DELICIOUS
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REDDITAccording to a recent poll by CIBC (Canadian Imperial Bank of Commerce), 32% of Canadians aged between 45 and 64 don’t have any money saved for retirement. In addition, 53% of Canadians say they are not sure if they are saving enough. Consequently, many people find themselves in a financial quagmire during retirement because of poor planning.
Here are some guidelines for effective retirement saving:
Figure how much you need to save
The first step in creating a budget for retirement savings is to consider how much you’ll need in retirement. You can figure this out by using one of the many retirement calculators available in Canada. One of the things most calculators will ask you for is your retirement expenses. These expenses could be divided into several categories:
— Essential expenses – Think about the things you spend money on every month. This could include groceries, household bills, loans, mortgage repayments and rent.
— New expenses – One of the main expenses to expect in retirement is healthcare costs. If you are employed currently, your employer is probably paying some or all of your health insurance premiums. Retirement means that you will have to begin footing the bills yourself. Look at different health covers for retirees to get an idea of how much you need to budget for. Remember to include health insurance for hearing, eye care and dental.
— Fun expenses – Retirement doesn’t have to be a boring and dreary period of your life. Be sure to budget for things that put a smile on your face. This could be going out for dinner with your spouse every month, attending sports events regularly or going on vacation every year with your family.
Start early
The key to saving enough for your retirement is to start as early as possible. With compound interest working for you, a very small amount of savings per month can make a whole lot of difference in the future. For instance, let’s say you begin saving for retirement at the age of 30, with the intention of retiring when you turn 65. If you decide to save $200 per month at a 7% rate of return, you will have about $357,000 upon retirement. The good news is that you can always increase the monthly retirement savings amount if your financial situation improves.
Once you have decided how much to allocate for retirement savings every month, it would be advisable to automate payments into your retirement savings account. This ensures that the money is saved before you get a chance to spend it on something else.
Lower your expenses
To save more towards retirement, always look out for opportunities to cut back on your expenses. Some of the things we consider ‘necessities’ are actually extras that we can do without. For example, you could downsize your TV subscription plan and channel the savings to your retirement account. If you are spending a lot of money eating out, consider cooking at home more often. Downsizing to a smaller apartment or house could lower your housing costs significantly, and the money saved put in your retirement fund. If you have a car, consider selling it and using public transportation instead. This will mean great savings on insurance, maintenance and gas.
Look for extra sources of income
While cutting down on unnecessary expenses, you should also think of how to boost your cash flow. If you’ve been very productive at work, consider asking your boss for a raise. Alternatively, look for a new job that provides better benefits and a higher pay. You could also start a side hustle that could earn you money in the evenings or weekends. This could be anything from freelance writing to playing in a band. Unexpected money from bonuses at work, income tax refunds and cash gifts from friends could also be channeled towards retirement savings.
Pay off debts before retirement
To enjoy a comfortable and stress-free retirement, be sure to get rid of debts as early as possible. Once all the lines of credit, loans, mortgages and credit card debts are paid off, you will have more money available to funnel to your retirement fund. To avoid any further fees and interest charges, avoid credit cards and use cash instead.
Charles Mburugu is a HubSpot-certified content writer/marketer for B2B, B2C and SaaS companies. He has worked with brands such as GetResponse, Neil Patel, Shopify, 99 Designs, Oberlo, Salesforce and Condor. Check out his portfolio and connect on LinkedIn.
