According to Statistics Canada, baby boomers account for close to a third of Canada's population. With hard-to-predict factors such as recessions and volatile stock returns impacting investments, consider the following steps to help put you on track for a secure retirement.
Your investments: set priorities
You need a twofold strategy: one to create stability for assets you will need soon, and another to achieve growth for savings you will need long term. Use the help of an online investment calculator. You can revisit your time horizon — the amount of time before you will need to access your savings to help you determine an appropriate mix of stocks, fixed-income (GICs) and cash investments. Then set investment priorities for three separate time frames. Assets you won't need for a decade or more may be invested heavily in stocks, which offer greater potential growth than bonds or cash equivalents. GICs and bonds can provide greater stability with modest growth potential, and are well suited for assets you will need in three to five years. Money market funds offer still greater stability for money you will need in the next year or two.
Your expenses: budget for retirement
Track your expenses over a couple of months; knowing where your money goes can empower you to make the most of it. Once you have a budget, you can adjust it to project your estimated retirement expenses. Many of your everyday costs will change as you leave the work force. For example, you won't have to spend money commuting to work each day, but you may pay more for health care as you age. Try to anticipate any lifestyle changes that could take place when you retire, such as increased travel or new hobbies. Putting your estimated retirement costs on paper will help you determine how much income you will need to meet them.
Your income: make sure you will have enough
Your retirement income will likely come from several sources, possibly including employer pensions, annuities, Canada Pension Plan benefits and RRSP savings. The "4% Rule" can help you determine whether your savings will be sufficient to meet expenses not covered by other income sources. The rule states that you can give your retirement savings a 90% chance of lasting 30 years if you withdraw no more than 4% of your savings the first year of retirement, and then increase your withdrawals at the rate of inflation in future years. If you think your first year's withdrawal will exceed 4% of your savings, consider ways to tighten your budget. Alternately, you could look for ways to delay withdrawing from savings, such as working while retired or postponing retirement by a year or two.