In a perfect world, you would have started saving for retirement in your 20s. You'd be dumping excess income into an RRSP or other pension plan for a good forty years or so and be laughing all the way to sunny destinations every winter when you retire.
In a realistic world, you might be attending school in your 20s. Or you might be busy with two, three, or ten babies, and not earning a lot of income. Maybe you started putting money away for retirement but had to pull that money out due to an unexpected job loss, or for other unforeseen circumstances. You may find yourself in your thirties or forties (or beyond) and wonder if it's too late to plan for retirement. Life happens and often it cannot be helped.
How You Can Take Owning A Cottage From Pipe Dream To Reality
Here's the good news: It's not too late. You will be fine, as long as you plan and tuck money away, now.
1. Calculate how much you will need to live on each year when you decide to "retire." (Retire is in quotes, because the retired people I know still do work that they love, and get paid to do so.)
This Will Help You Calculate How Much Money You Need When You Retire
2. Add up how much you will receive from the Government for CPP and OAS. We Canadians have that guaranteed income. It's not a lot, but it's something.
3. Take the difference of the two amounts, and multiply it by 25, for your estimated post-retirement life span. This will give you an idea of what you need to live on.
4. That amount can be reduced by any pension plans you are a part of, or any other sources of income (rentals, etc.). When you have your annual amount that you need to save, put them in an RRSP, which gives you tax savings right here and now.
5. Meet with a professional accountant or investment planner. Professional fees may seem like one extra expense, but this is their area of expertise. A few hundred dollars now could save/give you thousands of dollars in the future.
You may need to make some lifestyle adjustments, as well. You may see banks advertise about the "latte factor" and it's something to consider. Make your coffee at home instead of spending $4 at a fancy coffee shop. $4 times 5 days a week times 4 weeks = $80. EIGHTY dollars a month, and that's assuming that you only drink one coffee a day. If you pack your lunch instead of eating out every work day, you're saving yourself hundreds (Yes, HUNDREDS) of dollars a month. Take the money you would spend every day on eating out and put it in a separate bank account. As it adds up, transfer it into an RRSP.
Vacations are something else to consider scaling back on. Instead of spending a few thousand dollars every six months, pour that money into an RRSP and treat your family to something local instead. The same goes for vehicles; do you really need a new car every few years? My husband's truck is 15 years old and my Suburban is ten years old. There are repairs, sure, but they are in the couple of hundred dollar range as opposed to the $20,000 to $40,000 range for a new vehicle. (Please tell me that you never buy new cars, either. Brand new cars depreciate a few thousand dollars as soon as you leave the dealer's lot.)
When you're retired and have that money tucked away, then it's time to go on a vacation or buy a little sports car. (Used/New to you, of course.)
If you have any questions, that's why I'm here. Fire away!
If you liked this, check out Does Your Kid Know A Nickel From Their Elbow? and Taking Owning a Cabin From A Pipe Dream To A Reality