If your retirement plan is winning the lottery, then the time has come to start preparing for the future. Don’t know where to begin? Read on for five tips on how to get started!
Tip 1: Make a long-term plan
Compound interest is your friend. This cannot be over-emphasized: the earlier you can start planning for retirement, the better.
Yes, you can still spend your 20s mainly thinking about how to pay for post-secondary or maybe on buying a car or taking a trip. And in your 30s you may be more inclined to focus on paying down debt, starting a business or buying a home. But remember: saving a few dollars a month starting when you are 25 will earn higher returns over time than saving thousands of dollars a month starting when you are 55.
Tip 2: Make it automatic
Create an automatic withdrawal once or twice a month from your chequing account into your retirement savings account (for example, into an Registered Retirement Savings Plan or RRSP).
If the money comes out right away after you are paid – and before you can spend it – it makes it much easier to consistently set funds aside. And if your work offers a contribution matching program or the ability to automatically take funds off your pay (pre-tax) to go directly into a retirement or pension plan, even better! The less you have to think about saving, the easier it will be.
Tip 3: Cut back on spending
The less you spend, the more you can put away for retirement. Seems simple, right? But that can be easier said than done with the cost of everything increasing every month.
So if spending less doesn’t seem realistic, it might be time to review your budget with your financial advisor. Maybe you can save on utilities with a few small home repairs or save on gas by taking transit more often. Or maybe you can switch some of your products from another financial institution to a credit union to save on fees each month.
Tip 4: Enroll in workplace savings or retirement programs
If your workplace offers a matched retirement fund or pension program or really any kind of savings and retirement plans, sign-up! This often can mean you get “free” dollars from your employer to go towards retirement, but at the very least you might save on taxes if payments come off your cheque before you pay income tax.
If you don’t work somewhere that offers these programs, it might be time to switch careers! Many employers are using pensions, retirement plans or fund-matching programs to entice new hires, so look around at other options if you can!
Tip 5: Keep it diverse
When looking at your retirement savings plan, it is a good idea to include a mixture of investments to reduce risk. What this looks like varies on your age and long-term goals, but a good place to start could be a Registered Retirement Savings Plans (RRSP) and/or Tax-Free Savings Account combined with higher risk investment products. Start by chatting with your financial advisor or wealth specialist to determine the right mix for you!
Contact your local credit union for help creating a plan and ensuring you’ll be able to retire when you want!