By Peter Boys CAFA
The Financial Coach
Half of Canadians aged 55 to 64 who don’t have an employer pension have less than $3,000 saved up for retirement. Those numbers are concerning. Canadian baby boomers are no stranger to today’s increased financial demands. In fact, 20 per cent of retirees still have mortgage payments. And the financial strain doesn’t stop there. Retirees are still using credit in some of the same ways they did before retirement. Mortgage aside, here’s where they still owe money:
• 66 per cent unpaid credit cards;
• 26 per cent car payments;
• 7 per cent unpaid health expenses;
• 7 per cent holiday expenses or vacation property;
• 6 per cent on home renovations.
Most retirees are faced with a long list of expenses in life after work. Managing their finances can be overwhelming, particularly for those who are no longer working. At the same time that retirees are facing lingering debt, 24 per cent of working Canadians are dipping into their retirement savings. Canadians pulled cash out of their retirement savings for the following reasons:
• 63 per cent because they needed to for such things as health expenses or debt repayment
• 24 per cent as part of the First Time Home Buyers’ Plan
• 13 per cent because they chose to for a vacation, car purchase etc.
These survey results highlight the importance of being better prepared for retirement. Even though retirement can seem far away, it creeps up on all of us faster than we think. Hence, the importance of building a financial plan and making meaningful contributions that will pay off in the long run. There a lot of helpful tools and resources Canadians can tap into to get on the right track to building the income you want and need to retire.
The following tips can help you save for a bright retirement:
1. Start now. Begin saving and investing as early as possible to set yourself up for success. Save first, spend second.
2. Decrease monthly expenditures. If you don’t have one, create a budget. Make sacrifices to catch up.
3. Don’t leave money on the table. If your employer offers a pension plan and will match your contributions, contribute the maximum amount possible. It doesn’t get better than getting 100 per cent back on your initial investment.
4. Invest wisely. If you do not have access to a defined contribution plan, RRSPs and TFSAs are great vehicles to consider. With interest rates paying so low right now, shop around for the best rates. Fixed income investments can protect your savings but you will need to look into higher return investments as well to balance your portfolio out.
5. Downsize or relocate before retirement and put the difference it investments. This will also lower your living expenses now.
6. Earn side income. Take the extra income and invest it or pay down debt faster.
7. Reinvent your job. If you don’t have enough to retire, you could look into part-time, contract or temporary jobs, or you could choose to work longer.
Are you ready to get started? Find a trusted financial advisor who can support you on your journey to achieve a lifetime of financial security and well-being.