The best time to start saving is now – Millard

Even if you’ve reached age 40 and beyond, it’s never too late to start saving for retirement.

So writes Brett Millard in Kelowna’s Castanet.

“For those in their 40s, traditionally called `over the hill’ and who haven’t yet begun saving for retirement, the thought of catching up can feel daunting. Especially in the face of record-high costs of living and other financial challenges,” he writes.

But, he writes, there’s no need to worry. “While the task may seem formidable, it’s never too late to start saving for retirement. With careful planning, discipline and a proactive approach, Canadians in their 40s can take meaningful steps to secure their financial future,” he explains.

First, he writes, you need to fully understand your financial position.

“Gather information about your income, expenses, assets, and debts to get a clear understanding of where you stand. Evaluate your spending habits and identify areas where you can cut back to free up funds for retirement savings,” he advises.

Next, it’s time to set “clear and achievable goals.” You need, he writes, to “determine how much you need to save for retirement based on your desired lifestyle, retirement age, and expected expenses. Break down your goals into manageable milestones and track your progress regularly to stay on target.”

The third step is to focus on your debt, which is a barrier to saving.

“High-interest debt can be a significant obstacle to saving for retirement. Prioritize debt repayment to reduce interest expenses and free up funds for retirement savings. Focus on paying off high-interest debt first, such as credit card balances and personal loans, before tackling lower-interest debt such as mortgages or student loans,” Millard explains.

With debt managed, goals set, and finances clear, you can next try to “maximize contributions to retirement accounts.” Millard advises us to “take advantage of employer-matched retirement accounts first,” then look at registered retirement savings plans and TFSAs.

The sooner you start, the more you will take advantage of compounding, he explains.

“By investing your savings wisely and allowing them to grow over time, you can harness the exponential growth potential of compound interest to accelerate your retirement savings. Start investing early and regularly to make the most of compounding returns,” he says.

His last bits of advice are to consider seeking professional financial help, to be flexible with your savings strategy through the ups and downs of reality, and to “stay motivated and consistent,” and to stay focused on the long-term.

This is all great advice that we wish we had followed better in the past! We can add one additional “welts” of experience, such as avoiding investing in trendy things you don’t really understand, or tapping into your retirement nest egg for other non-retirement purposes.

Do you have little bits of retirement benefit from different jobs sitting in different accounts? If these amounts aren’t locked in, you may be able to consolidate them within the Saskatchewan Pension Plan. There’s no limit on how much you can transfer into SPP from an unlocked RRSP, and through SPP you’ll have the retirement options of a lifetime monthly annuity payment or the flexible Variable Benefit option.

Check out SPP today!

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Article warns of five “myths” about retirement

Writing for Kelowna’s Castanet blog, Brett Millard examines what he describes as five top “myths” about retirement.

The first such myth, he writes, is the belief that “the cost of living will be lower in retirement.”

Canadians may think “their income needs will be much lower once they stop working. After all, they won’t have those commuting costs or need to make mortgage payments,” he writes. But, the article notes, travel costs are likely to increase for the newly retired, and “plenty of Canadians have debt in retirement.”

Those of us retiring with debt are facing rising interest rates, which will “have an impact on your disposable income,” the article continues. We may also have to help struggling adult children, the article points out.

Finally, longevity — living longer — can impact your bottom line, the article notes. The longer you live, the more you’ll need to pay towards “in-home care, a care home, or renovations to make your home more accessible.”

The next myth, Millard writes, is that “registered retirement savings plans (RRSPs) are a complete retirement plan.” The article points out that RRSP income is not usually sufficient for all one’s needs, noting that most Canadians will be counting on other sources, such as “the Canada Pension Plan (CPP), Old Age Security (OAS), company pension plans, Tax Free Savings Accounts,” and such sources as non-registered investments or income from rental properties.

“RRSPs are one part of an investment plan, but a real retirement plan also includes estate planning, life insurance and tax efficiencies,” Millard’s article advises.

The next myth is that “one million dollars is enough for retirement.”

Millard writes that for a variety of reasons — such as when you start your retirement, and what other sources of retirement income you have — setting a target of $1 million might not be right for you. “The amount that any investor will need when they retire will depend on a whole array of variables, with the target amount being unique to each person,” the article notes.

Lifestyle, the activity level of your retirement, possible inheritances — these all factor into determining how much you actually need to save for retirement, the article explains.

The final two myths are that “retirement plan portfolios should be conservative,” and that you should “never carry debt into retirement.”

On the first point, the older “conservative” investment idea was based on assuming a shortish retirement, the article says.

“Now, Canadians could realistically expect their retirement to last 25 years or longer. Retirement portfolios that need to support you for this many years aren’t going to experience significant growth if they’re made up exclusively of fixed income. A conservative retirement portfolio runs the risk of running out of money,” the article notes.

The “no debt” rule, the article contends, “is not realistic or practical” these days, as “close to half of Canadians carry some sort of debt.” Instead, the article suggests, work on paying down high-interest debt from credit cards, which the article describes as bad debt.

The overall message in this well-written piece is that there’s a lot of factors to consider when thinking of retirement, so rather than going by “myths,” you may want to consult a financial planner.

The government benefits most of us receive in retirement — CPP, OAS, and even the Guaranteed Income Supplement — are paid for life, and therefore cannot “run out.”

Yet many people who have RRSPs choose to continue investing them in retirement via a registered retirement income fund (RRIF), rather than choosing to convert any of their savings into income via a lifetime annuity.

If you’re a member of the Saskatchewan Pension Plan, you have the option, at retirement, to convert some or all of your account into an annuity. That way, you’ll never run out of retirement savings in the future. Check out SPP today!

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