There is no single right way to prepare for retirement, but there are definitely bad habits to avoid and positive habits to embrace. The following are 4 mistakes to avoid while planning for retirement:
Mistake #1: Procrastination
Procrastination is the biggest problem most people face when it comes to money-saving endeavors. Most wait too long, or keep putting saving off because other things ‘come up’. Unfortunately, in the years when we are told to save the most – we have the biggest things happening that take up a lot of time and money. From buying a home, to starting a family – these milestones take up a lot of our resources.
Solution: It is never too late to start. Right now you are probably saying “I wish I started saving for retirement ___ years ago”. The best day to start is TODAY. In a few years you will be saying “I wish I started saving back then”. There is no time like the present! Even if you are unable to start with a substantial amount – get into the habit of putting away a portion of your income – and increase it when you can.
Mistake #2: Not Knowing the Numbers
Are your retirement goals realistic? Do you know the amount of money you will need to retire comfortably and live the type of lifestyle you desire? Many people know how much money they would like to have, but are not sure of how they are going to reach their goals.
Solution: Having an accurate understanding of how much you need to save and how much your retirement resources actually supply you with is important to have realistic goals and expectations.
The following is a great resource to help you understand and calculate your retirement resources and finances. The modules (approx. 30 minutes) will help you get a good idea of what you can expect:
Canadian Retirement Income Calculator
Mistake #3: Not Adjusting Your Habits
Preparing for retirement starts with altering habits and rearranging priorities. Many people have the desire to save, but are unwilling to make necessary changes.
Solution: The first and most important habit necessary to start saving for retirement, is analyzing exactly where all your money is going. Track your spending and pinpoint any habits that are unnecessarily draining your income. Instead of thinking about having to make sacrifices, treat it as simply changing your priorities (i.e. doing without daily expensive lattes, taking taxis instead of transit or having weekly manicures) and putting the money towards something that is more important to you. You alone know what matters the most, so consider your own priorities and figure out what you can do without.
Mistake #4: Going At It Alone
Retirement planning is not something to be taken lightly. Do you know where you should invest your money, or if/when you should downsize? It is important to get as much advice and information as you can about your finances and the resources available to you.
Solution: Even if you seemingly have all your finances in order, it never hurts to get professional advice, making sure you are taking advantage of everything available to you. One person who can make your life easier is a financial adviser. Consider a fee-only financial planner who charges by the hour and does not sell investments. You can purchase a consultation or a more comprehensive retirement plan.
If you are lucky enough to own a home in Toronto, you are at an advantage in today’s market. Selling your home could mean funding your retirement! If you want to find out how much your home is worth and what it could mean for your retirement planning, feel free to call me at 416.960.9995. and I can answer any of your questions
Want to learn more? The Globe and Mail has a specific section on global investment and retirement that has a lot of interesting content.
