How to Fast Track Retirement

July 18, 2013

How to Fast Track Retirement

Retirement is thought of by many as a magical time when your days are finally your own. There is no more toiling away at the office; you’ve earned freedom to do what you’ve always wanted to do. Kind of. The reality is, although time is freed up for infinite adventures, the money required to finance those adventures is finite when you’re no longer working. This means the life you’ll lead during retirement is dependent on the amount of savings you amass during your working years. So when we ask about fast tracking to retirement, we’re simply asking how we can save more money so we can stop working sooner. Here are a few things to consider.

Assess and plan

Take a look at your current spending habits and ask yourself how they might change once you reach your ideal retirement age. Take into account the things you’ll no longer be paying for (i.e. student loans, mortgage) as well as the things you’ll add once retired (i.e. trips to every location on your bucket list). Taking inflation into account, use hard numbers to estimate the basic and additional costs you’ll have. Then, calculate how much money you’ll need to save (annually or monthly) to end up with the hefty sum you’ll need as a retiree.

Budget – and stick to it

I’ve heard seniors tell younger folks, “pay yourself first.” In order to afford retirement – much less early retirement – it’s imperative that you save. No matter how little money you earn, take some of your income and put it away for yourself, first. Examine your current spending habits and create a budget in which savings is a fixed, non-optional “cost.” Creating a budget will show you where you can afford to cut back and save more. But a budget is only useful if you stick to it.

Open an RRSP

There are many ways to save for retirement but opening an RRSP (Registered Retirement Savings Plan) is one of the best. RRSP contributions are deducted from taxable income and you pay no tax on the interest earned in an RRSP. When you receive your tax return, plug it back into your RRSP. Also, find out if your employer will match the contributions you make to your retirement plan – many employers do. Doubling-up on your RRSP contributions is a surefire way to save more over the long term.

Open a TFSA

A TFSA (Tax Free Savings Account) is another great way to fast track retirement because like an RRSP, it puts some distance between your money and the taxman You won’t see tax benefits up front like you would with an RRSP, but investments in a TFSA grow tax-free. In short – start saving. The more money you have in savings will determine how early you can afford to retire.

The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This newsletter was written, designed, and produced by Lionel Khoury, for the benefit of Lionel Khoury, Investment Funds Advisor with Investia ECGI., a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Fund Fact sheet or prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.