Retirement: Save Now or Suffer Later


In the wake of the recent economic crisis, some boomers are being forced to delay their retirement or dig into their savings to get by. But preparing for retirement early is critical in preventing these perils in their golden years.  The key to attaining financial security in retirement is to start planning for it early. Some financial experts say age 30 is ideal; others say the earlier the better. Whatever the case may be, you do not want to outlive your savings.
An RRSP retirement savings plan allows both you and your spouse or common-law partner to contribute towards it.
Consider these factors:

  • You are on your own but stay the course – With an RRSP, you are responsible for making regular deposits to the RRSP on your own. It is here that discipline, commitment, sound financial planning and budgeting come into play.
  • Time is of the essence – While your taxes are based on a calendar year, the reporting of your RRSP contributions begin in early March. For instance, RRSP receipts for the first 60 days of any given year must be reported on your previous year’s income tax return. The RRSP contributions you make throughout the year are tax deductible.
  • Meet your annual contributions but do not go over by too much – There’s a cap on how much you can contribute to your RRSP annually. But, if your RRSP contribution is less than the limit, it can be carried forward to future years.  For instance the limit for the 2013 tax year is $23,820. If grandma contributes only $13,000 in 2013, the $10,820 balance can be carried over to her 2014 limit. A taxpayer may go over but only by $2,000. Paying in excess of that will lead to penalties.
  • Do Not Procrastinate – Many folks often put off investing for their retirement until the mortgage is paid off or until the kids graduate from college. But waiting for the “perfect time” to begin investing for the future is futile and can hamper their retirement plans.
  • Examine where you are now and where you are headed – The retirement age is 65 but people usually live 20 to 25 years post retirement. Figure out the life you want to live in your golden years, set goals and plan accordingly. Whether you want to travel or simply spend time with the grand kids, early planning is essential in making it worry-free and blissful.
  • Pay off debt and retire without taking on more – The last thing boomers want is to be bogged down by debt as they nest. Pay down high debt balances, mortgages, credit card bills and student loans. Doing so will make these nesting years headache-free and much more fun.
  • Save adequately and for a rainy day too – Experts say you need about 75% of your yearly income for each year of retirement.  We often think of death and not the unexpected challenges, like disability, that can occur before we die. In addition to life insurance, you might want to get disability coverage or long-term care. It is necessary to make sure your finances are in order before that retirement age and unexpected event comes.


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