Here’s a list of 5 things you need to look at as you approach retirement
1. Take a snapshot of your financial picture
If you’re looking to retire over the next few years, what does your financial picture look like today? Establish your net worth by adding up your assets (home, investments, pension, real estate…) and then subtracting the amount of debt you have owing. Knowing your net worth will give you a great starting point as you begin planning for retirement.
Tip: Use the Organizing Your Wealth Plan Worksheet to get all of your financial information down in one place.
2. Review your retirement expenses
How much will your retirement lifestyle cost? Will it be sustainable throughout your retirement? Most estimates predict a spending rate of 70% of your preretirement income. Although this is not always the case. You need to determine what type of lifestyle you want to have and the price tag associated with that lifestyle.
Tip: Use the Cash Flow Analysis to get an idea of what expenses you can expect in retirement.
3. Reduce your debt
As I’ve previously mentioned, retiring with debt is possible as long as it’s under control. You should still pay down your debt as much as possible to avoid an unnecessary burden on your cash flow in retirement.
Tip: Start with any high-interest debt such as credit cards, vehicle loans, and unsecured lines of credit. Once this has been taken care of, determine if it makes sense to pay off your mortgage or contribute to your investments.
4. Catch up on your TFSA contributions
On January 1st of each year, you’re able to top up your TFSA based on the limits provided by the government. The limit in 2020 is $6,000, but if you haven’t used your TFSA room in the past, you’re able to make catch up contributions.
If you’ve been 18 since 2009, your total contribution room today stands at $69,500. Take advantage of the benefits provided by the TFSA, as this will provide you with tax-free income in retirement.
5. Get Professional Advice
As exciting as retirement can be, it can also be nerve-racking if you haven’t accounted for all factors involved. Nobody wants to be in a position where they have to return to work in 10 years because they failed to take into consideration all aspects of their retirement.
A Certified Financial Planner can provide you with the peace of mind that your plan has been well thought out and is sustainable throughout your retirement. Additionally, they can make sure that all aspects of your plan (taxes, investments, cash flow…) are working together to keep more money in your pocket.[/vc_column_text][/vc_column][/vc_row]