Approaching retirement age? Some tips to prepare

Are you approaching retirement? Many Canadians look forward to the day they can leave work for the last time. This is a major milestone, and one that should be celebrated. Before you get too far, though, you should make sure you are fully prepared for the experience! Here are some tips to put you on the right track as you get ready for retirement.

Design a monthly budget

Arguably the most important financial aspect about approaching retirement is planning out your future budget. Once you retire, you will no longer be receiving regular paychecks or a salary from your employer. Even with a pension, you are looking at a much smaller income flow than you are used to. This is typical in retirement, of course. However, it’s critical to understand how much money you can afford to spend each month in order to retire comfortably.

There are a few factors that will influence your retirement budget. If you have a pension plan, you can count on a small amount of money coming in each month. This will help offset the costs of living, including potential mortgage payments, taxes, utilities, etc. You should also consider how much you need to spend on essential items each month. Car and credit card payments, as well as housing expenses, are not optional, and you will need enough money to cover them. Your retirement budget needs to be large enough to account for these unavoidable costs. Plus, you will want some money left over each month for things like entertainment or other non-essential purchases, and to continue building your savings. Each retiree’s budget will be unique, depending on their financial circumstances.

Think about your RRSP

Your registered retirement savings plan (RRSP) is about to pay off! If you have an RRSP, now is the perfect time to start preparing it for use. As you know, you can contribute up to 18 per cent of your annual income to your RRSP each year in order to save for retirement. Depending on how long you have had your account, this has likely grown into a healthy sum. You should check your RRSP to see how much you have stored away as you’re approaching retirement. This will help you determine how much more you need to save, and whether you are ready to retire. Your RRSP will be one of your biggest assets in retirement, so be sure to take the time to study it.

Consider using your TFSA

Tax-free savings accounts, or TFSAs, are not specifically designed to help retirees. However, they can certainly be used upon retirement! TFSAs allow you to save money for any future expenses, and this can include your retirement plans. Contributions to a TFSA are not deductible for income tax purposes. Any amount contributed as well as any income earned in the account (for example, investment income and capital gains) is generally tax-free, even when it is withdrawn. If you have a TFSA, you might want to consider checking its balance and considering whether it will be useful for you in retirement. This money can be spent however you want, so you shouldn’t feel obligated to use it for retirement purposes. Still, it’s worth thinking about!

Think about your future expenses

As you consider your future budget and how your various accounts may fit into it, it’s also important to think about any plans you have for the future. Many retirees want to travel, downsize, or help their children purchase their own homes. These plans all involve money, and it’s best to start thinking about those costs now! Approaching retirement, take some time to think about what you want to do. Do you have plans that will come with hefty price tags? If so, make sure you are actively saving for those future expenses. You shouldn’t just be saving enough to get by in retirement! Most people have specific plans in mind on how they want to spend their time and money. Make sure you have a clear image in your head, too!

Rid yourself of debts

Finally, it’s best to be debt-free upon retirement, if possible. As your income drops off and you are left with your savings, you don’t want to be dealing with extra debts that have yet to be paid off. We recommend paying off your debts to the best of your ability while you still have a steady income stream and can more easily afford these types of payments. You are aiming to retire in a financially stable position, and this includes being debt-free. You should make a list of any outstanding debts you have, and how you can pay them off before your last day of work. This will involve some planning and trial and error, but it will pay off by the time you leave your job!

Approaching retirement is an exciting time in many people’s lives. After years of hard work, retirees can enjoy their time to the fullest extent and take advantage of every opportunity. Plus, if you’re looking to buy a new home or get a handle on any debts in retirement, you can turn to a mortgage broker for help! We’re committed to guiding our clients towards financial success, and we look forward to helping you get there.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770, or contact us here.