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It's Your Money  

It's never too late to start saving for retirement

Late-stage retirement saving

For those in their 40s, traditionally called “over the hill” and who haven't yet begun saving for retirement, the thought of catching up can feel daunting. Especially in the face of record-high costs of living and other financial challenges.

However, while the task may seem formidable, it's never too late to start saving for retirement. With careful planning, discipline and a proactive approach, Canadians in their 40s can take meaningful steps to secure their financial future.

Instead of feeling that it is simply too late to get on the right track, consider taking these eight steps to getting your retirement plans started:

1. Assess your current financial situation—The first step in jumpstarting retirement planning is to take stock of your current financial situation. Gather information about your income, expenses, assets, and debts to get a clear understanding of where you stand. Evaluate your spending habits and identify areas where you can cut back to free up funds for retirement savings.

2. Set clear and achievable goals—Establishing defined and realistic goals is essential for staying motivated and focused. Determine how much you need to save for retirement based on your desired lifestyle, retirement age, and expected expenses. Break down your goals into manageable milestones and track your progress regularly to stay on target.

3. Prioritize debt repayment—High-interest debt can be a significant obstacle to saving for retirement. Prioritize debt repayment to reduce interest expenses and free up funds for retirement savings. Focus on paying off high-interest debt first, such as credit card balances and personal loans, before tackling lower-interest debt such as mortgages or student loans. You should typically make minimum payments only on every debt except the one that has the highest interest rate to clear that one off first.

4. Maximize contributions to retirement accounts—Take advantage of employer-matched retirement accounts first. Then, look at tax-advantaged accounts such as Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) to maximize your savings potential. Consider contributing as much as possible to these accounts, taking into account contribution limits and eligibility criteria.

5. Embrace the power of compounding—Even if you're starting later than you would have liked, the power of compounding can still work in your favor. By investing your savings wisely and allowing them to grow over time, you can harness the exponential growth potential of compound interest to accelerate your retirement savings. Start investing early and regularly to make the most of compounding returns.

6. Seek professional financial advice—Navigating retirement savings can be complex, especially if you're starting later in life. Consider seeking guidance from a qualified financial planner who can help you develop a personalized retirement savings strategy tailored to your unique financial circumstances and goals. A professional planner can provide valuable insights, recommendations, and ongoing support to help you make informed decisions about your retirement savings.

7. Embrace a flexible approach—Flexibility is key when it comes to retirement savings, especially if you're starting later in life. Be prepared to adjust your savings goals and strategies as your financial situation evolves. Stay adaptable and open to new opportunities for increasing your savings and optimizing your retirement plan.

8. Stay motivated and consistent—Saving for retirement requires discipline and perseverance, especially when starting later in life. Stay motivated by reminding yourself of the long-term benefits of retirement savings, such as financial security, independence, and peace of mind. Celebrate small victories along the way and stay consistent with your savings efforts, even during challenging times.

While starting to save for retirement later than planned may present unique challenges, it's never too late to get started. Sure, it would have been great to start 10 years ago but waiting another 10 years to figure it out is far worse. The best day to start is today!

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





Changing retirement plans in light of current fiscal climate

Adjusting retirement plans

As interest rates have risen dramatically, many Canadians are left wondering if they'll need to postpone their retirement dreams. The reality of higher interest rates can have a significant impact on retirement planning, affecting everything from investment returns to the affordability of debt.

In the first half of 2022, inflation hit 8%, the highest level in more than 30 years. In the same year, the Canadian stock market dropped by a little over eight per cent. So many investors saw their savings lose value at the same time as the cost of everything went up substantially.

However, while rising interest rates may present challenges, the decision to delay retirement should be approached with careful consideration and a thorough understanding of individual financial circumstances.

Firstly, it's important to understand the relationship between interest rates and retirement planning. Rising interest rates typically lead to lower bond prices and reduced returns on existing fixed-income investments. For retirees relying on fixed-income portfolios for income, this could translate to lower overall portfolio returns. Additionally, higher interest rates can increase borrowing costs, making it more expensive to carry debt into retirement.

For Canadians nearing retirement age, the impact of rising interest rates on investment returns and borrowing costs may necessitate adjustments to their retirement plans. Individuals may need to revisit their asset allocation strategies, considering a more diversified investment approach to mitigate the effects of rising interest rates on their portfolio. Similarly, those carrying significant debt may need to prioritize debt repayment to reduce their interest expenses and improve their financial flexibility in retirement.

However, the decision to delay retirement should not be based solely on the current interest rate environment. While rising interest rates may pose challenges, they are just one factor among many that influence retirement planning decisions. Individuals should take a comprehensive approach to assess their retirement readiness, considering factors such as savings, expenses, health, and lifestyle goals.

Moreover, the impact of rising interest rates on retirement plans will vary depending on individual circumstances. Canadians with substantial retirement savings and low levels of debt may be less affected by rising interest rates than those with limited savings and high levels of debt. Similarly, individuals with secure pension plans or other sources of retirement income may have greater flexibility in navigating the challenges posed by rising interest rates.

It's also important to recognize that retirement planning is a dynamic process that requires ongoing review and adjustment. While rising interest rates may present immediate challenges, they may also create opportunities for savvy investors. For example, higher interest rates may lead to increased yields on certain fixed-income investments, providing opportunities for higher returns for those willing to adjust their investment strategies accordingly.

Furthermore, delaying retirement is not the only option available to Canadians facing challenges due to rising interest rates. Individuals may explore alternative solutions such as adjusting their retirement income expectations, downsizing their lifestyle, or seeking part-time employment in retirement.

And having said all of that, delaying retirement may in fact be the right choice for some as it comes with certain benefits such as maximizing government led retirement programs such as CPP and OAS.

Seeking guidance from a professional financial planner can help individuals navigate the complexities of retirement planning and identify strategies to mitigate the impact of rising interest rates on their retirement plans.

While adjustments to retirement plans may be necessary in response to rising interest rates, there are a variety of strategies available to help individuals navigate these challenges and achieve their retirement goals.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Dealing with financial infidelity

Financial infidelity problems

Money matters are often considered one of the most sensitive topics in relationships.

Yet, while discussions about trust, fidelity and transparency are common in romantic partnerships, the issue of financial infidelity remains largely unaddressed.

Financial infidelity occurs when one partner hides financial information or engages in financial activities without the knowledge or consent of the other. In Canada, this phenomenon poses a significant threat to the financial wellbeing of individuals and their relationships.

Financial infidelity takes many forms, from secret bank accounts and undisclosed debt to hidden purchases and clandestine investments. Regardless of the specifics, the consequences can be devastating, both financially and emotionally. The breach of trust resulting from financial infidelity can erode the foundation of a relationship, leading to feelings of betrayal, resentment, and insecurity.

One of the most immediate impacts of financial infidelity is the strain it places on a couple's financial situation. Hidden debts, undisclosed expenses, or secret financial transactions can disrupt budgeting efforts and jeopardize long-term financial goals. In extreme cases, financial infidelity may even lead to financial ruin, as the unsuspecting partner is left to deal with the consequences of undisclosed liabilities or mismanaged funds.

Moreover, financial infidelity can have lasting effects on individuals' mental and emotional wellbeing. The sense of betrayal and mistrust that accompanies the discovery of financial infidelity can cause significant psychological distress. Feelings of anger, shame, and guilt may arise, further complicating the already delicate dynamics of the relationship. Left unaddressed, these emotional wounds can fester, leading to long-term damage to individuals' mental health and overall wellbeing.

Beyond the immediate impact on individuals and couples, financial infidelity can have broader implications for Canadians' financial stability and security. In cases where one partner has been financially dependent on the other, the revelation of financial infidelity can leave them vulnerable and exposed. Without access to essential financial resources or knowledge of their true financial situation, individuals may find themselves ill-equipped to navigate the challenges of financial independence.

Furthermore, financial infidelity can hinder individuals' ability to plan for their future and achieve their long-term financial goals. Trust is a fundamental component of successful financial planning and wealth management. When trust is compromised due to financial infidelity, individuals may struggle to make informed decisions about their finances, leading to missed opportunities for growth and prosperity.

Addressing financial infidelity requires open and honest communication between partners. It's essential to create a safe space where both parties feel comfortable discussing their financial concerns and aspirations openly. Couples should establish clear expectations regarding financial transparency and accountability, laying the groundwork for a healthy and trusting relationship.

Seeking professional help from a professional financial planner or therapist can also be beneficial for couples struggling to overcome the impact of financial infidelity. A qualified professional can provide guidance and support as couples work through the challenges of rebuilding trust and restoring financial stability.

Talking about money matters can be hard and sometimes even embarrassing, but by fostering open and honest communication, setting clear expectations and seeking professional guidance when needed, Canadians can mitigate the impact of financial infidelity and build stronger, more resilient relationships based on trust and transparency.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





Everyone needs a financial plan

Financial planning for all

In a professional services world that often seems tailored for the wealthy, the notion of financial planning can sometimes feel like an exclusive privilege reserved for those with substantial assets.

However, the truth is that everyone, regardless of their income bracket, can benefit from a well-crafted financial plan. Lately, a wider range of Canadian consumers are realizing the importance of financial planning in navigating the complexities of today's economic landscape.

Let’s explore the universal need for a comprehensive financial plan for all consumers and shed light on how certified financial planners (CFPs), as well as qualified associate financial planners ( QAFPs) can assist individuals at every stage of life and income level.

Financial planning is not just about managing vast fortunes, it's about creating a roadmap for a secure and comfortable future. From budgeting and saving to estate and retirement planning, a comprehensive financial plan considers an individual's unique circumstances, goals, and risk tolerance. It's a tool that empowers individuals to make informed decisions about their finances, paving the way for a more stable and prosperous future.

The misconception that financial planning is only for the wealthy is gradually fading away. Canadians from all walks of life are recognizing the need to take control of their financial destinies, and this realization has brought attention to the role of CFP and QAFP. These experts are equipped with the knowledge and skills to guide individuals through the intricacies of financial planning, ensuring that everyone, regardless of their income level, has access to sound advice and strategies.

One significant aspect of this inclusivity in financial planning is the role of QAFPs. The QAFP certification is designed to cater to a broader segment of the population, including those with less substantial assets. QAFPs undergo rigorous training to provide financial planning services specifically tailored to individuals with more modest means, making financial planning more accessible and relevant to a diverse range of Canadians.

For individuals with fewer assets, the emphasis shifts towards prudent budgeting, debt management and establishing a solid foundation for future financial growth. QAFPs are adept at crafting strategies that align with the unique challenges faced by Canadians with limited resources. This may include creating manageable savings plans, addressing debt systematically, and exploring investment options that match the risk tolerance of those with smaller portfolios.

Moreover, QAFP understand financial planning is not a one-size-fits-all endeavour. They recognize the importance of customization, tailoring their services to accommodate the specific needs and aspirations of individuals with varying income levels. This personalized approach ensures that financial plans are realistic, achievable, and adaptable to life's inevitable twists and turns.

The necessity for a comprehensive financial plan extends far beyond the confines of wealth. Every Canadian, regardless of their income bracket, can benefit from the guidance of a CFP or QAFP.

As we navigate the complex financial landscape of the 21st century, embrace the idea that financial empowerment is a universal right and, with the right guidance, everyone can build a path to a more secure and prosperous future.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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