With the rising rates of interest each year, added inflation, and increased monthly expenses, an average Canadian find it difficult to save money for the future. Most of the individuals and families are busy spending the cash and very few people are paying enough attention to life after retirement.
No matter how good your corporate job is, you will always need a sound financial plan for the later years. The majority of us are not sure when to start planning for life ahead of retirement. The best thing is it’s never too late to initiate the process, but you must start working on your investments and retirement plan at least in your 40s.
There are plenty of investment opportunities present in Canada for you to increase your net worth in the coming years. You can invest in real estate or buy bonds - investing now in profitable assets will help you achieve your financial goals. We present you with a simple guide that will show you how you can attain financial stability in retirement in Canada.
The financial experts advise starting planning for life after 60 as early as possible. Some people are shrewd enough to initiate the process in their 20s, most go for it in their 30s, while some leave it too late till they are in the middle of their 40s. No matter what stage of life you are at, you can calculate your retirement potential right here.
Completing this simple exercise will assist you in estimating how much you should save each month and what investment strategies you should adopt. This activity will give you the estimated figure of After-Tax Retirement income. In this way, you will come to know about your retirement income potential.
One of the safest ways of securing your future is by decreasing your expenses and increasing your savings. If you do not make your savings goals now, you might have to rely on credits during tough times to come. It could have a substantial impact on your retirement as well. You might have to delay it if you have to pay off your debts first.
In Canada, generally, the higher your income is, the higher the taxes are as well. To overcome the tax dilemma, you can opt for a Registered Retirement Savings Plan (RRSP), which offers tax-deferred retirement savings that increase tax-free. You won’t have to pay any taxes on your high-income tax rate if you start making contributions now. Instead, you will pay taxes at the time of retirement when you withdraw the amount, most probably at a lower income tax rate.
You can benefit from your employer plans, such as employee share ownership plans (ESOPS), employee pension plans, and group RRSPs. These plans could help in growing your retirement savings at a faster pace, specifically if they are offering a full or partial contribution option.
Creating a perfect retirement plan depends on the time when you want to retire. Whether it’s 20 years from now or it’s more than that - the shorter the time, the more effort is required and vice versa. If you have little time left because you started planning too late, then you might have to increase your time horizon, delay retirement, and save more.
When it comes to the RRSP contributions, you can keep adding your contributions to your plan until 31st December of the year you turn 71. The same age bracket applies if you have the RRSP plan on your spouse’s name.
The assets allocation means you have to select the most desirable investment opportunities and know how much money you can invest in them. These might include buying mutual funds, stocks, or guaranteed investment certificates. It depends on your current income, financial knowledge, financial risk tolerance, and the amount of time you have.
Gaining financial stability in retirement in Canada is possible through careful planning regarding savings, investing, and other related activities in a timely fashion. Everyone has a specific retirement plan needs, and one must always make their customized retirement strategy for the best results.
Kewcorp Financial is a professional financial planner in Edmonton . They offer financial services in investment and retirement, insurance, tax planning, and estate planning. Contact with a professional tax or financial planner to manage your finances, taxes to grow your small business.