At this point in your life, you’re in your 40’s or 50’s. Maybe your kids are grown up and moved out or headed off to pursue a post-secondary education. And you’re still working and starting to look towards retirement. Here are a few tips that will help you get there faster.
Just like you go to a doctor to make sure everything’s in healthy working order, a Northern Financial Advisor can help do the same for your finances. Everyone’s different, so it’s best to talk to a professional who’ll take the time to look at your unique circumstances.
They’ll help assess your current financial situation—looking at your debts, savings and investments—and balance that with your goals for the future. From there, they can provide you with some helpful advice about how to best allocate and grow your money.
One of the first things you’re going to want to take care of is any outstanding debt, and that includes your mortgage. You’re likely in your peak earning years and, with your kids grown up, you may have more money available to pay off your debt sooner.
If you have multiple sources of outstanding debt, you may want to discuss your options with your Financial Advisor. Some options could include consolidating them in one place at the lowest rate or perhaps focus on paying down high-interest debts (like credit cards) first. It’s also important to understand your mortgage and whether you have the ability to make payments in addition to your regularly scheduled payments without penalty. If so, consider putting down lump sum payments to pay off your mortgage earlier.
Another thing you might want to consider at this stage in your life, if you haven’t already, is taking out a life insurance policy. It’s hard to think about it, but no one knows when the end will come, and it may give you peace of mind to know your loved ones will be taken care of when you’re gone.
Disability insurance, sometimes also called income protection, is another safeguard that you may want to consider. Essentially, it’s a form of insurance that makes sure that you have an income if a disability prevents you from working and can enable to you still reach your financial goals heading into retirement.
At this point in your life, it’s time to start looking towards your retirement. First, you’re going to want to set your retirement goals. These goals may be different for different people, so your going to want to set yours based on your individual circumstances.
First, you’re going to want to consider what age you want to retire at and your life expectancy. From that, you should be able to extrapolate how many years you’ll need to support yourself in retirement. Then, consider how much you’ll need per year for a comfortable retirement. With those figured out, you should be able to come up with a target amount you’ll need to save.
Let’s do some quick math together. The average retirement age in Canada is around 65 years old and the average life expectancy is 82 years old, which would mean 17 years of retirement. If you decide you’ll need $40,000 per year, that would mean you’d need $680,000 in savings without dipping into your home equity or credit. You may also have a pension or benefits that can help you reach your goal.
At this point in your life, you’re going to want to boost your retirement contributions with your specific goal in mind. Try to maximize your contributions to your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) and if you have any money left over, consider investing it outside your retirement plans.
As with any other stage in your life, you’re going to want to create a budget, stick to it and save whatever you can for your retirement nest egg. But there are also some financial and personal decisions you can make along the way to help you achieve your goals.
For one, you might want to consider downsizing if your kids have left the house. You may not need all of that space anymore and by moving to a smaller property, you can free up some money to put towards your debts or investments.
It’s also a good idea to evaluate your work skills to make sure they’re relevant so you can continue to earn a good pay cheque. You may want to take some extra courses, so you have grounds to ask for a raise. Or, you could start a ‘side-hustle’ to earn a little extra money there. The point is you want to try to ensure you have a steady income through these years.
You might also want to scale back on riskier investments. When you were younger, you still had lots of time to make up for any potential losses. With less earning years ahead of you, it might be wise to play it safer from here on in.
There’s a lot to consider and like we said in out first tip: it’s best to start by talking with a professional who can help guide you towards your financial goals. If you have question or need some helpful advice, reach out to us at the True North Hub at 1-866-413-7071.