While you might not want to think about retirement right now, it’s still something you need to plan for, regardless of your age. It doesn’t matter what retirement means for you, whether you want to spend your free time traveling around or learning something new, you need to be sure everything has been thought of before you actually retire. To be on the right path, you will need a solid retirement strategy to make your dream situation a reality when you stop working.
Saving money is great, but it won’t really help you if you start planning your retirement at 55, as the magic of compounding won’t have enough time to really kick in.
To enjoy a comfortable retirement, you need to put money away as early as possible and on a regular basis, even if you start small. In doing so, you will be able to make your money grow over time.
Before you start saving money to invest it, you need to audit your current financial situation to be able to spot your strengths and weaknesses. Get your credit score, make a budget, pay off debt, pay bills on time, build an emergency fund, and start putting away a fraction of your earnings to build up your savings.
If you’re working full-time, start using employer-sponsored pension plans. There are many different retirement plans available in Canada and in the US you can benefit from it. If you’re working independently as a freelancer, you might want to have a look at different kinds of individual plans.
Fees and taxes can eat away at your retirement efforts, so you’d better be sure you’re keeping your fees to a minimum by comparing and negotiating the investment fees you’re paying. It’s also important to think about taking advantage of whatever tax relief is available to you – you can start by using retirement tax-advantaged accounts.
Among the most popular ones, you can find the TFSA (Tax-Free Savings Account) or the RRSP (Registered Retirement Savings Plan) in Canada and the IRA (Individual Retirement Account) in the US.
These accounts are actually great options to build savings for your future while reducing your taxes. If you want to have a look at how much money you can save by using these accounts, check out free tools like the RRSP calculator or the IRA calculator.
While calculators are great, they cannot predict the future, as they cannot take into account the many factors surrounding your personal situation (losing a job, getting a potentially bigger salary, having to face new financial obligations, etc.).
The best retirement strategies are therefore the ones that best fit your situation, your goals and your needs. Get a clear picture of your current situation, and be honest with yourself what you want to achieve and what you’re willing to do.
How are you feeling about your retirement savings right now? Do you need to make some adjustments to your retirement planning to fit your personal goals? How would you prepare for retirement?
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