Those looking to retire in Canada by all accounts have amazing potential to enjoy the relaxing and fulfilling post-work years that so many of us are after.
That said, there are a number of issues with the retirement system in Canada (and many countries around the world) that may prohibit certain seniors from experiencing the sort of retirement they may have dreamed of years ago.
In this article, I’m going to highlight three of the most prevalent concerns I’ve heard from Canadian personal finance experts, and why those of all ages may find some value in what these experts have to say.
Financial readiness is key
One of the most important parts of retiring (or at least having a retirement that’s enjoyed) is ensuring there’s enough set aside to do all those things that were “tomorrow projects.”
In Canada, the average soon-to-be retiree has around $800,000 stocked away in various places. That’s not bad. But it’s roughly half of the estimated $1.5 million the average Canadian will need to retire, so there’s some work to be done in the financial literacy space on this.
For those with the ability to still do so, contributing to a TFSA can be a better option over the long term, as the $800,000 you might have saved will go a long way, given where tax rates are in Canada and the fact you can pull capital out of TFSA’s tax free (it’s the not the same case with RRSPs).
Consider re-thinking what retirement is
One of the key realities (and things to be optimistic about) is that we’re all living longer. So, for those who are healthy and live healthy lifestyles, the retirement age one might choose to retire at, but be ready for, may be completely different.
Given the fact that some government programs will make excess payments if seniors choose to work longer, that’s a question only those reading this article and their loved ones can answer. But if delaying makes you happy, retirement doesn’t have to happen at a specific date.
Inflation is real
One unfortunate reality of the current monetary system we have is that some level of inflation can reasonably be expected over the coming decades. For those who believe this to be true, and who think that rising healthcare costs (outpacing inflation) is a dynamic that will continue, planning for some serious increases in expenditures in retirement is a good thing.
Diversifying across various asset classes and taking on more fixed income exposure to match one’s expected outlays are great ways to balance rising costs with the extra income these investments provide.
