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When should you start saving for retirement?
While it’s never to late to make a change in your life, the earlier you start planning and saving for your retirement, the better. With time on your side, you can start by making small contributions. While if you start saving much later in life, you might need to increase your contributions in order to meet your retirement goals.
Start and contribute to an RRSP as early as possible. Your savings will grow tax-free until withdrawal, by then you will be retired and most likely be in a lower tax bracket. And, if you haven’t already, consider opening and taking advantage of a TFSA as well.
How much do you need in retirement?
Life is constantly changing, and we need to adjust to these changes as they arise. For example, in the reality we are currently living in, for those who were planning on retiring they may decide to postpone retirement if their investments have been impacted by COVID-19.
Retirement planning is very personalised, with individual circumstances and goals. Lifestyle, income, savings, and expenses while working can help as a guide for what your retirement objectives will be. Do you plan to check travelling off your bucket list? Think about your retirement goals, have realistic expectations on how you plan to achieve them and how much time you will need to save for them.
Things to consider when planning your retirement
- Life Expectancy – We are living longer. We might spend 20-30 years or more in retirement. On average, women live longer than men.
- Savings and Investments – What is the time horizon that these will cover? Take into account tax implications.
- Spending Needs – will your savings and investments provide enough? From covering children’s education to any outstanding expenses – will these be covered? The chance of illnesses increases as we get older. If you are predisposed or already living with a medical condition, take into account the cost for health and medical care that might arise. And even if big ticket items such as your home may have been paid off by then, there are other expenses to consider such as a new car or funeral costs. Depending on the province – it can be higher/lower, on average funeral costs $8,500 in Canada.
- Estate Planning –If you haven’t already, have a will drawn up. Review your investments and the tax implications that your beneficiaries may have to cover.
Do you need life insurance in retirement?
Just because you’ve retired, doesn’t mean that you stop providing for your family. Your spouse or children might still depend on you. Has the mortgage been paid off, will the cost of sending your kids to university be covered, will your spouse manage to maintain the same lifestyle in retirement without your help?
Life Insurance plays an important role in retirement [planning] as well as estate planning as it can be used to cover estate taxes (and it is a tax-free benefit).
Wondering whether you can still purchase life insurance in retirement? Some insurance provider offer plans up to age 80. However, don’t wait until it’s too late. Like retirement planning, start early and take advantage of better rates. And as for planning for retirement income the same applies – the sooner you start saving the more your investments and savings will grow.