The average age for retirement in Canada is 63, but given your current financial situation, do you think that’s doable? According to Statistics Canada, about one-third of Canadians are retiring with debt and one-sixth of them owe more than $100,000. While debt is an unfortunate reality for a number of Canadians, if you don’t want this to be you then it’s time to take control of your financial situation now before it’s too late.
Start by looking for credit counselling in Toronto that’s offered by a non-profit credit counselling agency that can help you plan for the future. They’ll be able to answer all of your questions and offer non-judgmental guidance, as well as an option for debt consolidation if that’s what you need.
It’s also important that you take the time to understand how retirement in Canada works. Here are three questions that people usually ask when it comes to planning for retirement in Canada.
1. What steps do I need to take to retire?
Planning for retirement should begin as soon as possible – essentially, when you start working and earning income.
- Start saving by setting up a Registered Retirement Savings Plan (RRSP). The money you put there will grow thanks to compound interest, and the tax on your contributions gets deterred until you withdraw the money down the road.
- Open up and use a Tax-Free Savings Account.
- Use monthly budgeting tools to manage your money better and help you save.
- Think carefully before using your credit card and work towards paying it off.
- Delay retirement if you are able to in order to pay off outstanding debt.
2. How much money should I save for retirement?
This question depends on the individual person, their lifestyle, and how much you are willing to work towards saving. This is a tricky question, as it will depend on your lifestyle and your desire to maintain it. That being said, there are some general rules of thumb you can use to give you a sense of how much you should be saving up and will need.
- 4% Withdrawal Rate: Build up a retirement portfolio that provides a certain amount of income to you per annum at a 4% or so withdrawal rate.
- Desired Annual Retirement Income x25: Similar to the above, you want to have at least 25x your desired annual retirement income.
- 70% (or more) of Working Income: This rule estimates that if you don’t have a mortgage, you will only need 70% of your income, whereas if you do, you will need closer to 100%.
- Pre-retirement Income x Multiples of 10 to 14: Multiply your income just before retirement by a number between 10 and 14 to determine how much you need.
3. What is the best plan for retirement?
There really isn’t a “best” retirement plan as it really all depends on the individual. While one person may have no financial commitments when approaching retirement, another may still be managing a mortgage and supporting other family members financially (like their children or grandchildren).
Ultimately, the best plan is to achieve financial wellness and plan ahead. If you struggle with this, then seek the aid of a certified Credit Counsellor and get the help you need.