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Never too old for "life's firsts" - as long as you save
- TD Canada Trust provides advice on saving enough now to be able to enjoy new adventures well into retirement -
- TD INFOGRAPHIC ON HOW TO SAVE FOR LIFE'S FIRSTS IN RETIREMENT AVAILABLE AT: http://www.smrmediaroom.ca/TDRetirementFirsts -
TORONTO, Feb. 12, 2013 /CNW/ - If 65 is the new 55, today's generation needs to plan for a longer and more active retirement. Whether those plans include travelling the globe, mastering skills like gourmet cooking or just taking time to volunteer, retirement offers the opportunity to explore new interests and discover new passions. According to research from TD Canada Trust, for 40% of Canadians, retirement was the first time they had the time to spend on the hobbies they love.
"Traditionally, we used to consider life's firsts as getting married, buying a house, starting a family and then celebrating retirement," says John Tracy, a senior vice president at TD Canada Trust. "But today, people are living longer and are more active in their retirement than previous generations - and that means they need more money to sustain their quality of life and retirement dreams."
Tracy says the key to being able to enjoy a full life well into retirement is smart planning, so you know what you need to save today to make your life's firsts a reality.
"Many people look forward to the experiences they'll finally have the time to pursue in retirement, so it's important to be financially prepared when you get there," said Tracy. "In addition to contributing to an RSP or TFSA, an advisor at your bank can help you map out your goals, develop a saving and investment plan to help you achieve them, and keep you on track."
Tracy provides key factors to consider when planning for these life's firsts in retirement:
1. Taking up a new pastime
One of the most appealing parts of retirement is the gift of time. It opens up opportunity to take new hobby classes, master a new skill or enjoy a new sport. But hobbies can be expensive, particularly when you're living off a reduced income in retirement. In fact, 22% of retirees admit that retirement was the first time they were worried about not having enough money to live comfortably. Tracy says one way to alleviate these worries is to make reducing or eliminating debt a priority before retirement.
"Boomers who carry a large chunk of debt into retirement, will have to carve out a bigger portion of their RSP to cover repayments and living expenses, which will translate into a higher taxable income and less 'life's firsts' spending money," he says. "If money is tight, look for ways to compromise on expenses to pay off your mortgage and other debts faster, so you have more money to save now and less debt eating away at your nest egg after you retire."
2. Buying a vacation property
Buying a lakefront cottage or condo as a warm-weather vacation home to use as your primary residence in retirement seems idyllic. Tracy recommends planning ahead for the tax implications associated with vacation properties and the financial implications of taking on a new mortgage close to retirement. "Today's low interest rates may be tempting, but remember you can't rely on just one asset, like a house, to fund your entire retirement, because you will still need sufficient cash-flow to replace your regular income," Tracy says. "An advisor at your bank can help you decide if adding real estate to your retirement portfolio fits your timeline and risk appetite, and can then help you develop a plan and budget to achieve your dream."
3. Travelling the world
Whether you dream of travelling south every winter, jet setting across the Atlantic on a new adventure or just visiting another province for the first time, planning ahead and saving early is key. Tracy says a tax free savings account (TFSA) can be a great tool to start saving now, because your money can grow tax-free and may be withdrawn tax-free at any time.
"Set up a pre-authorized purchase plan that automatically invests a fixed amount at regular intervals into your TFSA. Regular contributions let you benefit from compound growth and dollar cost averaging, which may help build your wealth - and travel fund - faster," says Tracy. "If you're still decades from retirement, you may consider weighting your TFSA with growth assets like stocks and mutual funds and making up the balance with more conservative holdings like bonds or GICs, depending on your situation."
4. Starting your own business
People with an entrepreneurial spirit may find that retirement is the perfect time to "reinvent" themselves and start the business they had always dreamed of while in their working years. Tracy recommends that Boomers thinking of pursuing a new business plan now, in tandem with financial and small business advisors, to understand and prepare for the investment required.
"If you dream of owning your own business and working well into your golden years, it's still important that you prioritize retirement savings in your peak earnings years, both to save enough for your new venture and as a safety net," says Tracy. "To mitigate the risk inherent in a new business, you may consider holding more conservative products in your RSP, such as GICs."
About the TD Canada Trust RSP Poll
TD Bank Group commissioned Environics Research Group (www.environics.ca) to conduct an online custom survey of 2,407 Canadians 25 years of age or older, including 929 who are retired. The total sample was weighted by age, gender and region to be proportionately representative of the Canadian population who are 25 years of age and older. Responses were collected between December 5 and 11, 2012.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.
SOURCE: TD Canada Trust
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