BY FAZAAD BACCHUS
For many Canadians this is a dilemma.
Let’s go back a few years; our community typically believed that our retirement plan was in our children. Make a good few and one of them was bound to take care of us. Times changed and so did values. Economic times added its toll, children moved to different cities or countries and so retirement planning was now left with a totally new twist.
If you haven’t saved for your retirement then you are hopeful for a handout from the Government and the occasional gift from your children or relatives. Life was not meant to end this way. What should have been the golden years are now cast with doubt. When we were younger, we were told specifically that life has three distinct segments; the learning years which is from zero to twenty; the earning years which is from twenty to sixty five and then your golden years sixty five to ninety. The last period for many has changed. The segments unfortunately run in this fashion: the learning years; the earning years and the yearning years.
Many people who have migrated to this country anticipate a pension income from the Government, but only those who worked for the Government have an entitlement, anything else is based on the ability to fund it and the way ahead doesn’t look too good. Canada Pension plans need to be funded, so does Guaranteed Income Supplement and Old Age Assistance.
So why aren’t many more saving by way of RRSP? For many it’s a bad experience and for some it’s no experience. A RRSP is an abbreviation for a Registered Retirement Savings Plan; the operative word is that it’s a Retirement plan. Before you start to invest in any thing of the sort, you need to:
Build a retirement plan: this will include things like your chosen retirement date, your lifestyle needs at that time, your health and anticipated medical expenses, the size of your family, additional support from family or Government and your expected life span.
Determine what your savings goal will be: you should be saving for tomorrow even if you can’t live for today. Sound silly doesn’t it? Well it’s the truth, even if things are difficult today, it’s better to make a small sacrifice now and allow that nest egg to build so that you could at least have a reasonable retirement.
Choose the right investments: this is about the most difficult part of your retirement planning. Many persons don’t invest anymore especially if they have lost money over the years, the recent downturn of 2008 didn’t help in any way. This step should be done with a qualified financial advisor as you should choose the best possible investments along with your given risk tolerance. Depending on your age, an advisor may recommend portfolios which are best suited for you. Younger clients can tolerate more risk and older clients should be more focused on preservation.
Staying the course: often when things don’t go as planned, the natural tendency is to give up and just hope for the best. This is a sure prescription for disaster, a client needs to address their situation and make corrective actions to reach their goals. In real life, if the boat is drifting to the rocks, you have to make adjustment to the sails, so it is with financial planning; it needs constant and yearly review.
Finally, the 2016 RRSP season is upon us. You may contribute an amount to reduce your 2015 taxes payable based on your contribution room. And by the way, don’t be told by unqualified advisors that the taxes you save now must be paid back at retirement, that’s not how it works. If you would like a sample retirement work sheet, to plan your retirement just drop me a line and I will send you one, so that you can retire in comfort.