Seven Ways to Prepare Financially for Retirement
September 2, 2021 | Canada
Transitioning from working life to retirement takes careful financial planning and decision-making – give yourself plenty of time to prepare. Here are some things you can do ahead of time.
Generate income using your savings
Research your income options and set up a plan so you have an income from the first day you retire. Options include RRIFs, annuities, and unsheltered savings. You may want to speak with a financial advisor to help you set a plan to meet your income needs in retirement. It may also be a good opportunity to review your investment goals and make any adjustments to your investments.
Apply for government benefits
Don’t wait to the last minute to apply for government benefits – it may result in delays in getting your payments. For example, you need to apply for the Canadian Pension Plan nine months before you retire in order to receive your payments on time. Learn more about government benefits.
Pay off your debts
Pay off your debts as soon as you can – ideally before you retire. To help you pay debt off faster, make sure you are paying the lowest interest rate you can get.
Calculate your retirement income
The federal government’s Canadian Retirement Income Calculator will provide you with comprehensive retirement income information. This will help you better understand how each pillar of the retirement income system will contribute to your future financial security.
Make a budget
Not having a budget means you may be spending money on things you didn’t plan for. And the more you spend, the less you’ll be able to save. It is important to have a realistic budget that you can adhere to, in order to plan for the future.
The federal government’s Budget Planner helps you create a customized budget in 3 simple steps. Gather information regarding both your income and your expenses – then see how the two figures compare. In order to save enough for retirement, you may find that you need to either reduce spending or boost your income.
Review your insurance needs and ensure that you have enough
As you get older, your insurance needs will likely change. For example, if you have fewer debts and dependents, you may consider reducing life insurance coverage. However, there is always a risk of unforeseen health problems, and unexpected healthcare costs can be hard to cover when you are on a fixed income. You may want to consider critical illness insurance or long-term care insurance.
Ensuring you have enough insurance is very important. In the event that you or your spouse develop long-term or other emergency health challenges, it can help you get the care you need. Learn more about insurance planning for retirement.
Review your will and powers of attorney
If you’re about to retire, your will might need to be changed or updated. Having a valid, up-to-date will is essential in order to ensure that your estate is distributed as you intend it, and to prevent legal and administrative challenges.
If an individual passes away without a valid will, a court appoints someone to administer the estate and distribute the assets according to a formula set out in provincial estate and family laws. You may also wish to arrange for a power of attorney - a legal document that names someone to make financial and other decisions for you in the event you are unable to make them due to unfortunate circumstances. It is important to choose someone you trust, who knows you and will carry out your wishes.
Take Action
If you are getting close to retirement, don’t wait until the last minute to get your finances in order. Give yourself plenty of time to prepare. If you are concerned about the financial well-being of your parents or a senior close to you, or if you suspect that someone may be suffering financial abuse, review this checklist to help you evaluate your concerns and start a conversation.
Fast Facts
According to Statistics Canada, 1 in 3 retirees hold some form of debt. This CIBC poll finds that almost 1 in 3 (32%) Canadians between the ages of 45-64 do not have any retirement savings.
Take control of your finances and visit Your Financial Toolkit on iiCanada’s Financial Well-Being page for a comprehensive list of resources, tools, and tips to build a strong and secure financial future.
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