It is quite difficult to get someone that is in the prime of their life and is enjoying good health and prosperity to think far into the future. Yet the years fly by and before you know it, its time to take a close look at what retirement is going to be like, and how comfortable it will be is going to greatly depend on the financial situation for the retirement years.
You can never start too soon to plan for your retirement years, and a good deal of the financial success you will have in your senior years depends on time. The more time you have to invest the more secure you are going to be.
You also have to give some thought as to what is going to be your comfort zone for your retirement years.
- How do you plan to spend your golden years?
- Are you hoping to sell your residence then and downsize into a smaller home?
- Do you dream of being able to travel where and when you want?
- If your health were to fail and you had to move into a retirement home, are you prepared to go into a government funded establishment or would you want the choice ofprivate retirement living?
These are just a few of the questions that you want to determine the answers for, then you need to estimate how much of a nest egg are you going to need to insure this. Keeping in mind that the economy and cost of living is going to go through constant changes as you go throughout the years leading up to your retirement.
You may have to make some sacrifices now financially in order to invest in your retirement. It may mean that in order to start saving there are a few luxuries that you have to go without now, or extend the waiting time for them.
You now need to consider investments that are going to keep your retirement years secure:
High Risk or Low Risk Investing:
If you are going to invest your money then of course you want the best return on it that you can get. This comes with a risk. You also will have the choice in investing that brings a lower rate of return but is considered low risk. Your age, and how much extra money you have to play with should be the deciding factors here.
If your retirement years are not going to arrive for many years then you may be able to recover from a high risk investment. If retirement is not all that far off, then you would probably be better with a low risk investment. This way you are not putting your initial investment to a higher risk of being lost. It is really important that when you are making the decision to invest now to pad your retirement years, that you balance the risk with the amount you are investing, keeping the future in mind.
Should it be a RRSP or TFSA or both?
If staying out of the stock market is more to your liking and you want to look at investments that are secure then you are probably considering a Registered Retirement Savings Plan, or a Tax Free Savings Account. You may even be thinking about both. If so, you need to really look at what the return on these is going to be for you when you are ready to retire.
The added bonus with these two options is you get some tax breaks included with them. So if you are thinking that your return on these is low, keep the tax breaks in mind.
