How do you determine when you have enough retirement money?
The first thing I would suggest is to make sure you plan ahead and start early. That is the most important thing because it’s one thing to have a retirement plan at 65 when you’re retiring in two months, but it’s a whole other ball game to start thinking about this when you’re 35-50, as time will then be on your side.
The compounding effect of money and the tax planning that you’re able to do at an earlier stage will have a direct benefit on your retirement money, on your retirement cashflow. That is one thing I would strongly advise. Start early and plan ahead.
Now there might be some work programs that exist for you at the office, where you contribute money and the company matches a percentage of that contribution.
Maybe you have a defined benefit plan. Maybe you have an employee share purchase plan where you’re able to buy shares of the company you work with. I would definitely explore those because if they’re able to match or to give you free money, that’s one thing you should definitely do.
Aside from making sure you have the perfect financial plan, you will want to work on a retirement budget. I call it the monthly drain; what your actual cash spending is per month, and what you need to pay the bills.
Those are all factors that you need to consider. Whether you are going to be carrying debt into retirement or not is another factor. In my eyes, it is the most important factor.
If you are planning on carrying debt into retirement, which is not necessarily the worst thing on earth depending on what your situation is, then you need to factor that into the budget as well.
Check with CPP to verify your entitlement and your old age security (OAS), as these are both very important components of retirement. With your CPP, you can elect to take it early or you can elect to defer it. So roughly 0.6% for every month that you defer. Call it 7% or so per year extra if you are able to defer it or you lose 7% if you need to take it early. Either way, the CPP and your OAS will impact your retirement cashflow.
⭐ Full Video and Blog Article on Old Age Pension | Old Age Security | Canada Pension Plan
If you find yourself in need of a higher monthly cashflow, you can always work a part-time job
Finally, you have to establish a retirement plan. You’ve factored in how much money you will need, now you will have to put together a plan. Here are some factors that you should consider
- Living Somewhere Else in the Winter
- Grandchildren’s Education
- Charitable Contribution
- Estate (Legacy) Goals
These are all things that are critical when you’re looking at the retirement planning for the cashflow. You’re taking a look at your plan, you’re taking a look at your CPP options, your options. You took a look at work to see what happens there. You’re taking a look at how much your budget is.
You take a look at your budget, where your cash flow is drawing, and then you’ve got to plan for what we call the Go-Go years. Finally, some Slow-Go years and maybe some No-Go years. The old myth where you’re going to spend 70% of your money at retirement may not be true for you.
Maybe you want to spend a ton of money while you’re go going and maybe you’re going to spend a little bit less when you’re slow going and maybe when you’re effectively 90 or 95 or a hundred and you’re No-Going. Maybe there’s a lot less cashflow needs at that point.
All of this encompasses the very important process that I call the financial planning process or the retirement planning process. I think it is critical for you to take a look at this before your retirement. Those are all points you should consider.
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