Don't Stop Saving for Retirement
Don't Stop Saving for Retirement
Due to COVID-19, we have all had a shaky start to 2020. The pandemic has thrown many things into chaos, including people’s personal finances. While many people tend to just focus on the present, it is still important that we look ahead and plan for the future for when this pandemic is over. If you are fortunate enough to be able to continue working, you should use this time to look forward, start planning and saving towards your retirement. If you are already doing so, it is a good time to take stock, possibly reassess, and then continue your plan.
We understand there are many reasons for you to push the thought of saving for retirement to the side right now, but we have five reasons to show why you should still be looking to prepare for the future.
Most people have some extra time right now.
While most of us are self-isolating and social distancing, this is a great time to focus on developing a retirement plan. Putting a plan together helps to alleviate stress down the road. In your plan, you want to determine how much you will need to save each year, and what your end goal is. Looking at your monthly budget is a good place to start and, from there, you can assess how much you can put away into your Registered Retirement Savings Plan (RRSP) account each month moving forward. Remember, if you unfortunately lose your job or have a life event at some point in the future, you can still withdraw from your RRSP, if need be.
You can’t fully depend on government aid.
Calculating how much government aid you are entitled to is a great start. However, it may not be advisable to solely depend on Old Age Security (OAS) or the Canadian Pension Plan (CPP) as these policies could change in the coming years. You should always have a back-up plan of your own that you can count on, in case you need it. Determining how much money you will need to live per year in retirement is a good way for you to clearly plan how much government aid may cover, and how much you will need to save yourself.
Retirement is not as far away as you think.
Starting early is always the best thing you can do when thinking about saving for retirement. If you think retirement is too far away to plan for, our advice is to start saving anyway. You will thank yourself in the future, as compounding interest is a great thing to take advantage of. Albert Einstein referred to compound interest as ‘the eighth wonder of the world’. It’s staggering how much small contributions can grow over long periods.
Don’t count on possible inheritance or winning the lottery.
A BMO survey from 2014 found that 40% of Canadians are relying on an inheritance to help fund their retirement. The same survey also found that close to the same percentage, about 34%, are relying on lottery winnings to fund their retirement.
Counting on someone else for your retirement is not a reliable plan and, unfortunately, the odds are definitely not in your favour when it comes to winning the lottery. As stated above, the best way to set yourself up for success is to start saving now, even if the contributions seem small. Sticking to a reliable savings plan will allow you freedom from depending on external factors for your retirement savings. You can also hold yourself accountable if you feel yourself straying from your plan.
If you don’t know where to start, we are here to help.
It can be daunting trying to think of where to start when it comes to saving for retirement. We understand that it can be intimidating to think that far into the future. Once you create a plan, though, it becomes a lot easier. You can avoid a lot of stress by doing some research, and then implementing your savings plan. The stricter you follow it, the more comfortable you will feel when thinking about retirement. The most important thing to do is to start now. Start slowly and work your way up.
During this pandemic, don’t forget about saving for retirement. We have many resources that can help you, and you can always contact us if you have any questions. We want you to succeed and set yourself up for a great retirement.