Planning and saving for retirement can be daunting. You're not sure how much money you'll need or how to start saving. Obviously, putting away some money is a given, but how much? Is it going to be enough? Where should you put your money - in a TSFA? Mutual fund? RRSP? GIC? Term deposit? Government bond? Annuity? Or a combination of these, and other investment options that may exist? And what will you have to change about your life so that you live comfortably when you retire?

These are all big questions to ask when making the first steps toward a retirement plan. To help, we at Kanetix.ca put together 5 steps to help you build a basic retirement plan.

Step One: Decide How Much Income You Need

When you hit retirement, you'll need a certain amount of money each year to maintain your lifestyle. This includes the obvious necessities of a place to live, food to eat and clothing to wear; the additional costs for utilities, home and vehicle maintenance, property taxes and extra-curricular activities; and, of course, you'll need to pay for your insurance, too - and this is all just the start of what you'll have to consider. That said, some expenses may disappear entirely: Will your house be paid off by the time you retire? Will your kids be out of college? Will you have credit card debt?

Make a list of necessary expenses (needs, such as food) and unnecessary expenses (wants, such as your yearly golf club and curling membership). Everything on the "needs" list will be your minimal retirement income, and the "wants" list should be a factor that you should plan for to maintain a higher level of lifestyle than the bare minimum.

With this list, you'll have a strong grasp of how much you need to live - and how much you'll need to make life a little nicer.

Step Two: Factor In All Sources of Income

You now have an annual income number you're hoping to have access to for each year of your retirement. Let's find out if that's possible from the investments available to you right now.

If retirement is a long way off, then you'll be looking at investments options you need to start factoring into your budget right now. If retirement is closer for you, then you need to look at investments you've already made and see if they're sufficient to meet your needs.

How much income can you expect from...:
  • Government retirement funds?
  • Employer pension plans?
  • RRSPs or TSFAs?
  • Savings accounts and mutual funds?
  • Other sources of income (inheritance, contributions from your family, etc.)?
Total the amounts so you have an idea of where your income will come from, how much you'll receive, and the balance that you'll need to make up through other means.

Step Three: Calculate Your Time

How much time do you have before you retire and how much do you need to save during this time in order to meet your goals? No matter what the answer might be, you can adjust your lifestyle now and take steps to ensure the most money is available to you when you hit that magic number.

The Financial Consumer Agency of Canada offers online resources to help you budget and manage your money better. Everyone, it doesn't matter who you are, can save just a little bit more today to ease tomorrow. The FCAC offers tips on how to create a budget, manage your debt and get better organized financially.

Step Four: Tweak the Numbers

By now, you may have realized that the income you're going to have available to you when you retire isn't quite enough to cover the amount you were hoping for. Don't despair, there are lots of ways to tweak the numbers and achieve a reasonable retirement goal:
  • Can you sell your house and downsize your mortgage payments? You could invest the difference in savings. Is it possible that a smaller house, a different location, or a different design (e.g., few stairs) would be better to help you reach your retirement years?


  • Can you sell your car for something more modest and affordable? Transportation and car maintenance are large expenses. If you can downgrade your car and rely on other modes of transportation, you'll cut a large chunk out of your current expenses - which you can send directly to retirement investment options. Even downsizing to a smaller, more fuel-efficient car would be a good idea!


  • Do you have a realistic idea of your current and retirement lifestyles? Right now, you may be used to spending a certain amount of money on dinners out or travelling. Will those numbers remain constant as you get older? Can you be happy without those expenses? Whatever cuts in spending you can make in your lifestyle will make a big difference.
Step Five: Get Informed

There are countless free resources that can help you plan your retirement and offer tips on how and where to save. To help you get started, consider checking out:
    Service Canada where retirement calculators and overviews of the various government programs are available to you.
  • Canada Revenue Agency and their explanations about RRSPs and the benefits to you.
  • The Government of Canada TFSA website that shows how they work
Planning and saving for retirement is a big job, and may require you to get in touch with an accredited professional who knows all the tricks of the trade. A good financial planner may be able to help you out of a jam - and it's well worth the cost of consulting to make sure you aren't worrying about money in your golden years.

Kanetix articles that could help you save money
Back to top