How to get the most out of your retirement plan
Senior couple planning their investments with a financial advisor

Retirement planning is something that all of us need to think about. Generally, the earlier you start saving for retirement, the better position you’ll be financially when you stop working. That said, not everything goes according to plan – unexpected life events may happen that might require more of your attention, or you may have underestimated how much you need to save for your preferred lifestyle in your golden years. Regardless of where you stand, there are many ways you can get the most out of your retirement plan.

Start saving now 

Unless you have high interest debt, saving for your retirement should be one of your priorities. That’s because when you start investing at an earlier age, your money has time to compound before you retire. That compound growth can often be worth more than saving more money in your later working years.

In your early working years, you’ll want to set aside any amount you can for your retirement. That could be a set amount every month, or a percentage of your income. As your salary increases, try to save even more. Of course, there will be times where money will tight, such as if you buy a home or have children. The idea here is to build strong saving habits early.

While saving money is great, make sure you are investing into products that make sense for you. This could be things such as stocks, mutual funds, bonds, and more. Additionally, you’ll want to consider which accounts you’re using. A Registered Retirement Savings Plan (RRSP) is often a popular choice since you get a tax break on any contributions. However, a Tax-Free Savings Account (TFSA) is also appealing since it offers tax-free growth.

Set your retirement goals 

To get a better understanding of what you’re saving for, you should think of your retirement goals. Some people are perfectly content moving to a low cost of living area away from the city. If this is your goal, then you may not need to save as much. However, if you plan on spending your retirement travelling for multiple months a year, you’ll likely need to save a lot more. 

Mapping out how you envision your retirement years will allow you to start budgeting for things. Many people often underestimate how much money they’ll need when they retire, so this exercise can be a real eye opener. Once you know your numbers, you can calculate how much you’ll need to get there. You’ll also want to factor in inflation, since that will eat into your savings. While these calculations can be off-putting to some, it may also encourage you save more since it’ll give you a defined timeline.

Get familiar with government programs

If you’ve worked in Canada, you’ve likely contributed to government programs that can generate you some income when you’re retired. The Canadian Pension Plan (CPP) is the most popular form of government benefits. How much you’ll get depends on how many years you worked in Canada. Another government program for seniors is Old Age Security (OAS). What’s great about OAS is that previous years worked in Canada does not count for your eligibility. You just need to be 65 years or older and have resided in Canada for at least 10 years since the age of 18.

CPP and OAS aren’t meant to fund your entire retirement; they were designed to help supplement the income of seniors. This is relevant as it’ll help you plan for your golden years. If you know you’re going to qualify for OAS and CPP, then you might be able to get away with saving less of your income. It’s worth noting that there are additional government programs available, such as Guaranteed Income Supplement (GIS), that help lower income seniors.

Maximize any employer benefits

If your employer offers any kind of financial incentives, it’s worth looking into. Defined benefit (DB) pension plans is one of the best benefits possible, since it can be guaranteed income when you retire. However, many employers have switched to defined contribution (DC) pensions. Although a DC pension isn’t as lucrative as a DB pension, your company is still contributing your retirement.

Another financial benefit that can help you in your retirement years is an employee stock plan. If your company offers this incentive, you’ll want to read the details to find out what you’re entitled to. Sometimes your employer will match your contributions, give you a discount on stock bought, or even grant you shares as part of your benefits. Either way, maxing out your options can often provide a good return.

Consider hiring a professional 

Anyone can invest the money they’ve saved, but hiring a professional financial advisor can help as they’ll be able to make investment decisions on your behalf. If you go this route, make sure you’re clear with your advisor what your goals are. Additionally, make sure they explain to you what they’re investing your money in, so you can be confident in their decisions on your behalf.

Another professional worth considering is a fee-only financial planner. Instead of investing your money, they charge you a flat fee and give you a plan based on your current situation. They’ll go over all of your savings/investments and your goals, and then be able to provide an accurate breakdown so you’ll know if you’re on track or not. For some people, this can be an eye-opener, as they may realize that they’re on track to retire early (or later than planned). 

Finally, getting tax advice from an accountant or professional can also help. This should be obvious, since the less tax you pay means more money in your pocket. They can even advise you on the best way to minimize your taxes when you eventually withdraw your savings.

Final thoughts

Saving and investing is a major part of retirement planning, but it’s not the only thing. Be sure you have your will and power of attorney in place in case anything happens. It may also be a good idea to talk to your children about what your wishes are when you pass, so there are no arguments over your estate. With everything in place, you’ll be able to enjoy your retirement with peace of mind.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.

Barry Choi is a paid spokesperson of Sonnet Insurance.