Retirement may seem a long time away, but considering the fact that every day in Canada about a thousand people celebrate their 65th birthday, chances are you or someone you know is nearing the age of retirement. Even if it feels like it’s the last thing on your list to worry about, being able to stop working is a process that takes years to prepare for.
If you are thinking of retiring within the next 5 to 10 years here are 4 things you should strongly consider.
1. Have a plan
In my opinion the first step in achieving any goal is to have a plan. You wouldn’t just walk into a room blindfolded, so why enter an important life milestone without knowing what’s ahead? When you’re starting to form your steps, you should aim for a plan that would consider what age you will be, and your income you plan to retire with. Since your spending is likely to change, create a budget for yourself that will track your expenses.
Keep in mind that you have to account for what you plan to do while in retirement. For instance, many people will consider getting a part-time job or volunteering during the early years of retirement. Some people may want to sell their house and move elsewhere, or purchase a summer home. Another important step to make is to speak to your spouse or partner. There have been too many times when I find myself siting across the desk from couples who have done everything together to reach this point, yet they are envisioning completely different paths in retirement. One may wish to spend the majority of their time with grandchildren, whereas the other has always wanted to travel the world. Start the conversation early to ensure you’re both happy when it’s time to make the decisions.
2. Pay down your debt even by $500
One of the most sure things in retirement is that 91% of people will have a lower income than they had while working. Keeping that in mind, it’s clear that you should accelerate paying down your debt as fast as possible. Yes, there is such a thing as good and bad debt, and in general some debt is okay. However, when you stop working all debt is considered bad debt. If paying down your debt (including mortgage, line of credit, car loan, etc.) seems too far to be attainable, your local financial planner can help you set up a plan where you can pay down a more significant portion of your debt that you would have normally.
3. Increase your investments even if by $100
This one is more self-explanatory, the more money you have in retirement the easier life will be. However, when increasing your investments, do it smart. Get professional advice to make sure that in retirement taxes and other fees will not erode your income from all sources. You want to be careful if you have a traditional pension plan (defined benefit) since saving for retirement can result in lower income.
4. Convert your term insurance to permanent
The best time to convert your term insurance is yesterday, meaning every year that passes, you are older and the price of your policy has increased. It might be a good time to sit down with your financial planner to calculate how much permanent insurance you will need, and ideally try to pay it off before you retire. To learn more about retirement or term insurance please visit: https://primeservice.ca/insurance/life-health/