What You Need to Save for Retirement, Starting Now!

I want to retire. I want to retire right now and travel the world. Don’t we all? How do we make this a realistic dream? Financial freedom is often the solution to this equation. However, with the rocky economic climate and the confusing financial mumbo jumbo – pension, savings, RRSP, TFSA yada yada yada. What are the basics you need to know and how much should we try to save so that we can sustain the life we need, and want?

How much do you need to save?

Use a Retirement planning calculator such as this one

Depending on the lifestyle you want to maintain during retirement, you can adjust how much you need to save. This calculator can help you estimate your monthly income, and provides you with a goal for how much you need to save. It will also give you an estimate of the amount to contribute on a weekly and monthly basis.

How much do you currently spend?

How do you spend your disposable income after expenses? This means things aside from rent, mortgage, food, utilities and all your very basic needs (and no, manicures and Starbucks is NOT a basic expense). Consider how much you spend an average month so you know what you need to save if you want to maintain your current lifestyle.

When do you want to retire?

By creating a timeline and working back from the end state of your imagined retirement, you should create a realistic goal age. You want to guestimate the number of years you can sustain yourself in retirement.

How much do you have saved?

Add up all your current savings and take a financial snapshot. Do you have property? Add up all your cash and assets.

How much money are you guaranteed?

Do you work for the government or large corporation? If so, you might be able to expect a pension. You can often check with your HR department for information on the pension program. In Canada, it is often the CPP – Canadian Pension Plan – which is a program that mandates all employed Canadians to contribute a prescribed portion of their earnings income to a plan that will pay them back in retirement. OAS – Old Age Security when you reach the age of 65 years of age is also an amount that you can expect in Canada. However, the OAS payments can also be adjusted over the years- between now till you retire.

Build a plan

After you’ve done your preliminary analysis, you should consult with a financial planner, which can help you calculate the difference between your income, inflation and provide insight on your current financials.

But the general rule of thumb- always remember, a penny saved is a penny earned! And in this penny-less economy, better round up and save a nickel. Before you know it, you’ll be lounging on the beach in retirement. 

Tags: CPP, finances, financial freedom, financial planning, OSP, pension, personal finance, retire, retirement, retirement savings plan, RRSP, savings, Self-help

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