Unless you’re planning to work forever, chances are you’ll need a retirement savings plan to help you reach your retirement goals. But for some, developing a plan may seem more complicated than it sounds.
“We all know that we need to save for retirement, but many Canadians are confused about how to start, so they put off creating a retirement plan,” says Linda Knight, president and chief operating officer, BMO Mutual Funds.
“Developing a retirement plan isn’t as daunting as many Canadians think it is — especially when you seek the advice and guidance of a trusted financial planner.”
The first part of creating a personalized retirement plan is to have a goal in mind. Do you want to spend retirement travelling across the globe or fishing at the family cottage? Once that goal is set, you can work backwards to determine how much money you will need for your dream retirement lifestyle, what age you can retire at and how much you will need to set aside in savings each year.
An RRSP is a main staple in a retirement savings plan and acts like a retirement savings piggybank that collects funds overtime for the sole purpose of funding an investor’s retirement. The main benefit to investors is that all contributions made into an RRSP are tax-deductible. Within an RRSP, investors can hold a variety of investments, including guaranteed investment certificates, mutual funds, stocks and bonds.
The maximum annual contribution allowed for the 2008 tax year is 18 per cent of your earned income up to $20,000. Any unused contribution room can be carried forward to the following year.
In addition to RRSPs, investors can include real estate and company pension plans as other potential sources of retirement income.