Saving for retirement should be a priority for all wage earners in Canada. Seniors cannot entirely rely on their pensions to take care of all medical and other needs in old age. According to national data, only about 60 percent of Canadians save to retirement. Among this 60 percent, many do not save wisely.
Canadians should expect to live for two or three decades following retirement. During this time, it will be quite impossible to earn a steady income. Even if you are willing to freelance, health issues will get in the way. Senior citizens who need money for emergency medical care or housing cannot obtain loans the traditional way. Essentially, old age is a vulnerable time in life. Therefore, Canadians must plan well ahead for retirement financially.
Here are some tips to start saving smartly for retirement:
Start as Early as Possible
Though most people start saving for retirement in their late 40s or early 50s, financial experts say people should really start doing this in their twenties. But most young people are so concerned about getting a steady job, buying a vehicle, or borrowing for a house, they rarely think about retirement. However, if you aren’t saving for retirement now, start right away. The longer your money gathers in a retirement savings account, the higher the gains from interest would be.
Plan to Pay Off All Debt before Retiring
Do not plan on entering old age with hefty debts. If you think paying off debt is bad when you are earning a monthly wage, it’s a nightmare when you don’t have an income. Therefore, plan to pay off your debts, like mortgage, at least by your mid fifties. Do not let these big loans brew and accrue interest. Try to reduce superficial and unnecessary costs, so you can retire in peace without debt. Keep in mind that if you default on a debt when you are about to retire, you could risk losing your savings, or collateral offered, like your house.
Look beyond Government Bonds
Conventionally, Canadians put their retirement savings in government bonds. Three decades ago, a Canadian government bond yielded over 10 percent in interest. Today, a 10-year bond will yield about 2 percent. Inflation will simply kill your savings. Therefore, savvy retirement savers should look towards other means of low-risk investments. Don’t put your retirement savings in the stock market; if an event like the Great Recession or Brexit happens again, you could lose everything. Ideally, get your principal on the fixed-income side. If you going to take risks with your money, do it with equity.
Once you are retired, you might not need to live in an expensive house or apartment in the city. There’s no commute to work, and you might find the cacophony rather disturbing. Many retirees find it advantageous to sell off high-demand residences in the suburbs or the city and move to a quieter, less urban, and cheaper area. This is a good option to save up on living expenses during retired years. Just make sure that the area you plan to retire in has adequate healthcare facilities.
Stay Away from High-Risk Investments
If you are 50 or over, then do not get involved in high-risk investments if your income is not in the top 10 percent of the country. If you lost $10, 000 in your twenties, you would have decades to pay it off. When you lose a similar amount of money close to retirement, you don’t have time like that. Therefore, be careful with your investments. Don’t bet it all.
It would also be helpful to take up a good job with great retirement benefits when you are in your forties. Then you would not be entirely reliant on savings.
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