Friday, July 28, 2017
What I’m Doing For My Retirement Planning
This week at Budget Boss has been all about retirement and I thank you for tuning in. I have touched on various topics including ways to start saving, what the government provides, what your boss may provide as well as a retirement checklist. As a financial advisor, it is my job to help you see what you need to be doing as well as show you the products to help you do it. I think that part of the job is crucial, but I also think knowing the products intimately is important as well. This is where practicing what you preach becomes important. I too have many fears and worries regarding retirement planning. It is important to understand that these feelings are normal. What will separate you from those who do not succeed is understanding these fears and acting upon them. For myself, I have created a 5 point retirement plan that I will utilize to achieve my goals. In this post, I will explain what steps I am taking to secure my retirement goals.
1) Be Debt Free
It sounds pretty self-explanatory and simple but being debt free is crucial to retiring on your terms. Many people don’t realize the effects of reverse compound interest. This is the compound interest working in favor of your debtors instead of working in your favor. Every dollar you pay in interest is taking away from dollars you could be putting into savings. In my retirement plan, the only substantial debt I plan on obtaining is a mortgage. I will only take on debts that have investments attached to them. When you are debt free the sky is the limit. When you have debt, the limit is the sky.
The 30-Something’s Guide to Wealth – Budget Boss
2) Liquidity is Key
I will never, ever, ever, ever not have an emergency fund. What I currently have right now in my bank account will never be lower than it is right now. This is my escape hatch, rainy year fund, last resort money. If I ever have to use it it’ll be a sad day. The next step would be “panic mode” to build it back up. If I don’t use it, which I won’t, my continued focus will be to build this amount. The reason for this will be the ability to take advantage of opportunities that may come my way, such as Budget Boss. You have to have a stockpile of additional funds for comfort and opportunity. It’s just that simple.
3) Tax-Free Savings Account (TFSA)
I talk about my TFSA like it is Kate Hudson, but it truly is a beautiful thing. My TFSA will be the focus of my excess funds. I will be using my TFSA to strategically withdraw my funds in retirement because it is the only investment product that is completely tax-free. Maxing this account out is my primary focus and if I do so I will have over 1.3 Million dollars in it at retirement time. This account alone is enough for me to retire comfortably so it is essential I utilize it.
The case for a ‘TFSA-first’ strategy in retirement planning – The Globe and Mail
4) Registered Retirement Savings Plan (RRSP)
Once I get my income to a level where I truly want it to be I will start aggressively contributing to my RRSP. The reason for this is the tax implications. I will gladly max it out yearly to get the annual tax deduction. Like I have said before, free money is the best money, and I consider tax money saved to be free money. If they take it out of your pay and then get it back at the end of the year, consider it a blessing. You must also put it to use for yourself and make sure it is not all for nothing. There is no more widely used vehicle for retirement than the RRSP and I don’t plan on bucking that trend.
5 Ways to Maximize Your RRSP – Budget Boss
5) Whole Life Insurance
My Permanent Life Insurance will be the “fixed income” portion of my retirement savings. It will grow at a slow and steady pace that will give me extra funds if needed later in life. Quite frankly I don’t plan on using this policy for its cash value, but it is nice to know it’s there. I like the fact it has a guaranteed rate of growth even in down markets. Knowing that I will leave something to my loved ones is worth its weight in gold as well.
With these 5 components in place I know I will be alright in retirement and throughout life as well. I have all my bases covered and know what to expect. There may be some unsuspected bumps in the road but I am ready for those. Essentially I will only go as far as my discipline takes me and I feel I have solid control over that. I guess living in poverty for many years prepared me for any lean times that may come. My secret is to live like I’m poor, no matter how much money I make. That doesn’t mean I don’t treat myself and I doesn’t mean I am cheap. Anyone who knows me knows that is the furthest thing from the truth. What it means is that I am diligent with my money because I know the stakes. The key for me was to change my habits and then develop a plan. The habits are changed and now the plan is in place. While I reach these goals it will be my goal to help others along the way as well.
“I believe that through knowledge and discipline, financial peace is possible for all of us.” – Dave Ramsey
Email – joe@budgetboss.ca
Follow Budget Boss on – Facebook LinkedIn Twitter Instagram Pinterest Quora