We know that the definition of “retirement” is changing – and you’re defining exactly what it means to you. You may be thinking, “I want to travel” or “I want to spend time with my grandchildren.” But it could also mean focusing your energy on volunteer work or even another career. Whatever your vision, your investment strategy will need to keep up. You don’t just need investments to get you to retirement; you need them to get you through retirement.
Consider these steps to help you move toward your retirement goals:
Define what retirement security means to you. Everyone has different ideas about what a secure retirement looks like. You might feel that true security means being able to remain in your current home and live independently throughout your life. Or you might only feel secure if you know you can afford to travel or help your grown children or grandchildren financially. Once you’ve identified your own vision of retirement security, you should be able to determine the financial resources you’ll need to reach your desired outcome.
Create an appropriate financial strategy. To achieve your idea of a secure retirement, you can’t just hope for the best – you need to create a comprehensive financial strategy, accounting for your various sources of retirement income: pensions, employer-sponsored retirement plans, your investment portfolio and so on. You need to know how much you can expect from these sources, and how you can strengthen them.
Be diligent in your retirement savings. You could spend two or three decades as a retiree, so you’ll want to accumulate as many resources as you possibly can – and that means you’ll need to save and invest diligently during your working years. Put in as much as you can afford to your employer-sponsored retirement plan – and every time your salary goes up, try to increase your annual contributions. But you can also go beyond your employer-backed plan and contribute to a Registered Retirement Savings Plan (RRSP). In all your retirement accounts, you’ll want to include a reasonable percentage of growth-oriented investments, within the limits of your personal risk tolerance.
Establish an appropriate withdrawal strategy. Your retirement security isn’t just based on how much you’ve built up before you retire – it also depends on how you manage your assets and investment income during retirement. As you begin to take out money from your RRSPs and other investment accounts, you need to establish a withdrawal rate appropriate for your age, retirement lifestyle and asset level. If you take out too much each year, you risk outliving your resources. If you withdraw too little, you might be shortchanging yourself on your quality of life. You may want to work with a financial professional, who can review your entire situation – income, expenses and so on – and recommend an appropriate annual withdrawal figure.
These are the a few strategies to help you move toward the goal of retirement security. Keep them in mind as the years go by.
