A friend of mine described a terrifying ordeal. She was cross-country skiing in familiar terrain and decided to stay a bit longer to enjoy some night skiing. As sun set, however, her panic rose. To her surprise, that area of the mountain was no longer being lit! She made it out in time through sheer luck.
Her story conjured up an interesting parallel with retirement. You see, most Canadians believe the road ahead, while not exactly bright, nonetheless includes safety nets like pensions and Old Age Security.
Yet, the financial security of pension plans rises and falls according to interest rates and investment returns. As such, at various times over the years, they’ve been dangerously underfunded. In addition, Old Age Security is being postponed by two years for people born after 1958 and its longevity is questionable.
In a twist that can only be described as bittersweet, we’re also living much longer.
Think there are dark times ahead? Actually, the outlook is brighter than I’m leading you to believe (I needed to make a point!).
The good news is that most Canadians are already making annual contributions to RRSPs without affecting their ability to enjoy a decent lifestyle. The better news is that means we can easily contribute more and simply by allocating a little extra every month versus once a year.
We budget for food and shelter every month anyway. So why not budget a little more for food and shelter down the road too? Essentially, have a retirement paycheque that, at the very least, covers your cost of living.
Better yet, why not build enough to maintain your lifestyle? Generally, you need about 70% to 85% of your current income to enjoy a comfortable life ahead (conditional on life expectancy and whether your mortgage and debts are paid off). So, depending how far you are from retiring, saving just 10% – 15% of your income could help you reach your goals in time.
If you plan it right, one day you can stop working and still enjoy a decent income. So take action and soon. Come in for a consultation and let us help you arrive safely.