45% of Canadians with retirement plans feel better prepared for their future. Unfortunately, many still need to understand what a comprehensive plan must include. Contributing to an RRSP, TFSA, and pension program is good. But is it everything you need to have a safe and enjoyable retirement? Data suggest nearly 900k Canadians can leave their jobs before 2026. These pre-retirees need the right advice to prepare for their dream retirement life, covering all the aspects that can impact it for good or worse. Here are a few insights regarding this.
Investments for retirement income
Whether you want to relax, travel, spend quality time with loved ones, lead a healthy life, or indulge in a hobby, these choices determine how much money you need in retirement. Being with family or seeking free time doesn’t affect your savings drastically. However, travelling to other countries will be expensive and require a reasonable retirement income. If you continue to work half-time or start-up, you again won’t worry as much. Still, there has to be a solid base to build on these dreams. For this, you can explore the potential retirement income sources with Aleph Retirement Planners or other pros. They can help you with pensions, TFSA, RRSP, and OAS. They can estimate the income that will suit your chosen retirement lifestyle based on your receivables from CPP, employer pension plan, etc.
Since everyone’s investment style is different, tailored retirement planning is needed to save enough. It will consider your risk tolerance limit. Suppose someone wants to grow their funds faster. Their portfolio may benefit more from equities. Safe players can be more comfortable with a combination of balanced investments.
Longevity, inflation, and unexpected expenses
Market volatility and inflation are two looming threats for anyone planning their retirement. Hence, these need to be factored into your retirement plan so that you can adjust the investment accounts accordingly. It can help you avoid or minimize riskier choices like shares and bonds, which depend on market conditions. Even if you cash those investments out at a decreased value, your return risks continue to deepen, affecting the durability of your retirement savings. A trusted retirement planner can suggest better choices to tackle these situations because of their knowledge and expertise. Hence, it will be wise to seek their help.
Tax efficiency
It is another essential retirement plan component you cannot do without. It needs to be considered when building your investment savings or making withdrawals. Registered Retirement Savings Plans, for example, help reduce taxable income and promote tax-free savings growth. You pay tax during withdrawals. Other individuals can find tax-free savings accounts more favourable because they allow your savings to multiply tax efficiently. When you draw down on your investments, you must again be careful about tax implications. Every income source is taxed differently. For example, you pay a full tax rate on RRSPs, OAS, and CPP. However, money obtained from TFSAs tends to be tax-free.
These are some standard considerations that every retirement plan makes. However, it benefits when your retirement planner tweaks them based on your goals and preferences. Opening up and providing them with a clear picture of your expectations, backed with accurate data, is necessary for correct analysis of your situation.
