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It's Your Money  

Enhancing your retirement plan with the 'sharing economy'

The 'sharing economy'

The "sharing economy," characterized by peer-to-peer sharing of resources and services, has transformed the way Canadians earn income and plan for retirement.

In a country where the cost of living is rising and traditional job security is no longer guaranteed, embracing the sharing economy offers Canadians unique opportunities to supplement their income, enhance their financial stability, and supercharge their retirement planning.

For those of you that haven’t heard this term before, the sharing economy, also referred to as the “gig economy,” is a socioeconomic system in which individuals can share their assets, skills, or services with others for financial gain. It leverages technology platforms and peer-to-peer connections to facilitate transactions and exchanges.

Some of the most prominent examples of the sharing economy include ride-sharing services like Uber, accommodation-sharing platforms like Airbnb, and freelance work through platforms like Upwork and Fiverr.

How the sharing economy can boost income:

1. Flexible part-time work— One of the most appealing aspects of the sharing economy is its flexibility. You can use your spare time to take on gig work, whether it's driving for a ride-sharing service, renting out a room on Airbnb, or providing freelance services online. This flexibility allows individuals to earn additional income without committing to a traditional 9-to-5 job.

2. Monetize underutilized assets—Many Canadians have underutilized assets, such as a spare room, a car, or tools that they rarely use. The sharing economy enables them to monetize these assets by renting them out when not in use. For instance, renting out a room on Airbnb or lending tools through platforms like ToolShare can generate extra income.

3. Entrepreneurial opportunities—The sharing economy provides a platform for entrepreneurial Canadians to start their own small businesses. From offering home-cooked meals through meal-sharing apps to launching a local tour guide service, individuals can turn their passions and skills into income-generating ventures with minimal upfront costs.

4. Multiple income streams—You can diversify your income sources by participating in various sharing economy platforms simultaneously. By driving for a ride-sharing service, freelancing, and renting out a property, individuals can create multiple income streams, reducing financial reliance on a single source.

How the sharing economy can enhance retirement planning:

1. Supplement retirement savings —The extra income generated through the sharing economy can be channeled directly into retirement savings accounts like Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs). This additional contribution can significantly boost retirement savings and provide a more comfortable retirement lifestyle.

2. Pay down debt—For Canadians burdened with debt, the sharing economy offers an opportunity to accelerate debt repayment. Using the extra income to pay off high-interest debt can lead to financial freedom sooner, allowing for more substantial retirement contributions in the future.

3. Create passive incomes—Some sharing economy activities, such as renting out properties or investing in dividend-yielding stocks, can create passive income streams. These streams can continue to provide income during retirement, reducing the need to draw down retirement savings.

4. Maintain an active lifestyle—Retirement isn't solely about financial security. It's also about enjoying a fulfilling life. Engaging in sharing economy activities can keep retirees mentally and physically active, contributing to a healthier and more enjoyable retirement.

5. Retire on your terms—The sharing economy provides a degree of control over retirement planning that traditional employment may not offer. Canadians can choose when, where, and how they work, allowing them to retire on their terms and maintain a work-life balance that suits their needs.

What are the challenges and considerations:

While the sharing economy offers numerous benefits, it also comes with challenges and considerations. Those considering should be aware of the following:

1. Tax implications—Earnings from sharing economy activities may have tax implications. It's essential to understand tax regulations and keep accurate records of income and expenses.

2. Income variability—Income from gig work can be unpredictable, so it's important to budget and save accordingly.

3. Legal and insurance considerations—Renting out property or providing services may require compliance with local regulations and insurance coverage. Canadians should investigate legal and insurance requirements in their area.

4. Retirement planning balance—It's crucial to strike a balance between earning extra income through the sharing economy and dedicating time to retirement planning and relaxation.

The sharing economy has become a powerful tool for Canadians to boost their income, strengthen their financial stability, and supercharge their retirement planning. By leveraging their skills, assets and the flexibility of gig work, Canadians can create additional income streams and enjoy more control over their retirement.

Whether it's supplementing retirement savings, paying down debt, or creating passive income, the sharing economy offers versatile opportunities to secure a brighter financial future in retirement.

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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