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Learning path for self-directed investors who want to know more about financial markets and investing


Most Canadians have the chance to tap into several financial resources to help them maintain their lifestyle at retirement. Among others, most of us have access to public and private plans. Yet, when tallying up all these amounts, there is often a gap to fill if we want to spend our golden years basking in the sun!

Saving for retirement is the most common type of investing in Canada. We know that we should be putting money aside, but how much? How? When? With so many questions, it is important to first begin with a good plan.

5 steps to successful retirement planning:

1. Determine your retirement age

Regardless of when you want to retire, it is important to be aware of the financial consequences and unforeseen circumstances that can arise and influence your decision. For instance, health and family constraints need to be factored into your thought process.

Quick tip:

Start by setting an ideal retirement date, but do not lose sight of the fact that you may have to adjust it as you move through the next steps.

2. Calculate the income you will need at retirement

Generally speaking, retirees need approximately 70% of their average annual income over the last three years of full-time employment in order to maintain their lifestyle at retirement. However, reductions in certain living expenses (e.g., transit fees and clothing needs) or increases in health care fees can affect this percentage.

Quick tip:

Using your current budget, adjust each expense according to what you will need at retirement. In other words, you should evaluate the amount you will need for each entry currently in your budget.

3. List every one of the sources of income you can depend on at retirement
Most Canadians have access to several sources of income when they retire, namely:

These government websites provide you with all the information you need to determine if you are eligible to certain benefits. Your financial planner can also help you determine the amount you will receive under each program. It is important to understand that these amounts may vary over time because of economic and market fluctuations. That is why you need to grow your personal savings as much as possible when planning for retirement.

Quick tip:

Navigate through the different government websites to determine the sources of income on which you could rely at retirement, and write them all down, along with the amounts you would receive from them.

4. Compare your predictable income to your anticipated needs

Comparing the income you know you will receive to what you believe you will need at retirement is essential to a good plan. It will also help you determine the effect of inflation on your retirement strategy. For instance, if you currently need $20,000 a year to cover your expenses, with an annual inflation rate of 3%, you can fairly conclude that in 15 years, you would need $31,159 per year to maintain your lifestyle.

When establishing your retirement plan, it is crucial that you factor in the inflation rate. After all, you not only want to save sufficiently, but you also need to make sure you maintain your buying power. Your investments must therefore grow at a faster rate than inflation if you want to fully enjoy your retirement.

Quick tip:

Now that you have listed each of your expenses and income sources and have taken into consideration the inflation rate, you should have a much clearer picture of the role your personal investments should play. This role defines your financial objectives for retirement, i.e., the gap you need to fill to ensure that you can accomplish your projects. You therefore have a precise goal to achieve over a precise timeframe.

5. Find the right retirement saving solutions

Now that you have set a specific and realistic financial goal for your retirement, make sure that you have listed all of your expenses at retirement. This should include all expenses you anticipate to accomplish your projects, not just your basic cost of living. For instance, if you want to travel once retired, make sure you add this entry to your budget. Do not neglect any aspect, especially if it refers to an expense you currently do not have.

Quick tip:

The gap to fill could seem high, and you may be tempted to adjust it out of fear of not being able to save that much. But before you start crossing some of your retirement projects from your list, remember your retirement relies, for the most part, on the investment products you choose. It can seem outrageous to have to save $200,000 over 15 years, but there are strategies that can help you succeed.

National Bank Direct Brokerage has developed a calculator to help you plan your sources of income at retirement. You can access this retirement calculator at any time, by clicking here.

View our comprehensive list of retirement investment vehicles to find the solutions that are right for your objectives and situation.

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