{"id":1572,"date":"2022-10-26T09:00:38","date_gmt":"2022-10-26T09:00:38","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/sweeneybride-2\/?p=1572"},"modified":"2023-11-23T17:37:13","modified_gmt":"2023-11-23T17:37:13","slug":"what-you-need-to-know-about-saving-for-retirement","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/sweeneybride\/2022\/10\/26\/what-you-need-to-know-about-saving-for-retirement\/","title":{"rendered":"What you need to know about saving for retirement"},"content":{"rendered":"

You are not alone<\/h2>\n

What you need to know about saving for retirement is that you’re normal if you haven’t been doing enough of it. If your default is to scroll away when you see a shaming social media post about how \u201cthe best time to start was yesterday\u201d, you are not alone. If you feel you should be farther along than you already are in your retirement savings because you haven\u2019t saved enough or made good investment returns, you should know there are many people like you. If you\u2019re one of the people who thinks they\u2019ll never be able to retire, you should know many people feel this way. If you don\u2019t know what to do or where to start, or if the thought of a future retirement causes unease or anxiety, you deserve compassion.<\/p>\n

You deserve compassion most of all because the Canadian education system does not have a curriculum on personal finance or on financial planning. There\u2019s no education on how to budget or how to prepare your tax return, let alone how to save for retirement or what retirement planning even consists of. The Canadian social support system also puts most of the responsibility for retirement savings on individual shoulders. With all that responsibility, no education, and a culture of individualism that inspires competitiveness, it\u2019s easy to see why people feel lost, behind the curve, and anxious.<\/p>\n

What we know about reducing anxiety or stress is that it helps to face the problem with the support of a financial professional, just like meeting with a therapist. Our clients consistently tell us that they feel relief after only the first meeting with us. If you\u2019re not ready to get the meeting started, this article can start the process of informing you and therefore reducing stress and anxiety.<\/p>\n

For those who aren\u2019t anxious but just curious, this article will also be helpful to you!<\/p>\n

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What social supports are available<\/h2>\n

There are some social supports provided by public pensions in Canada, which should provide a bit of relief from any anxieties about retirement savings. If you don\u2019t manage to save much but have worked full time most of your life in Canada as an employee, you can still receive some retirement income as early as age 60; however, the amount of income will be highest if you work to age 70. High cost of living areas like the lower mainland of BC may become unaffordable if you\u2019re relying on those supports without any additional income from retirement savings, but the social supports do exist and can provide some income in retirement.<\/p>\n

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Financial independence & saving for retirement<\/h2>\n

Saving for retirement is a broad description of an activity that just means putting away funds that you don\u2019t intend to use until you\u2019re retired. It also implies for most people that the funds will be invested in some way, generating compound returns.<\/p>\n

Financial independence is a term that means you\u2019re earning passive income from your investments (and possibly pensions) that covers the costs of your lifestyle. The colloquial meaning of this term implies you could live off the income forever while potentially not needing to reduce the inflation-adjusted value of the principal.<\/p>\n

For most people, financial independence is synonymous with retirement.<\/p>\n

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Accelerating the timeline<\/h2>\n

Why is it that most people retire around the same age, about 65? Why is 50 not the typical age, or 80? It could go without saying that many people dream of retiring or semi-retiring early, so why is it that many people don\u2019t?<\/p>\n

Well, the earliest you can begin taking your Canada Pension Plan is age 60, but the monthly amount receivable would be 36% higher if you can delay taking it until age 65 (and a further 42% higher if you delay taking it until age 70). Old Age Security benefits can begin at 65 as well. The age when people are eligible to begin receiving these pensions being about age 65 is a big factor in why many people end up retiring at this age.<\/p>\n

Retiring requires trade-offs, no matter what age you retire. If you must work very late into your life, the potential trade-offs could be discomfort or pain at work due to age, boredom, weariness, reduction of freedom or exposure to the risk of job loss and the resulting risk of financial insecurity. If you retire early in life, the potential trade-off is having less resources during your healthiest and most energetic years to use for your enrichment because it\u2019s being used to build an investment portfolio.<\/p>\n

Many people dream of retiring early, but many people also prefer to use a lot of their income for their enjoyment now. Retiring well before the traditional age of 65 often requires spending much less income than your peers so that the difference can be invested.<\/p>\n

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Saving for retirement vs. a retirement plan<\/h2>\n

Retirement calculators<\/h4>\n

Many people have Googled, \u201cHow much do I need to retire?\u201d and found an online retirement calculator. Their income and their age were entered and then they pressed the \u201ccalculate\u201d button. The calculator then spat out some obscene number in the millions, at which they stared aghast before slamming their laptop shut. Later, over drinks with friends, they drearily commiserate that there\u2019s no chance they\u2019ll be able to retire. They may imagine working late into their 70s & 80s, hands aching with rheumatoid arthritis with no way to stop working. Is it any wonder that the idea of saving for retirement makes people feel hopeless?<\/p>\n

Unstructured savings<\/h4>\n

There are a few ways in which some people will often begin to save for retirement.<\/p>\n