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Are you approaching retirement age? If so, it’s time to do some retirement planning to ensure you’re ready! While retirement itself can be relaxing and leisurely, the process leading up to it can certainly be busy. It’s important to think about your budget, future plans, and debts, among other things. Here are some tips to help you get ready for this next phase of your life!
Check on your RRSP
Your registered retirement savings plan, or RRSP, will be one of your largest financial tools you can use once you retire. Assuming you have an RRSP, you likely know you can contribute 18 per cent of your yearly income to this account annually. Over time, this grows into a healthy savings collection. As you approach retirement it’s a good idea to see how much you have stored away over the years. This will help you determine if you’re financially ready to retire, and how much you can depend on your RRSP.
It’s important to remember that when you withdraw savings from your RRSP, they will be taxed. The good news is by this time, your income will be lower and you will be taxed far less.
Think about your future financial plans
Retirement planning can be a lengthy process. One of the biggest tasks can be working out your financial plans for the future. This includes determining your living situation, plans for travel, or any other large expenses you expect to encounter. Are you going to downsize, or perhaps start renting instead of owning your current home? Do you want to go on more vacations or complete home renovations? You might even be thinking about how you can financially support your children as they buy their first home, for example. All of these financial items require extra planning once you retire and you no longer have a full salary coming in. Even with a pension, you will be looking at a much lower amount of money flowing into your account. Take some time now to think about major expenses you will incur in the future, and how retirement will affect your ability to manage them.
Consider making a monthly budget
Being retired means living on a “retirement budget.” It’s a smart idea to create a specific budget you can refer to as you navigate this newest chapter of your life. It takes time to get used to living without your full income, and understanding how that affects the way you spend and save. However, this transition period can feel much smoother if you plan it out and make a personalized budget that fits your lifestyle.
Think about your monthly expenses and how much you currently spend on them. Some of these items, such as utility bills and groceries, won’t change. Others, like entertainment or dining out, may need to be scaled back. A budget helps you know what you can afford to spend so you aren’t in the dark with your own finances. We recommend using a budgeting app, at least to help you get started. There are several app options available, all with their own methods and styles to help people save. These tools can help you track your spending, pay your bills, and divide your money by spending category. You can read some of our top suggestions here.
Pay off any debts
If possible, you should include paying off debts in your retirement planning. You want to be in the best financial position possible by the time you retire, which means limiting and controlling your debts. Since your income is about to decrease or stop entirely, you don’t want to be in a position where you owe money you may not have easy access to. If you have outstanding credit card bills or car payments to make, for example, do your best to pay them off now. You can make a list of your debts to help keep track of what you owe, and what interest rates you have. Make a repayment plan you can realistically achieve, and adjust it as needed. The goal is to limit your financial obligations as much as possible by the time you finish your last day on the job.
Plan for the future
Finally, it’s important to make arrangements for the future upon retirement. Reaching this stage of life means it’s time to start planning for seniorhood. For example, now is a good time to update your will to ensure it reflects your current situation. This doesn’t have to be a negative event! In fact, it should be a relief to know you have prepared a document that outlines your wishes and requests. You should also plan for the possibility of losing your ability to handle your finances on your own. Should this happen, it’s important to give someone you trust Power of Attorney, which allows them to manage your finances if you cannot. Finally, consider whether you need to make any changes to your current insurance. For example, do you need to update your health insurance, or look into life insurance or long-term care insurance? These tools become more relevant as we get older, so retirement is the perfect time to look into them.
Retirement planning is a lot of work. However, once you have your plans in place, you will be free to enjoy all the leisure time you like. In the meantime, you can contact a mortgage broker if you have any questions about retirement and how it affects your finances or your mortgage. We will make sure you are ready to take on this next phase of your life with confidence.
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.