When it comes to retirement, many people are unsure of how to begin saving. With a retirement plan in place you can choose what you wish to invest in, figure out exactly how much you need to save and have a set age in mind for when you want to stop working.
Choosing the right retirement plan comes down to a few select factors, so we’ve come up with a list to help you choose the best retirement plan for you:
- Your age:
The earlier you start your retirement fund, the less you’ll have to put away from each paycheque. Keeping a certain amount aside from each paycheque isn’t easy, especially when there are many important life events you need money for such as paying off a student loan, setting up a child’s education fund, mortgages, credit card and car payments, weddings, etc.
These things add up so figure out what you can spare and be realistic. Putting away 20% of every paycheque may seem like the perfect amount to set you up for retirement but it may not be possible. Paying off debts is an important part of getting ready for retirement, so ensure that you are also managing your debt, too.
- The type of retirement you want:
Over the course of your working life you will become accustomed to a certain lifestyle. In order to maintain that lifestyle well into your retirement, you will need to save accordingly.
Let’s say you maintain a two-car household. When you retire it may be beneficial to only have one vehicle. If you take lavish vacations to escape the cold Canadian winters, you will need to save more for your retirement if you wish to continue vacationing to tropical destinations after you stop working. Basically, if you want to maintain your existing lifestyle when you retire, you need to save proportionately.
- The federal government:
There are many retirement programs available through the government like the CPP (Canada Pension Plan), OAS (Old Age Security) and GIS (Guaranteed Income Supplement). You may be entitled to these benefits once you retire. Look into them now to see what could be on the horizon, as this will also help dictate how much you need to save.
- Your company and your financial institution:
Your employer may have a retirement plan in place. A popular plan comes in the form of an RRSP (Registered Retirement Savings Plan). You can also get an RRSP through your bank or financial advisor. Additionally, there are TSFA’s (Tax Free Savings Accounts) and other financial programs available that help you save for retirement.
A company retirement plan can also be a beneficial idea. When you are enrolled in your employer’s plan, you don’t worry about how much of each paycheque goes to into the plan because the deductions are made at the source.
Putting away money for your retirement isn’t something you can do overnight. It is a long-term commitment that when done properly can set you up for a relaxing and easy retirement. If you have questions about choosing the right plan, contact the Step Benefits Group. We can help!