The Perfect Retirement Guide for Canadians
Hey guys, this is Thomas, Better Mindsets, Better Life. Let me ask you this. Do you ever feel stressed about your retirement? You have been working hard and saving hard for your entire life, and now it’s the day that you can decide how you want to live for the rest of your life, but do you actually have enough saved up to live happily ever after? Are you well prepared for what is ahead of you? Well, you can stop worrying because today I will share all the tools you need for a happy stress-free retirement life! Let’s dive in!
Even if you follow a retirement guide for Canadians, how do you know if your future retirement life is going to be secure and successful? To answer this, you must understand what is stopping you from getting there. There are three reasons why Canadians feel stress about their retirement. One, they never think about retirement planning. Two, they have no clear financial strategy free.
Top reasons why Canadians are never ready for retirement
They focus on assets but not income. Okay? Let’s start with reason number one, They never think about their retirement planning. Canadians are so busy with their current lifestyle, they just let their days go by. While many people are well aware that planning for retirement is important, it’s not urgent to them. It’s like hoping for retirement fairy to exist, and at the age of 65, the fairy just shows up and boom, here’s your retirement money.
Well, unfortunately, that only existed 30 years ago when there was something called Defined Benefit Pension in which a hundred percent of the responsibility for the retirement payment was held by the employers and governments. In the early eighties, over 60% of Canadians had a pension plan. But in 2011, only 18% was covered by a guaranteed pension plan. Which is why you need a retirement guide for Canadians now more than ever.
Second reason, no clear financial strategy. Since the defined benefit retirement plans are quickly disappearing, most of us won’t know exactly how much income we will have until the date we actually want to take it out.
Too many people today think that they can just wing it and be okay. That’s simply doesn’t work. Why? Because there’s too much uncertainty when it comes to future income expenses. Study shows that two thirds of Canadians do not know exactly how much they are going to need in retirement, nor do they know how long they will need it. They don’t have a plan to ensure that the retirement income can keep up with the rising costs of goods and service.
In the past, retirement planning seemed to be so much simpler. When the only decision to make was ‘when’; fast forward to the present day, it’s about how much money you need, how long you need the money for, where you will retire, and what happens when you have a long-term care event, and these questions must be answered.
Third reason, focus on assets but not on income.
Prior to our retirement, we are always in the accumulation phase where we focus on growing on assets, but retirement is the opposite. Retirees need guarantee lifetime income. We always see ads for investment plans from tv, radio, and social media. The problem with most of these ads is that they only focus on the accumulation. They don’t stress what you need to do with these accumulated savings once you reach retirement.
Be Wary of RRSPs
The best example would be RRSP, one of the tools that help Canadians save for retirement. I remember every time I walk into the bank, I always get sold on the concept of RRSP, that I get tax return and it helps me to save for the long term. However, no one tells me the consequences of taking the money out at retirement. I didn’t know by the age of 71, I’m forced to take the money out, and if I don’t plan it carefully, it could cause me to pay more tax.
Retirement in Canada | Save For Retirement
On the day that you retired, your game plan changes and its important to have a good retirement guide for Canadians. So how do we resolve these problems? According to the book “Don’t worry, Retire Happy” by Tom Hegna. There are four takeaways that could really help you live happily ever after. Take away Number one is to define what is retirement to you. To me, retirement is about doing things that you like without worrying about the bills. In other words, it’s financial freedom. For one person, it could mean being a couch potato for 12 hours a day, but for another person it means traveling the world five times a year.
Stages of Retirements
Everyone has a different lifestyle they want to live and each lifestyle costs differently, but everyone should have a retirement guide for Canadians. The author suggest that they are three stages in retirement life. The first stage is the go-go years. These are the early years of retirement where you’re going golfing, playing tennis, traveling and enjoying your retirements.
Then it’s followed by the slow go years, the slow go years are when you can still do everything that you were doing in the go-go years, but you just don’t want to. Then the slow go years are followed by the no-go years where you pretty much stuck to the bed the whole time. These three stages are to remind you to fully enjoy your early retirement years and to adjust your expenses over time.
Not everyone retires with the same amount of money. If income is a problem you might consider a hybrid. Retirements staying in the workforce can be financially advantageous, especially with today’s medical advancements. People’s life expectancy generally increases more and more. People now live over the age of 90. It’s not a bad ideas for retirees to work couple hours a week. Not only this will keep your bank account active. It also keeps your mind active too, which is beneficial to your overall being.
In addition, since you are still with the company, you may also qualify for the company’s health benefits plan and that will reduce your bills by a lot. You might be surprised that 45% of the retirees in Canada are currently enjoying a hybrid retirement.
Don’t Forget about inflation
Take away Number two, always, always watch out for inflation. Let’s face it, with the covid situation, Canadian government been jacking up debts like no tomorrow, and this means the cause of buying goods will eventually go up. Inflation will certainly affect everyone’s retirement life. $100k today compared to 20 years ago, is a lot less in terms of buying power. The book proposed that if you retire at age 70 and pass away at age 75, the inflation most likely won’t affect your retirement. However, if you retire at age 55 and left till your nineties, then inflation will most likely cut your purchasing power by 50%.
Here’s the fact according to statistics Canada, the life expectancy of a Canadian male is age 85 and female is age 87. What’s interesting is married couple usually live longer than singles and can often live up to age 92. Longevity is not just a blessing, but it’s also a risk multiplier. The longer you live, the more risk you are exposed to. That’s why it’s important your retirement income is able to beat the inflation. This is where a good retirement guide for Canadians comes in.
Keep your money managed properly
Take away Number three, consolidate your accounts. Couple years ago I worked with a retired couple. They want someone to take care of their finance so they can focus on where to travel. Next thing I know I found out they had 30 accounts in 3 different banks. Checking account, one two and three, three saving accounts, one two and three two joint accounts, two USD accounts and a bunch of mini term deposit accounts and so on.
The Perfect Retirement Guide for Canadians | Plan Ahead
Wouldn’t it be frustrating to see all those statements bombarding your mailbox month after month? What I told them is that you only need four piggy banks. The first piggy banks, is the one to pay for your current bills. Write down what your fixed expenses such as groceries, clothing, your car maintenance, et cetera, and also what your weekend bills are, such as the Country Club membership fees. Remember, when you’re retired every day is your Sunday.
The second piggy bank should be able to provide you a guaranteed lifetime income, such as pension, the government benefits, term deposit, rental income, et cetera. Wouldn’t you feel much less stressful when you know your guaranteed lifetime income can cover your bills? If you want to know more about the Canadian government benefits, make sure you watch my previous videos on the retirement benefits for Canadians. You can click the link at the top corner.
The third Piggy Bank should be invested in somewhere that can at least beat inflation and has enough growth that can later be used to fund piggy bank A and B. The last piggy bank is saved for the unexpected and unforeseeable circumstances, aka emergency funds. Did you know that one of the fastest ways to exhaust your retirement saving is to be ambushed by the cost of medical care? According to Statistics Canada, the chances of requiring long term care are 1 in 10 by age 55, 3 in 10 by age 65 and 5 in 10 by age 75, and how do Canadians react to these stats?
Medical Bills are unstoppable
Most agree that eventually they will need one type of care or another as they get older. But the funny thing is nobody thinks that they will actually be the one that needs it was more. They believe that all their long term care needs will be covered by the government.
Indeed, the Canadian government does have programs available to assist with a retirement guide for Canadians that require long-term care but it’s far from enough, so be ready for medical events. My suggestion is to have a look into an insurance plan. It can save you thousands of dollars if anything happens. The last takeaway is to work with a professional. It’s been proven that those people who planned it for their retirement are happier than those who did not. If you don’t have the time, nor the interest.
You can certainly hire a professional to help
They should be able to point out if you have any potential gaps in your planning and how to glue them back together so that you don’t discover them until it’s too late. In the next video, I will share what you need to know before working with a financial advisor, so you have a foolproof retirement guide for Canadians. I know one major thing that often stops people from taking action is they always feel like they don’t have enough time, but is this really true?
Think about how much time you spend on your phone. I bet you probably watch a lot more videos than just this one. If you have the habits of spending time planning your weekend or your upcoming summer vacation, why don’t you allocate some of your time planning for your longest and most important vacation of your lifetime then? I hope you enjoy today’s video which talked about a Retirement Guide for Canadians.
Try watching these two videos too. I promise you will get value out of them. Don’t forget to smash that. Subscribe button every week. I will share more on how money works and how you can work with money. This is Thomas and I will see all of you next week.