Like all Canadians, you’re likely hoping to retire comfortably. Yet, not every individual share identical retirement plans, nor do they tend to take the appropriate steps as early as possible. Regardless of how your dream retirement looks, asking the right questions can streamline the retirement planning process.
Question 1 – What are You Anticipating Most Upon Retirement?
Most individuals between the ages of 20 and 40 spend their time accruing finances in preparation for retirement. As you near the 15 to 10-year window before retirement, your sense of urgency will likely increase.
Before collecting overtime bonuses and looking into additional investments, ask yourself why you’re rushing. Why is retirement important to you? What about it do you look forward to most?
Put the whys behind retirement into perspective by mulling over:
- What you love to do in your free time
- How often you plan to travel to visit friends and family
- Whether you’ll be willing to work part-time or engage in volunteer work
- Where you’ll be living
If your future goals appear to escape you, focus on what you enjoy most now. You may still enjoy them in the upcoming decades.
Question 2 – How Long Do You Need Your Coverage to Last?
Though life expectancy isn’t something most can predict, it will play a large role in your retirement projections. Naturally, the longer you live, the greater the cost of retirement will be.
On average, couples retire at the age of 65, with a 50% chance that one will survive beyond 90. Men’s average life expectancy is 85, whereas women live a longer 88 years.
With that in mind, you’ll want to determine when you want to retire, personalizing assumptions based on your health habits and family history.
Question 3 – How Much in Savings Do You Need?
When crafting your budget plan for retirement, you’ll want to consider your standard of living. Do you plan to maintain your current lifestyle or simplify your activities? Regardless of the changes you intend to make, studies suggest that expenses will average between 70% to 90% of preretirement income.
At the same time, these numbers remain a ballpark estimate. Your desired income amount will ultimately depend on your projected lifestyle, inflation rates, anticipated healthcare costs, and other factors.
Question 4 – How Much Should You Save Now?
Ideally, the answer to this question should be “as much as possible.” You’ll want to save at least 10% to 20% of your income in your working years, which can become challenging if you’re dealing with high-interest consumer debt.
If you can’t save up as much as you’d like, consider contributing to your employer’s matching contribution or 401(k). Then, refer to a retirement calculation to assess your target savings.
Question 5 – How Much Do You Plan to Spend Yearly When You Retire?
Based on the Rule of 25, you’ll want 25 times your first year’s income upon retirement to support a comfortable handful of latter years. However, as with most financial recommendations, this “safe withdrawal rate” isn’t a hard value.
As much as possible, you’ll want to remain flexible during your retirement years. Remember, inflation rates and investment returns won’t be the same as they are now.
For most of the Canadian workforce, retirement planning remains at the top of the financial priority list. Thus, pushing frivolous expenses to the side will work to your advantage—eventually!
Get ahead of your retirement planning with services from Alberta Wealth Management Inc. From RRSPs to TFSA, we are committed to developing a plan that best suits your lifestyle and needs.