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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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6 Tips for More Successful Investing

There is no one and done way to invest, but there are a few tried and true principles that have served investors well over the years.

What You Need to Know

  1. Have patience and a long-term outlook – Great investment results do not happen overnight.  Think of your moneys earning potentials in the context of years, not months.
  2. Never buy on a tip… do your research – We all know someone who has “discovered” the next big money maker. Be wary of taking tips from friends and family members. Do your own research and make decisions that you are confident in.
  3. Don’t sell on bad news – This may be particularly relevant right now.  Markets tend to overreact on the downside, so be sure that you know the actual implications of any bad news on your investments before making a rash decision.
  4. Don’t allow your emotions to take over – Emotion has no place in the investment world. Facts, facts, and more facts are what should be making your investment decisions for you.  Having a plan and sticking to it can greatly help reduce emotion driven decisions.
  5. Stay invested and take advantage of compounding – Compound interest is one of the most powerful tools that investors have.  Leave you money invested as long as you possibly can to take advantage of compounding.
  6. Make an investing philosophy and stick to it – Know your comfort level and tendencies before you ever start investing. This way you will be sure to have a portfolio that will work for you instead of stressing you out.

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