Saving For Your Retirement

Retirement Planning

First Published: June 11, 2010 ADawnJournal.com

We all want to save for our retirement and we all know that hoping to win the lottery is a fool’s quest that should not be relied upon. You want to save as much money for your retirement because the more you save, the easier you will be able to live without an income. For example, if you save $100,000 for your retirement, that may seem like a lot but if your yearly expenses after 65 are $20,000 per year, then you end up only having enough money for five years. Likewise, if you save $1,000,000 for your retirement and you only spend $20,000 per year in expenses, you then have enough money for 50 more years. That doesn’t mean that you won’t have to pay out money suddenly for a large expense, but it does give you more breathing room.

Until the age you are 71, you can make a contribution to your Registered Retirement Savings Plan to a total of 18 percent of your earned income or $13,500 a year less your pension adjustments. This can give you more money for your retirement because your RRSP can grow by as much as eight percent per year. The thing is not a lot of people actually contribute everything they can for their retirement into an RRSP. In 2000, Canadians between the age of 24 and 64 put in $27.8 billion into their RRSPs, but that was only 10 percent of the total contribution amount available.

If you want to make sure you put money into your RRSP, then you should do an automatic withdrawal so that the money automatically comes out of your bank each month, or you can set up for an employer plan.

Another important way to save for your retirement is to get insurance. Critical illness insurance, disability insurance and life insurance can all ensure that you and your family have money if disaster strikes. Insurance is like a safety net for you that protects you from the worst. Remember the adage “Hope for the best, prepare for the worst” because that is how insurance works. Long-term care insurance can protect your finances if you suffer a disability or illness that causes you to need home care. This lowers the financial burden that you would have had to deal with.

You can also look at home equity plans through the Canadian Home Income Plan. The CHIP program comes from the government and it registers a mortgage on your title and you receive a lump-sum payment of 10 to 40 percent of the appraised value of your home. You own your home and when you sell your home the mortgage is repaid. Most banks offer CHIPs and you typically pay the cost of administration and the cost of the appraisal.

Planning for your retirement is very important because you do not want to be like the grasshopper that goes through life without planning for the winter. You want to be like the ant that works hard and enjoys what they have accomplished in their golden years.

Always consult a qualified financial/legal professional before making financial/legal decisions.