper retirement plan in place. Planning for your financial future does not need to be an overwhelming and complicated process, but it should include some basic considerations:
Do you ever spend time worrying about the following questions?
One of the most important questions to ask yourself is “will I have enough money?” It is important to clarify this question a little by going a little deeper and asking yourself “Will you have enough money to do what?” Answering this question will help you to figure out what you want from your money.
The next important consideration for retirement planning is how much money you actually need. A good place to start with this calculation is by thinking about all of the things you spend on now and asking yourself, “will my spending change in retirement?”
If you have been saving through your whole career, chances are good that you will have enough retirement income to meet your needs. However, if you haven’t been putting away a lot, it may be time to take a look at how much you need. Now is the time to figure out how much you should be saving! The earlier you start saving for your retirement, the easier it becomes to achieve your goals thanks to the power of compounding investment returns.
How long will my money last?
Depending on your plan and how much you want to retire on, it is important to know how long your money will last. For example, if you intend to withdraw a certain amount every year from your account for the rest of your life, it’s a good idea to take a look at how many years you have until retirement and what your average withdrawal rate will be.
How long your money will last depends on a few things:
- Rate of return.
- Rate of withdrawal.
- How long until you are going to start drawing your money.
How much can I spend to not go broke?
One of the most important things to do when retirement planning is determining your budget. There are a few considerations when answering this question:
- What sources of cash flow do you have?
- How much money do you need?
- How long do I expect to live?
There are some additional considerations that come into play with spending and inflation, but we’ll leave those aside for now. It’s also helpful to think about any windfalls or inheritances that might occur and whether they would affect your plans.
If it turns out that there is a cash flow shortfall, it may be time for another look at your goals.
Is it too late to get started?
It isn’t too late to begin saving for retirement. It is never too late to save for your future self. Retirement doesn’t have to be complicated, but it does need to be planned for. Retirement planning is about more than just the numbers on a spreadsheet or needing a lot of money saved up. It’s about being confident that you are on track with your life goals and have the means to address your financial goals and lifestyle in retirement.
The earlier you begin anything, the better your position will be. Especially when investing, the sooner we start, the more time compound interest has to work its magic.
If you are discouraged that it may be too late to get started toward retirement saving and planning, there are still things you can do. The important part is to not give up. There are always options to consider and it is never too late to plan for the future.
You may have noticed that there is a common theme. These are all questions revolving around money, and the fear of not having enough. These fears can make it hard to follow through on taking action towards your retirement goals. It’s important to be aware of these fears and have a financial plan that answers and helps to address your worries!