Retirement is something many of us daydream about. Having all the free time in the world to chase our passions and do what we want. But while many of us yearn for retirement, transitioning from working to retirement is not always easy and can take a lot of planning and decision making. With that in mind, here are 5 ways you should be preparing for your eventual retirement.
If you aren't already saving for your retirement, start right now. As long as you are over the age of 18 and have your basic needs taken care of (and a fully-funded emergency fund), you should be saving for retirement. One of the smartest way to do it is to maximize your contributions to registered accounts such as the Tax-Free Savings Account (TFSA) and the Retirement Savings Plan (RSP). The earlier you start, the more you will get to experience the powers of compounding interest. For example, if you save even a small amount from the age of 18 until retirement, it is likely you will be better off than someone who starts at 35, even if they save a much larger amount.
Know Your Retirement Needs/Budget
Retirement may mean something completely different to you than it does for someone else. While you may want an exciting retirement with lots of travel and excitement, someone else might just want to retire in a quiet town and relax for most of their time. Because of this, people's retirement budgets and goals will differ greatly. It is a good idea to figure out exactly how much you will need for your perfect retirement.
Leave Your Retirement Savings Alone
We know it may be tempting to touch that 5 or 6 figure in your retirement savings account when you are low in funds or want to make a big purchase, but that is not a good idea. If you withdraw your savings in an RSP early, you will not only lose its tax benefits; you will also likely pay a hefty tax bill. Retirement saving is all about being in it for the long haul, and not constantly withdrawing from it like its a bank account.
Re-Think Your Insurance
A lot of changes occur when you decide to retire, and among the biggest is to re-think your insurance. There is a good chance you will have fewer debts and fewer people depending on you, so you will likely need much less life insurance coverage than many middle-aged people.
Think About What You Want to Do When You're Retired
While many of the choices you have to make ahead of your retirement are financial decisions, some also pertain to your lifestyle. Most people have jobs where they work 40+ hours a week, so once you stop doing that, you will have a lot of free time on your hands. It is a good idea to think about what you are going to do with this time, because if you don't, you will likely become very bored, very soon.