Preparing for Retirement
Five Financial Principles
Spend Less Than You Earn
It’s easy to get into the habit of spending – to let expectations and wants exceed income, regardless of how much money we make. Studies show when people earn more, they tend to spend more. If your hard-earned dollars are spent before they even reach your bank account, it’s time to take a closer look at your finances.
Be Wise With Debt
Debt can accumulate when credit is readily available. But acquiring debt does carry financial risk and that’s why it should be managed wisely – even for things considered to be “good debts” like your home mortgage, a child’s education or a business investment.
Protect Against Setbacks
We all think it won’t happen to us – until it does. Knowing your insurance options is a good first step toward financial protection for you and your family. Preparing for life’s unknowns is part of a solid financial plan.
Have a Short & Long-Term Plan
Reaching your financial goals requires a short and long-term plan. Short-term planning looks at being prepared for unexpected events that could happen tomorrow, such as a job loss. Long-term planning is about creating a plan to achieve other significant financial objectives throughout life – like, funding for your children’s education and saving for retirement.
Being wise with money isn’t a new concept. But when we view generosity as part of wise money management, it introduces a new conversation about how we can be more intentional about giving – by planning ahead to give back.
What is Your Risk Tolerance?
Knowing your risk tolerance is an important step in determining how your money should be invested. Below are four questions to think about as they pertain to your risk tolerance.
- In how many years do you anticipate that you will need the money you have invested?
- How much money do you expect to withdraw from your investments in the next five years?
- How knowledgeable are you about investing and the various options available?
- If the stock market fell by 25% in one month, how would you react?
These questions help determine how much risk you should take on within your investment portfolio. By completing an investor profile with your financial advisor, you will have the comfort of knowing that you are invested in a way that you are comfortable with and that meets your objectives. Your risk tolerance will change over time. Regular reviews of your investment portfolio are recommended.
While preparing for retirement, it is important to balance saving for the future, and eliminating debt. One factor to consider is the interest rate charged on your debt vs the interest rate being earned on your investments. If you choose to either pay down debt, or invest for the future, both will increase your net worth and help you reach financial independence.
To reduce debt, it’s a good idea to calculate what should be paid off first. Typically, it’s best to start with the debt with the highest interest rate such as a credit card. As your high interest debt reduces, further assessment will help determine if additional money should be invested, or put towards your other debt such as a line of credit or mortgage.
Saving for the Future
According to CBC News and an RBC survey, one in six Canadians aged 55 or older have not started to save for retirement. When saving for the future, here are four tips for you to consider:
Plan for retirement
Picture what you want retirement to look like. Setting financial goals for retirement living is unique for each person, but determining what you want out of retirement will help you determine how much you should save and when you should retire.
Take advantage of work contribution plans
If your employer offers an employee-sponsored savings program that matches all or part of your contributions, look into the details to determine if this is a good place to be investing. This could provide additional money, which could make a difference in your retirement.
Understand the plans available to you
Leveraging the benefits of a Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) is good strategy for retirement planning. For example, a single RRSP contribution can trigger a tax refund which you can then deposit into your TFSA. Repeating this strategy over time will build up both accounts and help to ensure that you have money in your registered (RRSP) and non-registered (TFSA) while in retirement.
Consult with a financial representative
- Work with a financial advisor who will help you develop a solid financial plan that includes a variety of insurance and saving vehicles.
- Establish a trusted long-term relationship. Check-in regularly with your financial advisor for guidance and support to maintain your plan through life’s ups and downs.
- Assess the service and results you expect from your financial representative for peace of mind.
Many of our Financial Representatives have been guiding members and their families for three or more generations. It’s a family tradition that stands the test of time and results in the service of our valued members.
Protecting Your Investments
Completing a Financial Needs Analysis with a financial advisor will help you determine what type of insurance you need, and how much – and an annual review of your plans will help to ensure you have the right products to meet your short and long-term objectives through every stage of life.
Life Insurance can work for you by…
- PROTECTING your family against financial setbacks with a tax-free death benefit that can replace lost income.
- PRESERVING your estate by using insurance proceeds to pay final taxes and expenses.
- GENERATING WEALTH through the accumulation of tax advantaged cash value to supplement your short and long-term financial plans.
- GIVING BACK by providing a gift to your favourite charity or non-profit organization.
Long-Term Care Insurance
According to The Canadian Life and Health Insurance Association’s (CLHIA) guide to long-term care insurance (LTC), the costs associated with long-term care depend on the province you reside in.
- Accommodation in long-term care facilities typically ranges from $900 to $5,000 or more, per month, based on the type of room needed and the level of government funding available.
- Private home-care costs can range from $20 to $90 per hour for personal care or nursing care.
These costs add up easily and could cost you between $35,000 and $65,000 a year. Without long-term care in place, it’s easy to see how a person could be forced to tap into their retirement savings, run up credit card debt and/or even mortgage their homes.
Here are six things to know about LTC:
- Understand what coverage is available.
- Know what’s covered at home or in a facility.
- Evaluate the costs which are based on age and health when you apply.
- Learn about what being “dependent” means.
- Understand when coverage becomes effective – there may be waiting periods .
- LTC insurance is part of a sound financial plan and our Financial Representatives can guide you through this process.
A knowledgeable Financial Representative will help you navigate your way to financial preparedness on your way to retirement.