Here are goals to pursue in each decade leading up to retirement. A comfortable retirement requires a large nest egg — everyone knows that. Just how big depends on a lot of factors like your debts, health, and lifestyle (do you plan on traveling each year in luxury, or do you enjoy the quieter aspects of life?)
One common rule of thumb holds that you need enough in the bank so that you could support your lifestyle with an annual withdrawal of 4% of your savings. With $1,000,000 at retirement, you’d have $40,000 a year to live on.
But even if you know how much you need — and when you’ll need it — you might not know how to make a plan to actually get it — and how to keep that plan on track.
But fear not: This guide provides a set of financial benchmarks that tell you exactly where your finances need to be at every key stage leading up to that magical moment of no-more-work.
It can be difficult to determine how much of your income to divert to your nest egg each year, particularly when you’re dealing with more immediate financial concerns.
Financial services company Fidelity suggests you’ve saved at least one year’s worth of income by the age of 30 and 10 times your annual salary by the time you’re 67. We’ve broken down the numbers for you below:
67 years: 10 x income
If you’re fresh out of college or university, retirement’s probably not the first thing on your mind. Get your student loans out of the way first and make sure to pay your credit card bills in full and on time each month to boost your credit score.
When you get into your 30s, you’re likely worried about paying your mortgage, getting hitched and supporting your family. Basically, your finances don’t just revolve around only you anymore, so take out a life insurance policy to support your loved ones.
But while you’re doing so, make sure to still invest in an RRSP or TFSA and grow your income with other investments. By 35, you should have at least twice your annual salary saved up for retirement.
You should have a nice, tidy stash of retirement savings by now — if you’ve fallen behind in your goals, however, talk to a financial adviser to nail down a plan.
This is especially important if you’ve pushed your retirement savings aside to focus on other things in past years. At age 45, you should have four times your annual salary saved up for your future already.
Continue bolstering your savings with investments and any salary bonuses or raises you earn and look for ways to cut down on your regular monthly payments, like reviewing your insurance or mortgage rates.
Some Canadians choose to retire in their 50s and if you’ve managed to save up at least seven times your annual income by then, you might consider doing so as well.
If you’re not quite ready yet, however, just keep on doing what you were before. Maximize your contributions to your RRSP and TFSA, find ways to slash those monthly bills and continue monitoring the stock market and investing.
Make sure to deal with any remaining debts before you retire as well. If you’re juggling multiple lines of credit, you can even take out a personal loan to cut down on interest and pay off your debts faster.
Once you’re in your 60s, you’re eligible to start receiving benefits from the Canada Pension Plan (CPP), and Old Age Security (OAS) at 65. These won’t be enough to get you through retirement on their own — but that’s why you’ve bulked up on savings and RRSP income in past years.
You might start withdrawing money from your RRSP account, which means it’s now taxable and you’ll have to start reporting it on your returns.
Instead of hiring a tax professional with pricey fees to do all the work for you, use an online service and sign up for a plan that makes the most sense for you and your income.
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