How to Ensure Your Earnings Before Retirement

Planning for retirement has never been more important. However, how should you make sure that when you retire you have enough money to continue to enjoy your current standard of living?

There are many things that you can do to ensure that you are dealing with your current earnings sensibly so that you know they will enable you to enjoy a comfortable retirement, and here are a few of the most important.

Start Saving Now

When it comes to saving for retirement, the earlier you start the better. You are never too young to save for retirement, so start putting aside anything that you can afford right now so that you can slowly start to build up your nest egg.

If you want to find out how much you are on course to have when you reach retirement age, use an income calculator that you can find online for free. This can help you to understand what action you need to take to reach your financial goal.

Open an RRSP

One of the most popular retirement saving options is to set up a Registered Retirement Savings Plan (RRSP). You can deposit money into this on a regular basis, and as long as the funds stay in the plan they will remain tax free, making it a very efficient way to save for retirement.

This is a way to privately contribute to your retirement savings in addition to the contributions that you make to the Canada Pension Plan (CPP). You can pay into the account until you are 71, but there is an annual cap on how much you can save, and this tends to go up slightly each year.

When you reach 71, you can either cash it out or let in mature into a Registered Retirement Income Fund (RRIF).

Consider Your Investment Options

As well as your pension and any savings you may privately accrue in your RRSP, there are other investment options that you may want to consider. Which of these you choose to use will depend upon your personal situation, so it is best to get specialist advice to help you to decide.

For example, you may want to consider segregated fund policies where you will be able to get a guaranteed lifetime income, or a Locked-In Retirement Income Fund (LRIF), where your investment returns determine the maximum payments.

Manage Your Investments Carefully

Whatever investments you set up during your lifetime, including bonds, fixed-income investments and equities, make sure that as you approach retirement age you focus on more predictable investments. Some investments are more risky than others, and if anything goes wrong then you will have less time to recover.

Reverse Mortgage

If you find when you reach retirement age that you do not have enough to maintain your desired lifestyle, one option could be a reverse mortgage. You may be able to qualify for this if you are over 62, mortgage free and plan to remain living in your home.

If you are struggling to make ends meet because of fixed income then you have probably already heard that a reverse mortgage may be able to help you. Such a home equity conversion loan (HECM) works differently from a standard mortgage because you will not be expected to pay any part of it back right away. You will not receive a bill in the mail every month from your reverse mortgage lender, but you will have to pay interest, as you would with any other loan. You will also still fully own your home when you sign up for loan of this sort, and it cannot be sold unless you give up that ownership voluntarily or pass away.

However, it is better to plan for your retirement early on so that you do not need to get access to extra cash in this way.

Start Preparing for Your Retirement Today

The sooner you start preparing for your retirement, the better. Your retirement may seem a long way off, but if you leave it too late to start saving and making investments, you could find that when you reach retirement age you do not have enough money to maintain the lifestyle that you want. So start considering your options today, and start saving for a happy retirement.

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