The Road to Retirement Bliss: Navigating Key Milestones
The End Game
Getting to a secure and happy retirement never happens by accident. Retirement is the end game to a lifetime journey. I like to think of the road to retirement bliss as requiring navigation key milestones. These milestones are the building blocks to the final goal. So what are these lifetime milestones that get you to your happy retirement?
Let’s start with an easy one. Your reward for the privilege of being a Canadian citizen is the Old Age Security pension. The only qualification to reach this milestone is being at least 65. If you’ve worked during your lifetime you’ve likely contributed to the Canada Pension Plan (most likely you had no choice in the matter). This milestone is also age dependent but you have some choice in the matter. You can collect this pension as early as age 60 (with a penalty), at age 65, or delay to age 70 (and get a bonus).
What are the more difficult milestones?
If your employer has a pension plan you must choose to be enrolled and contribute through payroll deductions. Achieving this milestone means deciding to participate in the plan rather than declining and opting for more pay. Ignoring this milestone can cost you a comfortable retirement especially if your employer offers free matched contributions to the pension plan.
Registered Retirement Savings Plan (RRSP)
Contributions to a Registered Retirement Savings Plan (RRSP) allow you to invest for your retirement and set you up for a yearly tax refund. That refund is free money to invest yearly into your retirement savings.
Tax Free Savings Account (TFSA)
The Tax Free Savings Account (TFSA) allows you to shelter income from taxes and withdraw money when needed without it adding to your taxable income. It’s an ideal way to set up an emergency fund.
Why Do Many Fail to Reach these Milestones?
A pension plan, RRSP and TFSA are difficult milestones for people because they involve decisions and knowledge. Participating in these plans requires the willpower to make a decision. You also need the knowledge to select well diversified low fee investments.
What Is the Most Common Reason People Fail to Get to a Secure and Happy Retirement?
In my opinion destructive financial behaviour is the ruin of many a retirement dream. Personal debt fueled by credit cards, lines of credit, excessive use of charge cards, loans and leases all rob you of the ability to save for the future. Crippling debt means you can’t focus on these milestones and consequently the end game becomes impossible.
You have an entire lifetime to get to a happy retirement but you must choose to succeed. Success requires making choices, sticking to a plan and gaining the knowledge needed to get to your end game.
In my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.