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Playing 'catch-up' for retirement savings

By Carla Hindman, Director of Financial Education, Visa Canada

If you can remember when the Beatles first sang "When I'm 64," you're probably fast approaching retirement or already there, however when Paul McCartney wrote, "We shall scrimp and save," it may have just been wishful thinking. Today, more than half of Canadians admit to not feeing financially prepared for retirement, while only one third of Canadians confess to actually having a plan in place to meet their retirement needs.

No matter your age, the time to start planning and saving for retirement is now. Those in their twenties or thirties have several decades for their savings to grow, but if you're already in your 40s or 50s, and don't have a plan in place, you'll need to save far more aggressively to make up for lost time.

Here are a few tips to kick your retirement savings efforts into high gear:

Maximize your savings. There are several financial tools available to help maximize your current savings. Everything from Tax Free Savings Accounts (TFSA), GICs, mutual funds and stocks are all available to boost your funds.

In addition to these options, consider opening a Registered Retirement Savings Plan (RRSP) if you haven't done so already. An RRSP is a retirement savings program, registered by Canada Revenue Agency, which allows your contributions to grow tax free. One way to increase your RRSP fund is to determine whether other investments, such as Canada Savings Bonds, guaranteed investment certificates (GICs) and publicly traded stocks and bonds, are eligible for transfer into an RRSP in lieu of cash. You may need to check with a financial professional to determine whether it would be beneficial to transfer such assets, from both a retirement planning and a taxation standpoint. For more information on RRSPs, please refer to the Canada Revenue Agency website.

Some employers offer company-matching contributions, which can add hundreds or thousands of free dollars to your account every year. Take advantage of these matching contributions to build up your current savings. If finding more money to contribute is a problem, make a pledge to put your next pay increase directly into your plan.

Do a financial inventory. Many people don't know their net worth or how much money they'll need at retirement – some experts say at least 60 to 80 per cent of current income is necessary to maintain your current lifestyle after you stop working. In order to determine how much you'll need throughout your retirement years, start by reviewing your Canadian Pension Plan (CPP), RRSPs, savings accounts and assets. Once you have completed this inventory, enter these amounts into an online retirement calculator to roughly estimate how much money you'll need to retire comfortably.

Practical Money Skills Canada, a free personal financial management program sponsored by Visa Canada, features a retirement calculator to help you start thinking about your retirement financial well-being.

Consider downsizing. Once your kids are all grown up and moved out, consider downsizing to a smaller, cheaper home. This will allow you to invest some of your current home's equity for retirement, as well as pay less for utilities, property taxes, home repairs and other expenses.

Delay retirement. People today typically live much longer than their parents, so their retirement savings will need to last longer. By delaying retirement a few years or at least working part time, your savings can grow considerably before you need them. Plus, the longer you delay tapping into your CPP, the larger your monthly benefit.

Lower expenses. One big reason you haven't saved enough for retirement is because you may be spending more than you can afford. Best to start scrimping and saving now so you can be comfortable – when you're 64.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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