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Tips on Retirement Savings Plan

A retirement savings plan is a way of protecting your post-retirement financial lifestyle. However, in recent times, recessions, stock-market declines, housing market bubbles, joblessness, and, most recently, a global pandemic have created a series of challenges for people trying to start, grow, or maintain a retirement savings plan. With all the economic uncertainties, it’s natural to wonder if you’re doing all you can to protect your retirement nest egg. Taking a back to basics approach can instruct you on how to keep your retirement financial plan on track during uncertain economic times and beyond.

Consider these tried and tested tips that most financial advisors will recommend for a secure and enjoyable retirement.

  1. Make Realistic Budget and Lifestyle – Determining your retirement income needs starts with making realistic assumptions about your future. Because of increased life expectancy, retirement years are longer than they used to be. The average Canadian is expected to live to 78.79 years. Longevity can also be impacted by genetics, where you live, your marital status, and your lifestyle. All of these factors into how you plan for your retirement. It’s also good to be realistic about your post-retirement budget and lifestyle. Do not make the mistake of assuming that your post-retirement budget will be reduced. Retirement is becoming increasingly expensive, particularly in the first few years. It’s essential to have a plan to help mitigate expenses when you are no longer earning a paycheck.
  2. Have A Savings Plan – Based on these realistic lifestyle assumptions about your post-retirement days, you can begin to determine what you can do now to sustain yourself financially for at least 25 years post-retirement. The 4% rule is one popular method for working this out. In this model, you commit 4% of your savings for every year of retirement. Another approach is to draw down 2-3% of your total retirement portfolio annually, adjusted yearly for inflation.
  3. Consider Inflation – Speaking of inflation, failing to factor it into your plan could take a substantial bite out of your hard-earned nest egg. Inflation impacts how much your retirement savings will be worth over time, so understanding this is critical to ensuring that you have enough assets to last throughout your retirement.
  4. Grow Your Retirement Savings – Retirement means different things to different people, but the key is to enjoy this time of your life while making sure you don’t outlive your retirement savings. You are more likely to achieve this with a thoughtfully developed plan that allows you to withdraw money from your portfolio while enabling growth over the longer term. You can achieve this by using various investment vehicles with reasonable returns.

Bottom Line

Planning for the future is a complex and sometimes emotional process that is not easy to do without guidance. Financial advisors can help you remain objective and focused on your future goals. They also have the skills and tools you need to plan for a healthy financial future.

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The Top 5 Mistakes You Should Avoid When Selecting a Financial Planner

A financial plan is a strategy you set in order to be able to attain your goals. With a financial plan, you can effectively manage your cash inflow and outflow and other recurring financial responsibilities with the aim of putting you in a better financial position to attain your set financial goals. A good financial plan should include provisions for your debts, income, insurance, savings, investments, and other things that make up your financial life.

Mistakes You Should Avoid When Selecting a Financial Planner

Hiring A Financial Planner Based on Referral Only

In this case, what is good for the goose may not be good for the gander, and in that case, you should base your hiring a financial planner solely on the fact that your friend has good things to say about him. For one, financial situations are peculiar situations, and a financial planner may not be well equipped to handle all kinds of financial situations. Make sure you do your vetting using your criteria and not what your friend tells you.

Hiring A Financial Planner on Sentiment

When you hire a financial planner because of an existing relationship with them, then you might be making a big mistake. You should hire a financial planner based on your current and future financial needs. Also, you must ensure that such a person is absolutely qualified to handle your financial needs.

Using Past Performances

When you only consider the past achievement of a financial planner as a criterion of hiring such a person, then you may be making a mistake. The past performance of a financial planner does not guarantee future success or a better plan going forward. Once you notice your financial planner is not adapting your finances to your current financial situations for a better long-term financial position, then it may be time to make a change.

Not Conducting a Thorough Research

When hiring a financial planner, there are a lot of things you must consider. Such a person must tick as many boxes as possible of what you want in a financial planner. You should vet the credentials of the financial planner, if possible, interview his clients to know how he handles different financial situations that may be similar to your financial situation. Also, try and interview multiple financial advisors to know the different personalities and investment styles to be able to pick the best.

Getting Carried Away by Promises

Yes, we want the best financial planner but that does not mean a financial planner that promises heaven and earth is the best. Most of the time, a sweet talker is not the best at what they do. The same goes for financial planners. You should ensure that your financial planner is not only concerned about choosing the most profitable investment and exploring the market. These are usually for their ego. Go for a financial planner that has your long-term financial position at heart. They usually make the best decisions at every turn.

Tips On Having an Effective Financial Plan

Set Your Goals

A financial plan is mostly about having something for a rainy day and how to manage your current financial situation to be able to achieve that. Therefore, it is good to outline what you are saving for. You should be exact on why you have a plan and why you are saving for it.

Have A Budget

This is for you to better manage your cash inflow. You should outline your bills, debts, and other necessary financial obligations. Yes, you can spoil yourself once in a while, but that should not get in the way of what you are setting aside for your goals.

Sort Your Taxes

Taxes are inevitable but there are better ways to go about it that will ensure you save as much as you can on your taxes and enjoy tax deductions. This will give you a better cushion for your financial plan.

Be Ready for Emergencies

Life has a way of throwing us a curveball. Of course, things won’t always go according to plan, which is why it is important to include an emergency fund in your financial plan to enable you to deal with unforeseen circumstances and expenses. This is where insurance also comes in handy. Have a good insurance plan to help you deal with emergencies.

Don’t Swim in Debt

Achieving your financial goals doesn’t mean you should go committing yourself to every financial aid that will drown you in debt. Debt is one of the banes to an effective financial plan. Ensure that you manage your debt effectively so you can achieve your goals.

Be Ready for Retirement Taxes

Most financial plans get you ready for when you are no longer active. So, your retirement goals and plans should take the forefront of your financial plan.

Multiple Investments

The only way to multiply your savings is to invest in different portfolios that will bring you both short-term and long-term profit.

Have An Estate Plan

Lastly, have an estate plan that will help you make important financial decisions when you can no longer make them yourself. Having an estate plan is not only for the rich.

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