It's not always easy to find your way. Here are five tips to help you plan your retirement:
- Don't save blind. Plan regularly with SimulR or the tool of your choice, especially if your income or retirement plans change.
- Here's an example to illustrate my next tip. From age 25 to 35, Stephanie saves 1 000 $ a year. Fred starts saving at age 40 and saves the same annual amount until age 65. Stephanie therefore invested 10 000 $ and Fred 25 000 $. At age 65, Stephanie will still have 7 000 $ more than Fred through the effect of compounding. Amazing, no? You may already have guessed my second tip: save early!
- When it comes time to save for retirement, opt for registered investments. In the long term, registered investments such as RRSP or a TFSA deliver greater returns because of their tax benefits. In addition, it is less tempting to use the capital in an RRSP for purposes other than retirement, since withdrawals are taxable.
- If you are lucky enough to have a private pension plan, check what it will pay you in retirement. Make sure that amounts from your plan will be sufficient for you to maintain your standard of living. Otherwise, plan for additional savings. Read your statement of benefits carefully: it provides a wealth of information.
- Remember inflation! The increase in the Consumer Price Index must be taken into account in your retirement planning. For example, a litre of milk will cost much more in 15 years. Most financial planning tools take that into account. SimulR assumes a 2,5% increase.
If planning your retirement befuddles or intimidates you, specialists are there to help. You see a doctor if you feel sick, so why not see a financial planner for the cure to your financial worries?