How to prepare for retiring in the new year

Are you getting ready to retire in 2024? As you prepare for retiring, there are a lot of items to consider, and it can feel a bit overwhelming! However, below are some of the most important parts to sort out before your last day of work. Here’s what we recommend prioritizing on your retirement preparation list!

Consider your RRSP and TFSA

If you have a registered retirement savings plan, or RRSP, now is a good time to see how much progress you’ve made with your retirement contributions. As you likely know, you can add up to 18 per cent of your annual income, or a maximum of $30,780 in 2023, each year. Over time, this creates a large pile of savings for many retirees, depending on the age of their account. If you want to prepare for retiring in 2024, it’s time to see how much you have stored in your RRSP. This will help determine whether you are financially comfortable enough to retire. It’s important to remember your RRSP withdrawals will be considered taxable income too! However, your tax bracket in retirement will be much lower than when you had active employment and income.

Your tax-free savings account (TFSA) can also provide a boost in retirement, if that’s how you wish to use it. Annual TFSA contributions are far smaller than those of RRSPs, with the 2024 limit set at $7000. However, the advantage here is these withdrawals will not be taxed as income upon withdrawal. Your TFSA is a good option if you want some extra income to supplement your retirement.

Design a fresh budget

A big item to consider as you prepare for retiring is how your budget will be affected. Your current budget is likely based on your present income and expenses. However, your income will obviously drop upon retirement. It’s important to make sure you are staying within your means in the future. This can be a bit tricky at first, as it is a new situation you will have to get used to. 

Consider what your future expenses will look like. Do you have non-optional payments like a mortgage, car loans, or credit cards? Your budget must be large enough to accommodate these. You will also want to have room for non-essential purchases or unexpected costs that might come up. If you have a pension, this can help offset some of these costs. You should speak to an advisor to ensure you are in a good position to comfortably retire.

Try to clear some debts

We recommend paying off as many of your debts as possible before you retire. Once your income drops, you want to limit your debts as best you can. It’s best to not have extra expenses on your plate in retirement, apart from your essential costs. Make it a priority to dedicate your steady paychecks to clearing your debts out now. Part of a stable retirement plan should include being debt-free, or as close to it as possible. Start by writing out your existing debts, and which ones you may be able to pay off before your last day of work. You can then create some targets to help you achieve your goals along the way. You may still enter retirement with some outstanding debts, but as long as they are under control, you don’t need to worry!

Think about your future plans!

Finally, prepare for retiring by considering what your financial future will look like in 2024 and beyond. Maybe you want to take some time to travel the world. Perhaps you plan on downsizing to a smaller home, supporting a child’s first home purchase, or completing home renovations. These will all require careful consideration to ensure your retirement can support them. You should speak to your mortgage broker ahead of time to start forming these plans and discussing any potential barriers.

If you are approaching retirement, this is a very exciting time and something you are surely looking forward to. To ensure your experience is successful, it’s important to get in touch with a broker so we can help you plan out the biggest details. Whether you have questions about future housing, dealing with debt, or another aspect of retirement, we are here to guide you through the process.

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.