This article was written in partnership with the Chartered Professional Accountants (CPA) of Canada.
No matter what your age, it is important to have a plan in place for your retirement. Having a long-term financial plan can significantly reduce your stress and provide you with peace of mind in your retirement. That’s why Alberta Blue Cross® is partnering with the CPA to provide financial advice from experts you can trust.
How much do you need to save?
The best time to begin a retirement savings strategy is when you start your first full-time job. The second-best time to develop a savings strategy is now. To understand how much to save for your retirement, consider your goals and expectations for your life and lifestyle when you’ve retired. Ask yourself questions like “Would I like to maintain my current lifestyle, or am I hoping to spend more time and money on travelling, hobbies or dreams?”; “Am I planning to downsize my residence, or purchase a cottage or second property?” or “How much would I like to leave to charity or to my family when I’ve passed on?”. When you have goals and expectations in place for your retirement, you can begin planning your retirement savings strategies.
Below are some tips and considerations to keep in mind while planning your retirement. Remember, you can also consider working with a retirement planner to help you gain more specific information and guidelines for your unique retirement savings plan.
10 things to remember about retirement planning
- Planned wisely, retirement can be one of the most rewarding and fulfilling stages of your life.
- You are a member of the healthiest and longest-living global population ever.
- How much wealth you need depends on your goals and expectations.
- A successful retirement plan is a realistic one.
- Government payments and subsidies are not enough to fund your retirement.
- You MUST apply for the Canada Pension Plan (CPP) and Guaranteed Income Supplement (GIS) government plan benefits. For Old Age Security (OAS), you will be automatically enrolled.
- Utilize government tax deferral and saving opportunities such as a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA).
- Non-registered investments should be part of your retirement plan.
- Participate in company pension plans; maximize any company matching contribution benefit.
- Include all your assets in your retirement income calculation.
You have the potential to take advantage of the time and freedom that retirement affords many people as long as you have a solid financial plan in place.
The average person today can expect to remain healthier and live longer after retirement than previous generations. This means that the length of time you should plan to receive a post-retirement income for is greater than someone planning to retire in the previous century would need to be prepared for.
Your retirement income plan should be based on the lifestyle you want to have during retirement and the expenses related to that lifestyle, as well as your goals for giving money away or leaving it to others.
Your calculations for retirement should be based on realistic, attainable goals. Follow common budgeting guidelines such as the 70 per cent guideline: your retirement income can typically be budgeted as 70 per cent of your pre-retirement income. A retirement planner can be especially useful for checking your plan and making sure that it is realistic and attainable for you.
You should not expect to be able to rely solely on government payments to fund your retirement. These are intended as supplemental income sources, not primary income sources.
You can apply for CPP payments starting at age 60, but the longer you wait to collect, the greater your pension will be. However, this financial benefit only lasts until age 70. All seniors over age 65 are automatically enrolled for OAS, a monthly payment based primarily on years of residency in Canada. GIS payments are intended as a supplement to OAS for low-income seniors and must be applied for with a tax return as proof of low-income status.
Each of these accounts can be contributed to throughout your career to ensure that you are saving money for your retirement. This will also allow you to maximize your tax savings each year.
These can include stocks and bonds, money invested in mutual funds and other investment funds or properties and other valuable assets. If you own any income-generating assets, remember to include them when calculating your retirement income.
Check what kind of pension or savings plan your company offers. Many companies will match contributions to a retirement savings plan—if so, it is always beneficial to contribute up to the maximum amount matched.
When you calculate your retirement income, include CPP, GIS, OAS, any money in savings accounts including your RRSP or TFSA, as well as any non-registered investments and assets such as a home, second property, vehicle or valuable collectible that you may wish to sell in order to fund your retirement.
Tools and resources
To help you plan for your retirement, the following links can provide some helpful and informative tools and resources:
- The CPA’s A Guide to Financial Decisions: Planning for The End of Life
- Retirement Planning Checklist
- Canadian Retirement Income Calculator
- My Account – Your personalized CRA account
- Financial Consumer Agency of Canada