Lifespans are Increasing, But So Is the Cost of Living
What Does This Mean for Your Retirement?
As people live longer, it’s essential to plan for a longer retirement. According to data from Statistics Canada, in 2022, there were nearly 13,500 centenarians in Canada, a 43% increase from 2018. While a longer life expectancy is something to celebrate, it also means you’ll need to make your money stretch further into your later years.
The Impact of Taking CPP Early
Taking your Canada Pension Plan (CPP) benefits before age 65 means you’ll receive less money that will need to last for a longer period. Inflation also means that the money you receive will be worth less than when you first started receiving it. The government does increase CPP payments a little each year, but leaving yourself short in retirement can mean a very tight budget that doesn’t meet your needs.
Debt and Retirement
The temptation to go into debt to cover medical and lifestyle expenses increases when you’re not prepared for retirement. If you own your home, you may consider a reverse mortgage or utilize a Home Equity Line of Credit (HELOC) beyond your ability to keep up with the payments. It’s essential to avoid debt in retirement to maintain your financial security.
What Are Your Sources of Income in Retirement?
Before deciding whether to take your CPP benefits early or to defer them by up to 5 years, make sure you know what all of your sources of income will be once you retire. This is a crucial first step in building a sustainable retirement budget. Your retirement income will usually come from one or more of the following:
- CPP/QPP retirement pension
- Old Age Security (OAS) and Guaranteed Income Supplement (GIS) if you have low income in retirement
- Earnings, if you continue to work in retirement
- Employment-related pension plans
- Registered Retirement Savings Plans (RRSPs)
- Tax-Free Savings Accounts (TFSAs) and other investments
Canadian Retirement Income Calculator
Use the Canadian Retirement Income Calculator to get an estimate of your retirement income. This tool will help you plan for your retirement and make informed decisions about your financial future.
Retiring Debt-Free
Debt payments can eat up a significant portion of your retirement income. If you’re wondering how to retire debt-free, check out our webinar, "10 Steps to Retire Without Debt." This webinar focuses on learning more about government pensions available to you and the steps you can take to increase your income and decrease your debts ahead of retirement.
Financial Hardship Reasons for Unlocking Locked-In Pension Funds
If you’re facing financial hardship, you may be able to unlock your locked-in pension funds. Learn more about the reasons and process in our blog post, "Financial Hardship Reasons for Unlocking Locked-In Pension Funds."
Conclusion
Retirement planning is essential to ensure a comfortable and secure financial future. By understanding the impact of taking CPP early, managing debt, and planning for multiple sources of income, you can build a sustainable retirement budget. Don’t forget to take advantage of resources like the Canadian Retirement Income Calculator and our webinars to help you make informed decisions about your financial future.
FAQs
Q: What is the Canadian Retirement Income Calculator?
A: The Canadian Retirement Income Calculator is a tool provided by the Government of Canada that helps you estimate your retirement income based on your current income and savings.
Q: What are the benefits of deferring my CPP benefits?
A: Deferring your CPP benefits by up to 5 years can increase your monthly payment by up to 8%.
Q: How can I increase my retirement income?
A: You can increase your retirement income by contributing to Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), and other investments.
Q: What is a reverse mortgage?
A: A reverse mortgage is a type of loan that allows you to borrow money using the equity in your home. The loan is repaid when you pass away or sell your home.
Q: How can I retire debt-free?
A: You can retire debt-free by creating a budget, paying off high-interest debt, and building an emergency fund. Our webinar, "10 Steps to Retire Without Debt," provides more information on how to achieve debt-free retirement.
Author: nomoredebts.org
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