Secure Your Future: A Guide to Financially Preparing for Retirement

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Retirement planning can seem overwhelming, but with the right strategy in place, you can ensure a pleasant and financially secure retirement. This guide will walk you through essential steps, from determining how much you need to save to deciding where to invest your money. By planning carefully and making informed decisions, you can create a retirement plan that suits your lifestyle and goals.

How Much Should You Be Saving for Retirement?

A common rule of thumb is to strive for 70–80% of your pre-retirement annual income to maintain your standard of living after retirement, though this may differ depending on your specific circumstances and priorities like your health, lifestyle, family, and other income sources.

To determine what your savings goal should likely be, follow these steps:

  • Evaluate Your Present Financial Circumstance: Evaluate your current income, expenses, debts, and assets. This will give you a clear picture of your starting point.
  • Determine Your Retirement Expenses: Consider future costs such as healthcare, housing, travel, and leisure activities. Don’t forget to factor in inflation.
  • Set a Savings Goal: Based on your estimates, calculate how much you need to save annually. Many financial advisors recommend saving 15-20% of your annual income.

Where to Save and Invest for Retirement 

Building your retirement fund requires careful selection of the right savings and investment vehicles. Here are some options:

  1. Employer-Sponsored Registered Retirement Plans (RPP):
    • Contributions are tax-deferred, and many employers offer matching contributions. Maximize this benefit by contributing enough to get the full match.
  2. Registered Retirement Savings Plan (RRSP):
    • Contributions are tax-deductible, and earnings grow tax-deferred. Withdrawals in retirement are taxed as income.
  3. Individual Pension Plan
    • Created by your company, this is a replacement to RRSP contributions. It is often a higher amount than RRSP contributions and will provide a deduction to the company for tax purposes as well as other tax benefits.
  4. Tax-Free Savings Account (TFSA):
    • Contributions are made with after-tax dollars, but withdrawals are tax-free. This account is versatile for both short-term and long-term goals, and earnings grow tax-free.
  5. Registered Education Savings Plan (RESP):
    • While primarily for education savings, it offers government grants and tax-deferred growth, which can indirectly support retirement if your dependant’s education expenses are covered through other means.
  6. Taxable Investment Accounts:
    • While these do not offer the tax advantages of registered accounts, they provide greater flexibility. Investments in stocks, bonds, and mutual funds can provide growth to supplement your retirement savings.

Preparing for the Unexpected in Retirement

Unexpected events can disrupt even the best-laid plans. Here are some tips to protect your retirement savings:

  • Emergency Fund: Maintain an emergency fund with 3-6 months of living expenses to cover unexpected costs without dipping into your retirement savings.
  • Insurance: Ensure you have adequate health, life, and long-term care insurance. These can protect your savings from being depleted by major health issues or other unforeseen expenses.
  • Estate Planning: Create or update your will, power of attorney, and healthcare directives. Consider consulting an estate planning attorney to ensure your assets are distributed according to your wishes and to potentially minimize estate taxes.

Accounting and Advisory Support to Help You Plan for Retirement

Preparing for retirement takes careful planning, regular saving, and smart investing. By understanding what you’ll need in retirement, making the most of tax-advantaged accounts, and investing wisely, you can secure your financial future. KWB Accountants & Advisors can help you navigate this journey with confidence. Schedule an introductory meeting today and take the first step towards a well-planned and financially secure retirement.

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