Living out your golden years in comfort 

 Once upon a time, it was very common for someone to work with the same company from high school until the age of 65 and receive a lucrative pension plan to commemorate their dedicated tenure and support them throughout their golden years. 

Life is not so simple anymore, explains Millie Gormely who works as certified financial planner with IG Wealth Management. People are changing jobs and career paths more often while companies are also less eager to hand out sustainable pension plans, leaving the responsibility onto the individual to plan ahead. 

If the furthest you’ve planned for financially is next week and terms like registered retirement savings account (RRSP) leaves you scratching your head, read on to learn some tips on how to kickstart your retirement plan. 

Get started early and be consistent 

Retirement can seem far away when you’re young but the best way to grow money is to invest early. 

“The more money you have to begin with, the faster it will grow,” Gormely says. “If you start off early, you’re giving yourself the absolute best chance of ending up where you want to be.” 

Sharon Foy, who has been retired for eight years, started saving for retirement when she landed her first job at 18. She automatically put away the same amount of money with every paycheque, which has allowed her to live comfortably in her retirement.

Gormely encourages young people to take a similar approach, as it’s much better to be consistent and disciplined with a small amount than to shell out more than you can handle. 

Investments and bank accounts and tax statuses, oh my!

The two major financial accounts that Canadians can utilize to save for retirement are Tax Free Savings Accounts (TFSA) and RRSPs. These terms can seem intimidating but they’re essentially just labels for investments to inform the government of the associated tax status, as contributions to a TFSA are not deductible for income tax purposes while RRSP contributions are tax deductible.  

While they both have benefits, Gormely highly recommends opting for the TFSA if you’re just starting out because there are limits to how much money can be deposited and the money is not taxed—even if it’s withdrawn. The money also collects interest, which is similarly tax free. She also notes that while the name can be misleading, a TFSA is not limited to a cash savings account but rather can also be used to contain investments. 

RRSPs are a little different as they are based on your income—18 per cent to be exact. Gormely advises young people to save their RRSP contribution room for when they come into some extra cash later on in life and need the tax break. The reason for this is that the RRSP allows for you to defer paying taxes until you take the money out, which will be easier in the future when you’re more financially stable. 

Be flexible with making adjustments

Let’s say you’ve run the numbers and conjured up your magic retirement number. Great, but things like inflation, the economy, interest rates and real estate prices are constantly shifting and need to be factored in when planning for retirement. 

“Don’t focus on having ‘x’ of dollars,” Gormely says. “Financial planning is not a one and done kind of deal, make tweaks as you need to.”  

Gormely also suggests preparing for unforeseeable events, like market crashes. It can be really tempting to pull all your money out from your investments and run for the hills, but that’s not always the best decision, she explains.

Foy seconds this advice as there will always be unpredictable impacts on the market—no one saw the COVID-19 pandemic coming and the attached negative collateral damage on a domestic and global-scale—but the market will eventually stabilize. 

While Foy was initially very anxious during the Great Recession in 2008, her investments recuperated and she’s happy she didn’t jump ship. She also wants to remind young people that they can select investments with low-risk, or dial back the risk, if they run into some financial hardships. 

Find the right balance for yourself

Everyone’s life and circumstances are different and so is everyone’s retirement plan. Gormely always advises her clients to focus on their personal financial situation and comfort levels, as it will allow them to achieve a balance that lets them live their life now while also saving for the future. If you have $1000 left over after paying all your bills, there’s no rule that says you have to put away the entire amount. Make the best choices for yourself and your current situation. 

Ultimately, while planning for retirement can seem like an extremely daunting task, the earlier you plan the more control you’ll have over your quality of life later on.