In financial publications, you regularly read about couples that are wondering if they are able to retire as planned. These people all seem to have above average incomes, company pension plans, have been saving since they were five years old and have amassed a respectable portfolio. The consensus is always, “Yes, you will definitely be able to retire at your specified age and live the lifestyle you desire – no problem.”

But, what if you haven’t been a regular saver, don’t have a company pension, maybe have had periods of unemployment, or gone through an expensive divorce? Now you’re approaching the big five-oh (and I don’t mean Hawaii) and you’ve come to the realization that you haven’t saved nearly enough and wondering if it’s too late for you. Will you be flipping burgers well into your old age?

According to a recent article in the Financial Post, up to 20% of middle-income households will face a decline of 25% or more in their standard of living after they retire.

So You Haven’t Saved For Retirement?

Bemoaning past poor decisions and bad luck won’t change reality. You need to start getting your financial house in order, now.

How can you make proper decisions if you don’t know what you have, what you want to do, and how much it will cost? It’s time to make a plan.

You Haven't Saved For Retirement? Why It's Not Too Late To Have A Plan

1. Pay off any debts

Make this a top priority. If you will be living on a fixed income you don’t want to be using your savings to make consumer loan and credit card payments – with the accompanying high interest.

If past bad spending habits have led to your being in debt, you need to break them.

2. Start thinking about your retirement lifestyle

How will you live, and how much is it going to cost you? Visualize and price out your desired lifestyle. How much will you pay for annual golf fees, the Panama cruise or that motorhome? Find out now instead of having a vague idea in your head.

3. Review your retirement income sources

Determine your income target. How will you reach it? You might have some combination of employer pension, government benefits and your own personal savings.

If you haven’t already done so, sign up with Service Canada to determine your CPP and OAS benefits. Think about when you might want to begin payments. It’s important that you know and understand the implications of taking benefits at various ages.

Pull out your latest company pension statement. It will tell you at what age you can start taking payments and how much.

4. Do a retirement projection

There are tons on retirement calculators available online – some better than others. However, even the best ones are only tools that provide guidance. You don’t know the future so can only make assumptions about inflation and investment returns. Try out different saving an spending rates to get a range of outcomes. You may not like the answers, but it’s better to know you have a potential shortfall while you still have time to make adjustments.

5. Ramp up your savings rate

Maximize your TFSA and RRSP contributions. If you earn a higher income you should put as much as possible towards unused RRSP contribution room, then re-invest that tax return instead of spending it as you did in the past. While these contributions won’t have the years to compound like those made by a 20- or 30-year old, they are still important.

Take full advantage of any matching contributions offered by your employer. Or, you may be able to top up your pension plan.

We are eight years into a bull market for stocks. Have these recent stock market highs favourably impacted your portfolio? You may be tempted to try to realize the highest possible returns on your investments. This is a risky strategy and could cause you to fall even further behind.

6. Revisit your retirement date

Most people want to retire sooner rather than later.

Staying on the job an extra year or few increases the number of years you can save for retirement, and reduces the number of years you will have to withdraw from your savings.

Another option is to plan on working part-time after you leave your long-term employment.

7. Be creative

After you’ve crunched all the numbers, you may still feel you won’t have enough. This is where you have to start thinking about other possibilities.

Most of us plan to stay in our current homes, but there might be good financial reasons to move. It might make sense to consider downsizing to a smaller, newer home or one in a less expensive area to free up cash and reduce expenses.

Even if moving is not going to be on your radar, think about how you can use the equity in your home for a reverse mortgage or line of credit. You may take on a boarder, or rent out your garage or extra room for someone else’s storage.

Identify opportunities to save more. Get a side gig. Sell no longer needed or wanted belongings. 

Final thoughts

Funding your retirement is really a math problem. You need to assess your current situation – assets and debts. Beefing up your savings, making smart investing decisions, working longer and/or tapping into your home equity all can help.

You may not have the pleasure of a luxurious lifestyle, but you should be able to manage a pretty decent retirement doing the activities you enjoy.

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8 Comments

  1. Mrs. Picky Pincher on August 16, 2017 at 7:10 am

    It’s never too late! I know plenty of people in their 40s who just shrug and give up, thinking it’s too late to start planning for retirement. It’s *never* too late, y’all! It’s better to have time on your side, for sure, but it’s still very doable.

    • boomer on August 17, 2017 at 10:49 am

      Too late to save at 40? Oh, my! They still have 20 plus years of working and saving ahead of them! Why would a person just resign themselves to living off government benefits because they think it’s too late to plan? I’m shaking my head.

  2. brett on August 16, 2017 at 8:15 am

    Lazy people will not plan. Self centered people will spend far more time buying their next TV than they will thinking about retirement let alone planning for it. It is not just about you. It is about your spouse and your loved ones.

    We are seeing the standard of living drop among some of our acquaintances as they retire early. Especially among those who experienced premature involuntary retirement. You can lead a horse to water…. I have no doubt that we will see an exponential increase in this challenge over the next 20 years. Transfer of wealth will solve the problem but only for a minority of people.

    • boomer on August 17, 2017 at 10:45 am

      Hi brett. Relying on an inheritance is like hoping for a lottery win. Unless you come from a really wealthy family, with the “great” generation living into their 80s,90s and even 100s their resources are dwindling, plus you’ll likely be sharing with siblings. That’s not a scenario I want to be counting on.

  3. KarenJ on August 16, 2017 at 9:14 am

    I agree it is never too late. In my 30s, I focused on paying off my mortgage. After that I was very surprised at how much I was able to increase my retirement savings between 45 and 55. Just 10 years and I was able to retire at 55.

    • boomer on August 17, 2017 at 10:34 am

      Good job KarenJ! Once you set your mind on a plan of action things will often fall into place. It was your focus that got you where you want to be now.

  4. Cheryl on August 16, 2017 at 11:03 am

    David Bach wrote a book called Start Late, Finish Rich and I believe he had a plan whether a person was in their 40s, 50s, or 60s. I’m a little foggy on whether it began or ended in a different decade. It was all good advice and very encouraging for people who did start late to save for retirement.

    As you mentioned in your first paragraph, why do articles focus on people who have good paying jobs, own homes, have savings, a company pension plan and maybe they have debt they’re working on getting rid of?

    There are many people who have low paying jobs, live paycheque to paycheque with nothing left over to save after paying the bills, have gone through periods of unemployment maybe due to illness, no chance of home ownership, and no matter how hard they try can not get ahead. Maybe they’ve gone through an expensive divorce later in life and that’s wiped out their retirement savings or left them living off those funds, with few years left for working and saving. These are the people you want to see profiled in articles because they’re more relatable to many readers.

    The sad reality for many people is they will probably be in their highest income of their life when they get old enough that all the CPP, OAS and GIS kick in.

    • boomer on August 17, 2017 at 10:40 am

      Hi Cheryl. It’s true that many low income workers will be slightly better off by age 65. But, they are used to living frugally. It’s the middle to higher income people who will get a jolt. The maximum CPP/OAS is only about $1,800 a month. If someone is used to spending $6000 the additional money has to come from their savings – and it will go fast.
      I’m a fan of David Bach. His plans are straightforward and easy to implement if one puts their mind to it.

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