8 ways to prepare financially for retirement

How to get your budget ready for your golden years

Transitioning from working life to retirement takes careful financial planning and decision-making – give yourself plenty of time to prepare. Here are some things you can do ahead of time.

1. Convert your savings to income

Research your income optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition and set up a plan so you have an income from the first day you retire. Options include RRIFs, annuities and unshelteredUnsheltered A regular investment or account that does not shelter your money from tax. In other words, you have to pay tax on your savings and the money you make investing them.+ read full definition savings. Learn more about these options.

You may want to speak with a financial advisor to help you set a plan to meet your income needs in retirement. It may also be good time to review your investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition goals and make any adjustments to your investments.

2. Apply for government benefits

Don’t wait until the last minute to apply for government benefits – it may mean a delay in getting your payments. For example, you need to apply for CPP 9 months before you retire in order to receive your payments in time. Learn more about government benefits.

3. Pay off your debts

Pay off your debts as soon as you can – ideally before you retire. To help you pay debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition off faster, make sure you are paying the lowest interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition you can get. Learn more about managing debt.

4. Calculate your monthly income

Use this calculator to estimate how much monthly income you’ll receive from your savings, government benefits and any pensions.

An inflationInflation A rise in the cost of goods and services over a set period of time. This means a dollar can buy fewer goods over time. In most cases, inflation is measured by the Consumer Price Index.+ read full definition rate of just over 2% is often used as a rule of thumb for longer termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition planning. But times of higher inflation rates may mean you should review how much you plan to withdraw from your retirement accounts each month.

Your best strategy will depend on how much guaranteed income you have each month, how much flexibility you have, and how long you need to depend on your retirement savings.

Learn more about adjusting your household budget for inflation.

5. Review your budget

Figure out how much you’ll need to spend to make ends meet in retirement – then see if it matches your monthly income. If it doesn’t, you’ll need to find ways to save more, cut spending or boost your income in retirement.

6. Review your insurance needs

As you get older, your insurance needs will likely change. For example, if you have fewer debts and dependants, you may not need as much life insurance coverage. But you might have more health problems, so you may want to consider critical illness insurance or long-term care insurance. Learn more about insurance planning for retirement.

Make sure you have enough insurance

Are you covered in case you or your spouse develop long-term health issues or have other emergency health problems? Unexpected health-care costs can be hard to cover when you’re on a fixed incomeFixed income An investment that pays regular income to you. Examples: Guaranteed Investment Certificates, Canada Savings Bonds and types of other bonds.+ read full definition.

7. Name a Trusted Contact Person

Your financial advisor is required to ask you about adding a Trusted Contact Person to your accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition. This person essentially serves as your emergency contact. They are someone your advisor can talk to if they are unable to contact you, or have concerns about your financial safety.

Learn more about naming a Trusted Contact Person.

8. Review your will and powers of attorney

If you’re about to retire, your will might need to be changed or updated. Having a valid, up-to-date will is essential to ensuring your estateEstate The total sum of money and property you leave behind when you die.+ read full definition is distributed as you intend it, and that your death does not create a legal and administrative burden to your family.

If you die without a valid will, a court will appoint someone to administer your estate and distribute the assets according to a formula set out in provincial estate and family laws. Learn more about willsWills A legal document that establishes what you want to happen to your money, property and other assets after your death. A will can also set out plans to take care of your children or other family members who count on you financially.+ read full definition.

You should also make sure you have a power of attorneyPower of attorney A written authorization for another person to make financial and health care decisions for you if you are not able. Rules vary from province to province.+ read full definition, a legal document that names someone to make financial and other decisions for you when you can’t make them yourself. Choose someone you trustTrust An account set up to hold assets for a beneficiary. A trustee manages the assets until the beneficiary reaches legal age.+ read full definition, who knows you and will carry out your wishes. Learn more about powers of attorney.

Take action

If you are concerned about the financial well-being of your parents or a senior close to you, or if you suspect they may be suffering financial abuse, this checklist will help you start a conversation.

Get your finances retirement ready:

  1. Convert your savings to income
  2. Apply for government benefits
  3. Pay off debts
  4. Calculate your monthly income
  5. Review your budgetBudget A monthly or yearly estimated plan for spending and saving. You work it out based on your income and expenses.+ read full definition
  6. Review your insurance needs
  7. Name a Trusted Contact Person
  8. Review your will and powers of attorney
Last updated