Retirement Planning is the process of making sure that you will have enough money to maintain your standard of living during your post-working years. It is a very personal process that reflects a person’s goals, desires and needs.
It can be difficult to estimate how much you will need, because your expenses will change in retirement. But, you can get a good idea of your annual retirement income needs by creating a budget that divides your spending into three categories: essential, discretionary and unexpected.
When you have a better sense of your retirement income needs, you can make adjustments to your savings plan and other financial decisions, such as selling a home or paying off debt.
The amount you need will depend on a variety of factors, including your income sources, health care costs and how long you intend to work. It is best to examine your income sources, such as Social Security benefits, a pension, or investment earnings, well in advance of your retirement date so you can adjust your savings plan accordingly.
If your income is expected to increase, you may be able to boost your retirement planning by contributing more to your retirement accounts, or investing more in your portfolio. This can help your investments grow faster, and it can also be a great way to take advantage of compound interest, which can help your money grow even more.
Choosing the right mix of investments is another important part of your Retirement Planning in Toronto strategy. Consider keeping a balanced portfolio that includes a mixture of stocks, bonds and other asset types that fit your risk tolerance, investment time horizon and liquidity needs.
For example, you can buy mutual funds or an exchange-traded fund that focuses on small-cap stocks and high-quality bonds. These can help soften the effects of big market fluctuations.
You can also consider purchasing a life insurance policy that will pay out a certain amount of money to you on your death. This can provide an additional safety net and a means to help cover the cost of long-term care expenses if you ever become unable to manage your own finances.
Many people are not aware of the potential tax benefits that are available for saving into a 401(k) or other type of retirement account, but these savings can be tax-advantaged and can grow over time with the power of compound interest.
If you have multiple retirement accounts, it’s a good idea to consolidate them so that you can easily tap your savings when you need them in retirement. You can do this by working with a financial advisor who can help you decide how to move your retirement accounts around so that you are able to tap the most valuable ones first.
Once you have a handle on your retirement savings, it is also important to develop a plan for how you will tap those savings once you retire. Your Ameriprise financial advisor can help you determine the best way to use your various retirement accounts and create a withdrawal plan that fits your specific circumstances.