Retirement is supposed to be the most carefree time of your life. However, it usually doesn’t end up that way. There are a lot of items to consider before pulling the trigger and entering a life without work for good.
Today, as interest rates continue to rise, markets drop, and spending is at all-time highs, we’re going to go through three tips on what future retirees should consider before leaving the labour market.
Budget for life after retirement
You might have a budget, you might not. But if you’re about to enter retirement, you’re going to need one! And one that is completely realistic to your future needs and plans, including whether those plans include travel, a major purchase, or to simply lounge in luxury.
So go through the last year to see what your spending habits, bills, insurance and everything all add up to. Don’t leave anything out! And I do mean going over the last year. We live in Canada, after all. Therefore, items are likely to increase and decrease depending on the time of year.
This can sound daunting, but it can be far easier with an application or online tool. There are plenty of free options out there where future retirees can simply input their items, and come up with a budget based on your current and future needs.
Those future needs are important, too. Consider not only if you want to travel, but how you want to live the rest of your life. Is it in retirement living? Will you need in-home care? How much will all that cost? Again, don’t leave a line item out.
Don’t miss out on income
I mean this in a few ways. Canadians will likely have access to multiple sources of income once they enter retirement. This might be the savings you’ve created from your Registered Retirement Savings Plan (RRSP), which you must convert by 71 if you want to avoid taxes.
However, there are other sources of income as well. This includes the Canada or Quebec Pension Plan, Guaranteed Income Supplements, and Old Age Security. Just make sure you know not only when you can take out these amounts, but when is it the most financially beneficial?
In the case of Old Age Security, if Canadians wait until they’re 70, they can increase their monthly income by a whopping 36%, according to the federal government! So if you’re financially able to hold off, it’s incredibly lucrative to do so.
Review your investments… often
If you’re entering retirement, it’s time to meet with your financial advisor, and to do so on a very regular basis. These funds have to last the rest of your life, which hopefully is long and full of health. With that in mind, your investments will likely need to change and shift as you age.
If you’re entering retirement on the younger side, perhaps this means continuing to invest in more growth investments. As you age, you’ll want more stability with things like bonds for secured savings. Yet even so, you can still create room for passive income throughout this process.
One strong option that will do well even in an environment like this one is investing in infrastructure stocks. A great option these days is Finning International (TSX:FTT). The dividend stock has a yield at 2.43%, focusing on the sales, service, and rental of heavy equipment and engines around the world. Shares are up a whopping 69% in the last year alone, with a solid history of growth. In fact, shares are also up 90% in the last decade.
Bottom line
Whatever you decide, make sure your retirement decision is based on what you want, rather than the need to continue working. Make a plan, and you’ll never have to re-enter the workforce again.
