Tag Archives: Retirement Plan

Are You on track to a secure retirement

Are You on track to a secure retirementThe question, are you on track to a secure retirement is a common one that many people have. They may be nearing retirement or their company is about to provide a special retirement plan. They wonder if they should take it and whether they will be OK financially in retirement. Whether you are retired about to retire or have a few years yet to work it is never too late to assess whether you will be comfortable in retirement.

Are you on track to a secure retirement

One of the best ways to answer this question is to build a retirement budget. First you should identify where your income is going to come from. Your income may include company pensions, government pensions, income from investments, and other miscellaneous income that is on a recurring basis.

Next you must consider all of your expenses. Your expenses will include all of the regular monthly expenses such as heat, Hydro or electricity, utilities such as cable TV, telephone etc. You should also include your taxes and mortgage payment if you have one. Your home is going to need maintenance over the years and you should budget an amount each year for maintenance of your home. The same applies to your car and whether you have a car payment or car maintenance, insurance etc. this should be part of your budget.

Once you have totaled up all of your income and expenses you will have some idea as to whether you will have sufficient money during your retirement.You may find that your expenses are going to be greater than your income. You will either have to work longer or cut your expenses. You may also decide that you will increase your savings if you have time.

Another area that we did not mention is all of your expenses associated with your free time. You now have a great deal of free time to pursue hobbies, travel and even go back to work. Depending on what you decide he may need to budget for this activity.

A good plan developed early, reviewed regularly and adjusted as needed will help to ensure a secure retirement.

How much do I need to save to retire a millionaire

How much do I need to save to retire a millionaireEveryone sometime in their lives asks the following question? How much do I need to save to retire a millionaire? The answer is not that hard to come up with. It really depends how old you are and how much you have already saved for retirement. Consumers who start early and stick to it, have an advantage. Their savings work for them and their investment income continues to build towards their retirement objective. In the following paragraphs we will give you some examples. You decide where you are and whether you can meet the objective of having a million dollars by the time you retire.

How much do I need to save to retire a millionaire

Assuming a 10% average annual rate of return which is the historical average of the S&P 500. Assume you are going to 40  years, a 25-year-old could build a $1 million retirement nest egg by saving just $175 a month in their investment accounts. Their total contributions over those 40 years would amount to less than 10% of that total, just $84,000. All the rest would come from the income from your investments.

If you are 35-years old and starting from scratch, your monthly contributions would have to be more than twice as great as a 25-year-old’s. Saving $470 each month in your retirement investment accounts over the next 30 years will yield $1 million, assuming the average 10% annual rate of return. Your total contribution over the years would be $169,000.

At 45, if you’re starting from scratch, then your monthly payments will need to be significantly higher. To reach $1 million by age 65 with 10% annual growth, you’ll need to contribute $1,330 a month. Your total contribution will be about $319,000.

As you can see it pays to start early! During your 40’s and 50’s it can be your prime earning time where you make the most money. However what if you get laid off or there is a health issue. Or perhaps you don’t like your boss. Would you not like to have the flexibility to make your own decision regarding when you retire. Start saving now!

Plan for Retirement Success

Plan for Retirement SuccessEven the most basic plan will help you understand what your situation would be during your retirement.  Plan for retirement success to avoid surprises. The most basic plan looks at your income during retirement. Also your anticipated expenses during retirement.  The expenses are those you assume should be the average daily or monthly expenses that you would expect to have during your retirement years.  You should also add in expenses for extraordinary things. Such as: weddings, health issues, downsizing, and any special events that could take place during your retirement years. Assume taking 4% of your savings each year as income to assess whether you have sufficient savings. This is a simple method. There are more complex approaches, however you can get started using the 4% rule.

Start Early With Your Retirement Plan

If you develop your retirement plan early enough it allows you to take the appropriate steps to ensure that you have sufficient savings.  If you wait until your late 40s or early 50s, to develop a retirement plan you may get some nasty surprise. Which suggests that you must work much longer than you anticipated.  If your objective is to retire at 55, a retirement plan that starts when you’re 25 can easily attain this objective.  If you have no plan and you’re already at 45 the chances of retiring at age 55 are remote. It is difficult to know unless you fall into an inheritance or have a large lump sum of money available.

Those people with a plan will tend to save more money towards a retirement than anyone who does not have  a plan.  Having a plan means that you’ve thought about retirement. You have thought about what you need to do to accomplish the quality of life you’re working for while you are retired.

Plan for Retirement Success – Build Your Own Plan

You do not even have to have a financial adviser to develop your own retirement plans.  Keep it simple, make assumptions about your income. Make assumptions about your savings, Make assumptions about the amount of interest and capital appreciation that you will achieve in your savings plan.  With these basic assumptions the majority of people will have more than sufficient income and savings while they are retired.

Keep it simple.  Consider all of your expenses to maintain your home, your utilities, holding, food and entertainment.  If your home needs some updating such as new windows, new roof, new furnace or of some other maintenance activity you will need to factor that into your savings plan and your retirement plan.  The next most important thing is then to set a budget for your daily expenses. Also most important your savings plan.

Starting early will ensure that you will have more than sufficient income. You will be able to live the quality of life that you and your spouse had planned for. For more information about retirement planning, click here.

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Canadians Uncertain About Meeting Retirement Goals

Canadians Uncertain About Meeting Retirement GoalsA recent study conducted by the Bank of Montreal revealed some interesting statistics about Canadian retirement plans. We refer to this retirement study throughout this post. We also suspect that Americans reading this post will have similar statistics or possibly even worse since Canadians are known for higher savings rates than Americans. Also for our American readers an RRSP is similar to your 401k. We certainly do not want to be like this guy in the picture with no savings at all for retirement.

Canadians Uncertain About Meeting Retirement Goals

Eighty per cent of Canadians are not confident that their RRSP investments will provide enough to meet their retirement goals.  In fact, most people do not have retirement goals and have no idea regarding how much money they will need at retirement or how much income they will have during retirement. This is a really scary situation for many people, since it is a well know fact that government programs will not even come close to providing a reasonable income and will place most people below the poverty line if they do not have other income from other sources.

Canadians have uncertainties about meeting their retirement goals and are not sure they are taking the right steps in planning for retirement, according to a survey released today by BMO Financial Group.

The survey, conducted by Leger Marketing and commissioned by BMO, found that:

  • One-third of Canadians have no Registered Retirement Savings Plan  (RRSP) investments
  • Of those who do, an overwhelming majority (80 per cent) are not confident that their RRSP investments will provide enough for their retirement
  • Nearly half do not feel they contribute enough to their RRSPs to meet their retirement goals

The survey focused on RRSP’s and did not assess other investments that Canadians may have. In Canada, RRSP’s are the tax free savings vehicle of choice for most people. Income within the RRSP is not taxed until it is withdrawn from the RRSP and the contributions to an RRSP can decrease the total amount of tax paid in a given year. Some Canadians, probably a relatively small number, will have savings outside the RRSP, however all income from these investments will be taxed in the year the income is generated.

How Much Do You Need for Retirement?

Research also showed that Canadians are not certain how much they need to set aside for a comfortable retirement:

  • One in four respondents (25 per cent) said they simply do not know how much is required
  • More than half (54 per cent) estimate that they will need to accumulate at least $550,000 to achieve their goal

There is no magic, one-size-fits-all number. The amount you will need, will largely depend on your personal circumstances and the kind of retirement lifestyle you want. The key is first to determine what you want your retirement years to look like and then start budgeting for them.

Start by developing a budget based on your current life style based on your current income and your current expenses. Take into account all expenses, including those that are discretionary and non-discretionary. Once you have this baseline, develop a post retirement budget based on your expected income from all sources, and your expenses during retirement. Both income and expenses will change when you retire. Income will change since you are no longer collecting a pay check. You may be collecting a pension if your company provides a pension and you may collect CPP and Old Age Security payments as well.

Your expenses will change a lot. There will no longer be work related expenses; however you will have much more time on your hands. Many people volunteer their time; however they also travel and find additional things to do which usually cost money. Be realistic in your budget planning for post retirement activities.

Improve Your RRSP Relationship

According to the survey most Canadians appreciate the importance of contributing regularly to an RRSP:    –  Most (56 per cent) said they believe successful investors contribute   to their plans either annually (22 per cent) or monthly (34 per cent)

In reality, however, only 37 per cent say they make regular contributions to their RRSP

One-third (33 per cent) of Canadians do not contribute to an RRSP at all

The fact that so many Canadians have no money in RRSPs is troubling. Fewer employers are providing pension programs and people cannot count on the Canada Pension Plan to meet all their financial needs in retirement. It’s essential that Canadians start contributing to a plan on a regular basis at the earliest possible age.

At the very least you will be decreasing your tax obligation in the year you make your contribution to an RRSP. If you are concerned about losing your money in the markets, go to a conservative approach for investing within your RRSP. Many Canadians and Americans lost a great deal of money during the last crisis in the markets during 2009. If you invested conservatively, chances are you have regained all of that loss and then some. Risky investments have not fared so well.  Stick with quality mutual funds even if the return is not so high.

About the Survey:

The survey sought responses from a national random sample of 1,516 Canadian adults, 18 years of age or older, and was conducted between January 4 and January 7, 2010. This survey is estimated to have a margin of error of +/- 2.5 percentage points, 19 times out of 20.

We have posted other articles on this blog about diversification of investments as well as with investment advisers. Bottom line, do not put all of your savings in one investment.   Start by investing a small amount from each paycheck. Before you know it you will have a nice amount saved up and once you  get used to not having the funds to spend, saving will be easier.  Start now by seeking out a financial adviser to assess your situation and the tax savings you may be able to obtain.

Doing nothing is really not an option if you want to have a retirement that is comfortable and meets your needs and plans.