Planning your retirement early is critical today now more than ever before. With the new actuarial tables published for life expectancies in North America in 2007, it appears as though a majority of people will be living longer than ever before. Clearly, this means that people will have to either work longer until retiring, or save more money for retirement.
The raw data
However, the statistics do not support the idea that people are following this philosophy. A recent Canadian study showed that three quarters of Canadians don’t have workplace retirement plans. One third make RRSP contributions to an RRSP and very few put away the maximum RRSP (Registered Retirement Savings Plan) or RESP (Registered Education Savings Plan) or TFSAs (Tax Free Savings Accounts).
The study revealed several other alarming facts about retirement. 39% of Canadians over 50 retire with some debt. 22% started retirement with mortgages on their primary residence . 28% got new credit products in retirement. All of this shows that people are not preparing properly for retirements which is very concerning to financial management experts around the world.
How can you avoid the pitfalls?
But, there is hope for us according to one finance expert. Malcolm Hamilton, an actuary and expert on retirement planning said “As I tell anybody under the age of 50, you shouldn’t be giving up hope. There’s almost always some combination of living frugally and saving and investing wisely that can give you a viable retirement income as long as you’ve got 15 years to work on it”. There is no doubt that this is very valuable advice, particularly for those of us in a younger generation who need to focus on the discipline necessary to save.
Good ways to start planning early include making a budget of your current expenses and how they will change in retirement. This will help you get more perspective on how much you need to save in order to retire. You can incorporate various assumptions in for investments, but remember to understand that you will experience some losses in any portfolio and that should be included in your forecasts. In addition, you should focus on your will since your assets will distributed by the government if you do not preemptively create a will. Although it is uncomfortable to discuss the idea that someone will pass away, it’s something that has to be done. Determining who the trustee of your estate should be is also important.
It is obvious that many factors must be considered in retirement planning. However, being prudent and diligent are crucial to one’s success in planning for retirement. So, if you haven’t begun thinking about your retirement plans, today is the day to start.