You want to be able to live a peaceful, happy life in retirement. And an important part of having a happy retirement is having stable finances.
Here are 5 tips to help you have a financially stable retirement:
- Save with a registered retirement savings plan (RRSP)
When you are young, it can be tempting to spend money on many things while neglecting to put money into an RRSP account. But if you wish to live a peaceful life in retirement, you need to have a good source of income. So, it’s very important that you start saving for retirement as early as possible. Saving in an RRSP enables your money to grow without being subject to tax until it’s withdrawn. You must close down your RRSP account by December 31 of the year in which you turn 71. At that time, one option is to convert it into a registered retirement income fund account to provide you with an income while continuing to grow tax-free each year until withdrawn.
- Consider where to live
Decide beforehand where you wish to live in retirement. If you currently own a home in a big city such as Toronto or Vancouver, you may wish to consider downsizing and moving to a less-expensive region in order to draw out some of the value of your home to help fund your retirement.
- Pay off all debts
Try to ensure that all of your debts are fully paid off by the time you retire. If you retire with a massive amount of debt, then your retirement income will suffer. You may even be forced to look for other ways of earning money to make ends meet. So, plan out a repayment schedule for all your outstanding debts to make sure that you will be debt-free by the time of retirement.
- Tighten your budget
Prepare a detailed monthly budget and ensure that you stick to it to reduce expenses. For example, if you have been dining out at restaurants two times per week, try cutting it down to once every two weeks. Such tight expense control can help you save in the years leading up to retirement. Plus, adhering to a well-prepared budget can help you avoid financial problems in retirement.
- Other retirement income
In addition to the registered accounts and other assets you have saved for your retirement income, you may also be eligible for Canada Pension Plan (CPP) and Old Age Security (OAS) benefits. The amount of CPP you receive is based on your contributions into the plan during your working years. OAS is funded by tax dollars and the amount you receive may be clawed back based on certain income thresholds. You may choose to collect CPP as early as age 60 or as late as age 70, and OAS any time after age 65.
This post was sponsored by Sun Life Financial.