Ready to Retire? If You Can’t Answer These 3 Questions, You’re Not

Retirement planning is the same, even in a pandemic, although the key is to ensure that your plan uses the loopholes. The most crucial is to have other income sources like the Toronto-Dominion Bank stock. This blue-chip asset can deliver lifetime financial support.

| More on:
Path to retirement

Image source: Getty Images

Retiring is always a difficult decision, but the coronavirus pandemic has made it painful. People approaching the crucial phase in life are no longer as eager as before. Many would rather postpone instead of rushing to the retirement exit.

How much is enough? There is no perfect answer to this long-standing question, because there is no magic number. The amount is relative and depends on the kind of lifestyle a retiree desires. However, the common goal is a comfortable and carefree retirement.

If you have the same objective, your answers to the following questions should determine your preparedness. Be truthful, or else you’re setting yourself up for a disaster.

Are you ready to downsize?

Your regular paycheque isn’t coming anymore, so you will subsist on your pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS). It will require budgeting discipline on your part, because you need to slash your usual spending significantly. Healthcare costs might increase too as you get older.

It would help if you can assess your retirement expenses early. The combined total of the CPP and OAS might be inadequate to address or cover all your needs.

Are you free of debt?

If paying bills during retirement will be a struggle, having debts will completely drain your meagre pension and slice a big chunk out of your retirement savings. Thus, start paying down debts, especially those with high interest. You don’t want to keep working and be a prisoner of debt.

Are you saving and investing?

Your CPP and OAS are replacement incomes but cover less than 40% of the average pre-retirement income only. Thus, it’s advantageous to have other sources of retirement income.

Blue-chip stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are game-changers for retirees. This $111.5 billion financial institution and the second-largest bank in Canada has a 162-year tradition of paying dividends. You’ll have a reliable source of steady income for a lifetime.

Saving cash is good, but the money won’t compound to increase your retirement wealth. Investing is a better alternative. TD is a haven for risk-averse investors. For the last 20 years, the total return of this A-1 stock was 554.49%. At present, the dividend yield is 5.24%. Your $100,000 savings can produce $1,310 in quarterly earnings.

The economic impact of COVID-19 is harsh, although TD should overcome the headwinds, as it did during the 2008 financial crisis. No other company reported revenue and earnings growth, except this Canadian bank.

100% confident

Forget about the pre-corona days, or the good old days. They’re not coming back anytime soon. Everyone is pushing the reset button to greet the new normal. However, the solution to a successful and graceful retirement remains the same.

Prepare ahead of time and develop a financial plan where you will see the flow of money. Adjust your retirement strategy, so you can fill the gaps. Remember that investment income is necessary, because you can’t rely on pensions alone. Also, cash reserves can deplete over time.

You are 100% confident of retiring if your answer is yes to all three questions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

Man holding magnifying glass over a document
Dividend Stocks

Passive-Income Investors: 2 TSX Dividend Stocks to Watch in February

There’s never a bad time to think about building a passive-income stream. Here are two top dividend stocks to get…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

Better Buy: Enbridge Stock vs. Telus

Enbridge and Telus are top TSX dividend stocks. Is one a better bet right now?

Read more »

Dividend Stocks

TFSA: How to Invest $88,000 to Get $5,450/Year in Passive Income

Top TSX dividend stocks such as Enbridge can be held in your TFSA to benefit from steady payouts and capital…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Dividend Stocks (Down Over 30%) to Buy in January 2023

Given their discounted stock prices and high yields, these three cheap dividend stocks could be attractive for income-seeking investors.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

TFSA Investors: Earn Passive Income With 3 Blue-Chip Stocks

TFSA investors can worry less about a recession and earn passive income with three blue-chip stocks as core holdings.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

Is Now the Right Time to Buy Consumer Discretionary Stocks?

Investors cannot paint consumer discretionary stocks with a wide brush. Each stock must be investigated individually. Here's why.

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Ultra-Stable Canadian Stocks Just Crowned as Dividend Aristocrats for 2023

Waste Connections (TSX:WCN) stock and another Dividend Aristocrat could help investors crush the markets in 2023.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Create $200 in Passive Income Every Quarter From 1 Defensive Stock

Risk-averse investors can seek safety in a defensive stock and earn more in passive income in 2023 and beyond.

Read more »