3 Ways to be Ready for Retirement

Tonight on my radio show The Late Shift

on www.NewsTalk1010.com, I’ll be doing a show

on kids’ books. Tune in babies.

Take full advantage of the company pension plan available at work. You’ve signed up, chosen your investment options, and put your retirement savings on auto pilot? No?

So if your manager told you tomorrow that there was a way to get a raise immediately, no questions asked, would you be interested? That’s what the company pension plan is all about.

People who haven’t signed up are often unwilling to give up the money they want to spend on other things to save for a goal that may seem a very long way away. Unwilling to give up the $125 a month specialty channel package because “TV helps you to relax?” Think about what it’s going to be like later when it’s time to hang up your hammer. Will you be saying, “Y’know, I’m really glad I had all those TV channels; it really makes this Ramen Noodle diet worth it?”

Probably not.

Passing up on your long-term savings is shortsighted. Embrace a new reality that leaves you enough money to save. Then head on over to HR and sign up.

 

Think about how you want to live during retirement. Some people dream of buying a sailboat and sailing through the Caribbean all winter. Others want a trailer in Florida. Some think retirement is a great time to buy a cottage, renovate their homes or travel the world. More power to you if you’ve saved up the money to make your dreams come true.

If you think retirement means nothing much should change in your life despite the fact that you’ll be living on a reduced income, think again. Most pension income comes in at approximately 60-70% of your working income. If you’ve been living well within your means, adapting to 30% less money shouldn’t be too big a problem. But if you’ve been shopping like it’s a sport, and if you’ve given no thought to what life will reasonably entail when you do turn in your spurs, you may be in for a bit of a shock.

This goes for a whole bunch of things from missing a sense of purpose to eliminating all your debt so you don’t have to worry about mortgage or credit card payments on your smaller income.

 

Look at the numbers. Being a little scared about what retirement will mean isn’t uncommon. The number one thing on most folks’ minds is the end of the paycheque. If you’re uneasy about how much of that paycheque will be replaced by income from pensions, investments, and savings time to stop guess and look at the numbers.

The only way to know for sure if you will you be able to maintain your lifestyle and do all the things you’ve dreamed of is to do the math. Find out how much you’ll be getting from your pension plan, how much you can count on from government benefits and how much you’ll have to make up from your own savings.

Create a budget for your retirement spending. Go over your existing budget — if you don’t have one, now you have another good reason to make one — and highlight those costs that will remain the same, those that will go down (think commuter costs and clothes) and those that may go up (think medical and, perhaps, travel).

Start planning early enough and you’ll have the time and flexibility to make some moves that’ll put you in a better place during retirement. You can:

Rein in your spending. Look for ways to eliminate costs here and there. Practicing living on less now – use your estimated retirement income as your guide – and you’ll not only build some confidence about the future, you’ll add to your savings.
Boost your earnings. Are there ways to increase the money currently coming in? Look around for ways to make a little extra money. This goes hand in hand with . . .
Delay your retirement. The later you retire, the more time you have to save and the more time your money has to grow before you have to start pulling on it. And if you also . . .
Plan to work during retirement, you’ll stretch your retirement savings even further. Do you have an interest or hobby you could turn into a money-maker? Would you consider working part-time? A little extra income will make your retirement savings go a longer way.

 

Like death and taxes, retirement is a reality. You can plan for it and make it what you want it to be, or you can stick your head in the sand and hope for the best. If you choose the latter, you should not be surprised if you get to your golden handshake to find your life far less satisfying than you had hoped. And since retirement will likely last 20 years or more, you’ll have lots of time to worry.