Get Ready for Your Golden Years: 5 Steps to Prepare for Retirement

Whether your nest egg has been growing for many years or you’ve just started thinking about what you need to do to retire, here are five tips to get you started:

1. Prioritize Retirement as a Financial Goal

It is easy to put off working towards goals that seem less urgent. For many Canadians, retirement is one such goal. It can be decades away when we start our working lives. However, time flies and before we know it, it’s time to see where we stand with our money and when we can retire.

If you’re guilty of not taking an active role in planning for retirement, one of the best ways to understand where you’re at is manage your money at least as often as you receive income or a pay-cheque. Take your finances off autopilot and plan how you will spend, save, and meet your goals.

Be savvy as you give each dollar you earn a job. Prioritize savings, debt payments, and planned expenses. Consider all of your weekly and monthly expenses carefully. Determine which can be reduced, which must stay about the same, and which need more funds allocated towards them. Reign in any lifestyle spending that is financed with credit cards so that you can live within your means.

2. Prevent Debt from Prolonging Your Working Years

Your retirement date will be impacted by your financial situation. While savings is important, how much you owe on your home equity line of credit (HELOC), credit cards, loans, and mortgage can delay your ability to retire on your terms. Use the 10 to 15 years before you would like to stop working to outline a plan to pay off what you owe. That will help you enjoy your golden years without having to worry about payments that could be difficult to afford on a lower income.

3. Stagger Large Expenses to Keep Them from Coming Due all at Once

When did you last replace your hot water tank, buy new furniture, upgrade your appliances, or put on a new roof? It’s easy to forget to plan for these types of expenses when what we have is working just fine. However, in the years leading up to retirement, if you’re responsible for these costs, your budget needs to include them.  

Create a checklist for yourself so that you can anticipate large future expenses and determine the best schedule to pay for them. For example, stagger when you replace your large appliances. That way they don’t all need to be replaced at the same time again, which could make things easier after you retire. This can mean looking for deals that don’t involve buying several appliances all at once or split a great deal with a friend.   

4. Plan For the Future With a Will, Power of Attorney & Medical Directive

Each of us needs to have a Will, Power of Attorney, and possibly a medical directive in place. However, many people find it difficult to think about their wishes for ‘the end.’ Not speaking to loved ones can cause a lot of undue hardship as they must guess what you may have wanted. In addition, planning for what will happen if you become incapable of managing your affairs yourself is part of managing your finances effectively today.   Contact a lawyer or notary in your area for help with preparing these legal documents. Each one serves a very specific purpose and is used at different times and for different reasons:

• Your Will ensures that your wishes are carried out after you pass away and is the key document, along with a death certificate, that is used at that time. The other 2 documents are used before you pass on and cease upon someone’s death. 

•  A Power of Attorney can be drawn up in several ways. It allows a designated person(s) to act on your behalf either with limited scope and at specific times (e.g. to pay your bills while you’re out of the country), or more broadly should there come a time when you’re no longer able to make your own financial decisions (e.g. to sell a senior’s home and manage their finances when they enter long term care). 

•  A medical directive, sometimes called a Representation Agreement, outlines the medical decisions you would like your substitute decision-maker to make on your behalf if there comes a time when you’re no longer able to make your own decisions about your care.

As you think about your future wishes, take the time to review your life insurance needs as well. If you have current policies, including through employment benefits, ensure that they still meet your needs, or arrange for new policies if you need them.  

5. Invest in your Health and Well-being 

Prioritize taking care of your health and well-being as early as possible. Be proactive with regular exercise and a healthy diet. Even when you start this later in life, it can go a long way towards minimizing unnecessary health care expenses as you age.

Many retirees are caught off guard when they realize how costly health, vision, and dental expenses are, once they must start paying for them out of pocket.   Ensure that you are understand and account for all of the costs that you will no longer have coverage for once you stop working. Also consider which expenses you’ll want to incur before your coverage ends. For example, check your policies to determine when to buy new glasses or when to have dental work done.  

At the time your employer-sponsored policies end, there is often an opportunity to buy a private extended health policy. While these policies are tax deductible, they can be costly and premiums often increase with age. Begin your research early because once you lock into a policy, should something change with your health, you may no longer be able to adjust your coverage or purchase a new policy elsewhere.  

It’s Never Too Early to Start Preparing for Retirement

Most Canadians face a reduction in their income when they retire so it’s never too early to start preparing for retirement. Spending time and energy improving your finances and knowledge around financial topics is a sound investment that will always pay off.