Did not save for retirement? Here are some tips to start now
Tags: Cpp, Rrsp, Retirement, Finance And Banking, Financial Planning

Did not save for retirement? Here are some tips to start now Hardik Jul 6·3 min read

According to a recent CIBC survey, about 32 percent Canadians between the age of 45 and 64 have nothing saved for their retirement.

While the survey did not reveal the age these people plan on retiring, it can be assumed they plan on working beyond the average retirement age (65) since they do not have any money saved.

The definition of retirement has significantly changed in the last few decades. As life expectancy continues to go up, people have been pushing their retirement further to their seventies. In most cases, it is because they cannot afford to retire at an early age.

Deciding when to retire is a crucial decision and it is best to consult a financial advisor to work with for developing a strategy that best suits individual circumstances and lifestyle choices.

For example, retiring just one year early than 65 can result in a 0.6% per month reduction in CPP amount. On the other hand, delaying retirement for one year comes with a benefit of 0.7% per month on CPP income.

But what can you do if you’re on the cusp of retirement and haven’t saved anything so far? Here are a few steps to start with:

1. Start budgeting: One of the reasons why you might not have been able to save so far is living paycheck to paycheck. To avoid that, start preparing monthly budgets and try to stick to them. Prepare cash-flow statements and find areas to cut costs. How much are you spending on your coffee? How much are you paying for subscriptions you do not need? Think such small costs do not matter? Think again. If you are 45 now and save that $3 you spend on coffee every day by switching from Starbucks to Tim Hortons, you can have an additional $50,000 income by the time you retire at 65, if you invest that money wisely, of course.

2. Invest: One of the simplest and most important concepts in economics is inflation. Understand that a dollar today is not worth a dollar tomorrow. It loses its purchasing power as prices go up. Keeping your money in your savings account is no longer a good option. The interest rates are at an all-time low and your savings account will not grow your money at pace with inflation. There are many other options to consider, depending on your circumstances and risk tolerance. Some of them are mutual funds, stocks, bonds, T-bills, GICs, etc.

3. Don’t fall for Ponzi schemes: While studies haven’t been able to find any common characteristics in people who fall for scams or Ponzi schemes (everyone is prone to frauds), it is safe to assume people who come to terms with their money problems late in life are more susceptible to ‘get rich quickly’ type scams. Never invest your money in a scheme/program you have no idea about.

4. Get a financial advisor: Financial advisors don’t just pick stocks. They help you reduce your debt, plan for your retirement, save on taxes, suggest government benefits and investment products, and ensure you don’t worry about money day and night. Working with a financial advisor to plan for your retirement might be the best decision you could make. The advisor can make a realistic projection on the money you would need for your retirement based on your life expectancy and lifestyle choices. He/She can then help you find ways to save for your retirement so you live the golden years peacefully.