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Retirement Planning

For most Canadians, retirement is a primary financial goal for their future that entails substantial financial commitment. Recent statistics show that as many as 49% of all Canadians hope to retire before the age of 60.* Whether you have already started a retirement savings plan, or are just in the beginning stages of considering one, it is never too late to start planning and saving.

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Retirement Planning: Seven KEYS to Success

1. Determine Your Retirement Income Needs

Retirement Planning is a primary financial goal for most living in SE Edmonton. Whether you have a savings plan in place, or are thinking about one now, the first step is to figure out how much you will need, and how much will be available to you when you retire. You want to be sure that your needs cover your wants when you retire.

Contact our office for COMPLETE ANALYSIS of your retirement income wishes and prospects.

2. Remember THE Three "S"s

Save now, Start now and Stay invested. Begin by investing what you can and try to increase your regular contribution every few months. Setting up a pre-authorized deposit helps you to make regular contributions to your retirement savings plan over time. Keep in mind that even small amounts can accrue significantly over time. It doesn’t matter when you start investing, the key is to keep investing as long as you can. The longer you keep your funds invested, the more they will gain from compound growth.

It’s also important to try and increase the amount you contribute when you can. The more you can add early on, the better it will be for you in the long run. You don’t want to place yourself in financial stress early on, however, just to keep growing your retirement plan. Only contribute an amount that you feel comfortable doing.

3. The Importance of Diversification

Diversification means that you are not putting all your financial eggs in one basket. You minimize your risk by putting your money into several different investments. This lowers the impact of one, or even a few, poor performer in your portfolio. Experts agree that the mix of assets in your investments – that is - safety, income and growth - make up more than 80% of the return of your portfolio.

Retirement planning in SE Edmonton requires you to set aside enough money while you are in your working years to provide enough income for a comfortable retirement. While it is a simple concept, many people fine it to be a difficult and complicated activity once investment options and their tax implications are considered.

We all begin to plan for our retirement years at different times in our lives. Experts agree that the most effective plan is to begin in your 20s or 30s with the acquisition of you’re an RRSP (Registered Retirement Savings Plan) or a TFSA (Tax Free Savings Account). But even if you haven’t started then, it’s still not too late to begin.

An effective retirement planning strategy will help carry you right through your retirement - confident in the fact that your funds will last you for the rest of your life. It doesn’t matter what your age is, the key to a financially secure retirement is to start as soon as you can. Now even.

While it is impossible to come up with exactly how much you will need for retirement in 30 or 40 years from now, it is vital to start saving for it today. By providing regular contributions to a RRSP or TFSA when you are young, you help put time on your side while your savings grow tax-free over a longer period.

4. Start Early

It does not take a huge amount of money to build your future financial reserve if you start early enough and let time work for you. Plan to make your first deposit as soon as you can in your working career to benefit from compound interest.

Compound interest is interest that is earned on your entire contribution, not just new deposits. That means that you not only earn interest on what you contribute today, but on funds (and the interest already earned) on earlier contributions. It is interest on the interest you’ve already earned.

5. Contribute Regularly

Taking a “slow but steady approach” to securing your financial future by setting aside small amounts on a regular basis is the best way to safeguard your success.

Freeing up a large amount of money at year-end is often difficult and is therefore the most typical reason we fail to maximize or sometimes even make our annual RRSP/TFSA contribution. That is why we suggested making smaller, more regular contributions over the course of a year. These smaller portions are easier to absorb in our day-to-day living budget than 1 large lump sum before a tax deadline.

6. Contribute THE Maximum

Make a point to add the maximum RRSP/TFSA amount whenever possible. Also make sure to figure out whether an RRSP, TFSA or both are best way to help build your nest-egg.

By contributing the maximum amount, you can, you help to ensure that your retirement will be fully funded when you need it.

7. Think of Your RRSP and/or TFSA Untouchable

While it can be a tempting safety net in times of crisis, try not to withdraw from your RRSP/TFSA unless you absolutely must if it isn’t part your planned strategy. Funds you withdraw today will not be there when you need them at retirement.

Plus, you generally are taxed on the income you withdraw, whereas if you keep it in your plan you likely won’t pay tax until you use it. So, consider the tax implications as well, if you are considering such a withdrawal.

Instead, see if there’s a better way to tackle your current financial problem using other tools at your disposal.

Contact our office if you have any questions about Retirement Planning in SE Edmonton.

*Statistics Canada, Summer 2014 Perspectives and Labour Force Survey.