For everyone who's thinking about retirement at some point in the not too distant future, we thought we'd offer our top five retirement planning tips for Canadians. Over the past few years, surveys have shown that as high as one in three Canadians are looking to pay for retirement by winning the lottery. Other surveys have discovered that as many as five out of every ten believe they are going to inherit their retirement money. If you find yourself thinking along these lines, hopefully we can help you out a bit here. Reality is that unless a person takes a long-term, disciplined approach towards their retirement investment, looking to hit the jackpot comes with a whole lot of risk. You should do your best to put a solid retirement plan in place, and then let any inheritance or windfall be icing on the cake that makes your retirement that much better.
Before you get to the icing, you need to bake a good retirement cake on your own, here are five tips to get you headed down the right path.
Plan to Start Retired Life Debt Free
Retirement is normally accompanied with a reduced income level. However, settling down to a reduced income level can be challenging if you still have debt payments to make. Around 10 to 15 years before you plan to retire, estimate what will be needed for you to pay out every one of your high interest credit cards, loans, mortgages, and lines of credit — and keep them completely paid off. While in their work years, a lot of people rely on adding to their income if money becomes tight, but during the retirement years, specifically near the later stages of retirement, enhancing retirement funds with supplementary earned income to manage debt is much harder.
Medical Expenses are Usually More Than You Anticipate
A lot of people significantly underestimate the cost of health and medical procedures, services, and supplies that are required in retirement. All the way from medication that isn't covered, to hearing aids, home health services, taxis, or moving to a seniors' home, the expenses seniors face can be shocking. A fair number of the costs have lower fees for seniors that are based on income-tested measures, but if you would like or require extra services or care, there are things you will have to pay for on your own. In addition to the reality of higher medical costs, potentially comes the diminished legacy parents then have the ability to leave behind for the next generation. Therefore, counting on an inheritance to pay for your own retirement may not be the wisest plan.
Plan When to Change Your Retirement Investments to Income & Get Retirement Advice
Way before you retire, and for sure by the time you are 55 - 60 years old, make sure that you have looked into your options for retirement income. Things to think about include: applying for government benefits, talking to your insurance professional, learning about any pensions that you should receive, getting in touch with a realtor if you're thinking about downsizing, and most importantly, making sure to meet with your financial or retirement advisor. There are deadlines and rules and to pay attention to as you decide on what you're going to do. A lot of people also decide to begin a career or small business that they can do on a part time basis during the early part of their retirement. Well before you decide to retire is the right time to investigate these options and get retirement advice.
Update your Will, Beneficiary Designations, and Power of Attorneys
The best time to ensure that your financial house is in order is well before you face any health challenges. Because we never know when that will happen, take the time sooner than later to consult a lawyer, notary and/or accounting professional who has expertise in estate planning. They can advise you on the most recent legislative changes that affect your specific situation, strategies to minimize probate fees, responsibilities of an executor, the importance of designating beneficiaries by name, and the various things to consider with choosing a power of attorney. This is also the time to speak with your doctor about advance care planning and who will make decisions for you if there comes a time when you’re not able to do that for yourself.
Create a Realistic Budget and Increase Your Level of Financial Literacy
Everybody, despite how old they are or how much income they earn, should have a budget. When you simplify it, a budget, is essentially a plan laying out how you have decided to use your money. It helps you work out what to allocate for the expenses that you need, how much to put aside to future spending, and which things you’re able to afford that you really want.
If you do not have a budget as you head into your retirement, then that should be one of the first things you put in place. If you don’t have a clue where your money is being spent, it's difficult to adjust things when your income goes down or there is a change to the source of your income. This is sadly when so many people start to depend on credit cards to pay the bills. Instead of stumbling to this trap, educate yourself about your money, and what your retirement savings are invested in. Find out more about personal finance subjects so that you'll be able to make smart decisions and improve your financial planning skills. It's not necessarily in your best interest to simply presume that your financial adviser is looking out for your money in the same way that you would look out for it yourself. In fact, no one should be more interested in your money than you.
The Bottom Line on Retirement Planning
Financial advisers recommend that you diversify your accounts and do things to protect yourself from the unknown. Preparing to pay for your retirement with a big win is super risky. Instead of risking a retirement full of stress and difficulties, take charge of your future with a solid money management plan and truly look forward to years that are really golden.
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