So many of us dream of the day when we can finally say goodbye to the office for the last time, kick our shoes off and enjoy our retirement years. But how do you know when the best time to retire is? And, even more importantly, will you be ready?
According to the Financial Post, the average retirement age in 2019 was 64 years old. In the same survey, 20% of participants said that they expected to retire between 65 and 69, and 40% said they didn't know when they would retire.1 In 2018, the average Canadian retirement savings was $184,000, and 30% of respondents said they had no retirement savings.2
This begs the question: How retirement-ready are Canadians? There's no straight answer to that question. Still, it's safe to assume that you'll not only need substantial retirement savings by the time you want to retire, but you'll also need to have a good idea of your overall financial picture.
Let's look at some things you can do to get retirement-ready and feel confident as you enter your golden years.
Take Full Advantage of Retirement Benefits
One of the most important things to consider when evaluating retirement readiness is whether you can take full advantage of your retirement benefits. As a Canadian citizen, you have the CPP, which you can start receiving as early as 60 or as late as 70.3 Remember, you have to apply for CPP, and payments are not automatic.
CPP includes some benefits, including retirement pensions, post-retirement benefits, disability benefits, survivor's pensions, and children's benefits. To prepare yourself for a successful retirement, make sure you're taking full advantage of these programs.
Get Your Financial House in Order
The next thing to consider when evaluating your retirement readiness is how your overall financial picture looks. You might have a ton of money saved in your retirement savings accounts. However, if you still have looming debt or other expenses, this money isn't going to take you very far.
Some financial experts recommend ridding yourself of debt before retirement, including car and mortgage payments. This depends on each retiree, but limiting your debt-to-income ratio in retirement is beneficial, especially since you'll be living on a fixed income.
Have a Retirement Budget
Speaking of fixed income, another thing to consider when asking yourself if you're ready for retirement is your retirement budget. Because you'll be living on a fixed income, it's more important than ever to stick with a budget to get the most out of your assets. Most financial experts would argue that you're not ready for retirement if you don't have a clearly outlined retirement budget (and one that you can stick to).
Make Sure Your Portfolio Reflects Your Retirement Goals
Lastly, you should ensure that all of your investments match your current goals as a retiree. When you were younger and contributing to your investment portfolios for retirement, you may have been invested in riskier choices because you had time to potentially make up your losses. Now that retirement is right around the corner, you should work with your financial advisor to ensure your investment portfolio makes sense for your needs.
Asking yourself if you're ready for retirement is a complex but important conversation, and these are just a few tips to get you on the right foot. Preparing for this important life milestone will help you make the most of your assets so that you can enjoy this time.
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